Q3 2023 Revvity Inc Earnings Call

October 30, 2023

Hello, and welcome to the Q3 2020 <unk> earnings Conference call. My name is Alex there'll be coordinating the call today.

If you'd like to ask a question at the end of the presentation expressed all funded by one on your telephone keypad.

Like to remove your question you May press star followed by <unk>.

I'll now hand, it over to your host Steve would it be senior Vice President Investor Relations. Please go ahead.

Thank you operator, good morning, everyone and welcome to <unk> third quarter 2023 earnings Conference call.

On the call with me today are <unk>, Zhang our President and Chief Executive Officer, and Max Krakowiak, Our senior Vice President and Chief Financial Officer before we begin I would like to remind everyone of the safe Harbor statements that we've outlined in our press release issued earlier. This morning and also those in our SEC filings statements or comments made on this call may be.

Forward looking statements, which may include but are not necessarily limited to financial projections or other statements of the company's plans objectives expectations or intention.

These matters involve certain risks and uncertainties.

Company's actual results may differ significantly from those projected or suggested due to a variety of factors, which are discussed in detail in our SEC filings any forward looking statements made today represent our views as of today we.

We disclaim any obligation to update these forward looking statements in the future even if our estimates change. So you should not rely on any of todays statements as representing our views as of any date after today.

During this call we will be referring to certain non-GAAP financial measures a reconciliation of the non-GAAP financial measures. We plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release.

I'll now turn it over to our President and Chief Executive Officer, <unk> say a lot.

Thank you, Steve and good morning, everyone.

<unk> has been built to help accelerate the advancement of human <unk>.

Through science.

While also being able to execute at a high level through various macroeconomic conditions.

This unique and differentiated profile is intended to help make the profound impact on the future of healthcare.

Insulate to outperformance during periods of macro pressure.

While still allowing us to capitalize on industry tailwind at our back.

And those are in the midst of one of those periods of macroeconomic and industry pressure.

This is evident with the increased headwinds that we began to experience during the second quarter.

Which intensified during the most recent quarter.

While we attempted to build some cushion into our assumptions should industry dynamics worsen.

11 of increased challenges, we faced from our pharma and biotech customers.

Particularly in September was more than we anticipated.

As a result, while our total company organic revenue grew by 1% in the quarter.

We finished below our mid single digit assumption from 90 days ago.

I drove an expected revenue was driven by softness that occurred fairly late in the quarter.

Given this last minute pressure I'm very proud of our continued strong margin and earnings performance.

Is the incremental headwinds in September <unk>, very little time to try to properly manage our expenses.

Adjusted EPS in the quarter of $1 18 was still in line with the low end of our implied guidance.

Despite revenues coming in meaningfully below our expectations.

The downturn in demand from our pharma and biotech customers led to our life Sciences business declining in the low single digits organically in the quarter.

This was below our low single digit growth expectation.

The software spending from pharma and biotech customers also put pressure on our applied genomics and genomic lab businesses within our diagnostics segment.

Alex: Hello, and welcome to the Q3 2023 Revvity earnings conference call. My name is Alex. I'll be coordinating the call today.

Wildlife sizeable immuno diagnostics business performed extremely well.

Operator: If you'd like to ask a question at another presentation, you can press start by one on your telephone keypad. If you'd like to remove your question, you may press start by two.

Grew in the high teens overall.

Including high teens growth in China.

Pressure from softer farmer spending impacting parts of this segment.

Steve Willoughby: And I'll hand it over to your host, Steve Willoughby, Senior Vice President and best of relations. Please go ahead. Thank you operator.

Resulted in the overall diagnostics business growing 4% organically year over year in the quarter excluding covered.

Steve Willoughby: Good morning, everyone. And welcome to Revvity's third quarter, 2023 earnings conference call. On the call with me today are Prahlad Singh, our President and Chief Executive Officer, and Max Krakowiak, our Senior Vice President and Chief Financial Officer. Before we begin, I would like to remind everyone of the same harbor statement that we have outlined in our press release issued earlier this morning, and also those in our SEC violence statements are comments made on this call may be forward looking statements, which may include but are not necessarily limited to financial projections or other statements of the company's plans, objectives, expectations.

Slightly below a mid to high single digit expectations.

While Max will touch on this in more detail.

We anticipate these end market headwinds to continue through the fourth quarter.

Steve Willoughby: These matters involve certain risks and uncertainties. The company's actual results may differ significantly from those projected or suggested due to a variety of factors which are discussed in detail in our SEC violence. Any forward looking statements made today represent our views as of today. We disclame any obligation to update these forward looking statements in the future, even if our estimates change. So you should not rely on any of today's statements as representing our views as of any date after today.

Resulting in a non COVID-19 organic growth expected to be down in the mid single digits year over year.

Which would bring our full year non covered organic growth to approximately 2%.

As to when this industry downturn might dissipate.

Do not have a crystal ball, but we remain confident as ever in the future potential off our industry and for everything itself.

As of right now, though we are anticipating the pharma biotech headwinds persist into at least the first half of 'twenty four.

There is currently a wide range of potential outcomes for next year.

Which is why we want to take the next few months to further evaluate underlying trends.

Steve Willoughby: During this call, we will be referring to certain non-gap financial measures, a reconciliation of the non-gap financial measures we plan to use during this call to the most directly comparable gap measures is available as an attachment to our earnings press release.

This range of potential outcomes, including the possibility that organic growth could be in a similar range to what we are now expecting for this year.

Prahlad Singh: I'll now turn it over to our President and Chief Executive Officer, Prahlad Singh, Prahlad. Thank you, Steve, and good morning, everyone. Raviti has been built to help accelerate the advancement of human health through science, while also being able to execute at a high level through various macroeconomic conditions. This unique and differentiated profile is intended to help make the profound impact on the future of healthcare and to insulate our performance during periods of macro pressure.

The second half of the year likely being stronger than the first half.

Given this current outlook.

Look to take additional cost actions heading into next year.

Beyond the roughly $80 million of expenses, we will have cut in 2023.

Since some favorable items from this year are not expected to repeat at the same level in 2024.

The heightened level of industry demand over the last few years now being followed by a subsequent correction.

Prahlad Singh: While still allowing us to capitalize when industry tailwinds are at our back. We and others are in the midst of one of those periods of macroeconomic and industry pressure. This is evident with the increased headwinds that we began to experience during the second quarter, which intensified during the most recent quarter. While we attempted to build some cushion into our assumptions, should industry dynamics worsen, the level of increased challenges we faced from our PAMA and biotech customers, particularly in September was more than we anticipated.

We are also currently analyzing our previously provided 2024 through 2026 midterm outlook to ensure it remains reflective of what we expect the business to be able to produce over that timeframe.

We would expect this analysis to be completed by the end of this calendar year.

While the future of our end markets remain bright.

We expect global investment levels into science to rebound.

We are certainly seeing more end market pressure than we had previously anticipated and some of our markets.

Prahlad Singh: As a result, while our total company organic revenue grew by 1% in the quarter, we finished well below our mid-single-digit assumption from 90 days ago. Our lighter than expected revenue was driven by softness that occurred fairly late in the quarter. Given this last-minute pressure, I'm very proud of our continued strong margin in earnings performance. Collins, as the incremental headwinds in September led us very little time to try to properly manage our expenses.

As we've highlighted in the past.

While we are likely more insulated from the macro and industry pressures than many of our peers.

We are not immune to the current softer spending environment from pharma and biotech customers.

Our ability to still post positive organic growth in the quarter. Despite these headwinds will likely standout as earnings season continues to progress.

As we prudently manage those items that are fully within our control.

Particularly as it relates to our margins.

Prahlad Singh: Our adjusted EPS in the quarter of $1.18 was still in line with the low end of our implied guidance, despite our revenues coming in meaningfully below our expectations. The downturn in demand from our farmer and biotech customers led our life sciences business declining in the low single digits organically in the quarter, which was below our low single digit growth expectation. The software spending from farmer and biotech customers also put pressure on our applied genomics and genomic lab businesses within a diagnostic segment.

While we persevered through this current market I believe we are making good progress on coming together is that by focusing on our operational commercial and R&D priorities as a new company.

This focus and progress.

Up very well to prosper in the future. Once this period is over.

A few recent examples of this with the launch of two new in vivo imaging platforms.

The IV spectrum too and the quantum <unk> III.

These launches represent nearly complete refresh of our market leading in vivo imaging portfolio.

Prahlad Singh: While our sizable immunodagnostics business performed extremely well and grew in the high teams overall, including high teams growth in China. The pressure from software farmer spending impacting parts of this segment resulted in our overall diagnostics business growing 4% organically year over year in the quarter, excluding COVID, slightly below our mid to high single digit expectations. While Maxwell touched on this in no detail, we anticipate these end market headwinds to continue through the fourth quarter, resulting in our non-COVID organic growth expected to be down in the mid single digits year over year, which would bring our full year non-COVID organic growth to approximately 2%.

The quantum <unk>.

For example, with its market leading resolution.

Allows us to now have a competitive solution for the bond market, which is a field we have not previously meaningfully participated in.

It was also great to see.

Initial set of pinpoint base editing reagents debut following a recent post license of our technology to a major pharma customer earlier this year.

These new reagents provide customers for the first time.

To use consumables to allow them to begin exploring the scientific potential of our novel base editing technology.

And its unique ability to perform complex and multi gene editing.

Prahlad Singh: As to when this industry downturn might dissipate, we do not have a crystal ball, but we remain confident as ever in the future potential of our industry and for everything itself. As of right now though, we are anticipating the farmer biotech headwinds persist into at least the first half of 24. There is currently a wide range of potential outcomes for next year, which is why we want to take the next few months to further evaluate underlying trends.

Our ability to not all for these two customers is another proof point for how we are leading with science.

Booking to democratize base editing technology for all.

You May have also seen recently that we've entered into two new important commercial collaborations.

First Ian.

<unk>, a collaboration with element biosciences to use their cutting edge, obviously sequences system.

Combined with our significant portfolio of sample prep instruments and consumables.

Prahlad Singh: This range of potential outcomes includes the possibility that organic growth could be in a similar range to what we are now expecting for this year, with the second half of the year likely being stronger than the first half. Given this current outlook, we will look to take additional cost actions heading into next year. Beyond the roughly 80 million dollars of expenses we will have cut in 2023. Since some favorable items from this year are not expected to repeat at the same level in 2024.

To jointly offer unique complete ngf's workflows.

We expect this collaboration to initially focus on continuing to expand our NGL presence in newborn screening.

Secondly, we also recently announced an agreement with Danaher Sykes business to begin providing their mass specs in select markets as a new option to be used with our new base newborn screening the agents in our customers' workflows.

By expanding the breadth of instruments, we offer our customers and our newborn screening business.

Prahlad Singh: With the heightened level of industry demand over the last few years, now being followed by a subsequent correction, we are also currently analyzing our previously provided 2024 through 2026 midterm outlook to ensure it remains reflective of what we expect the business to be able to produce over that time. Train. We would expect this analysis to be completed by the end of this calendar year. While the future of our end markets remain bright, and we expect global investment levels into science to rebound, we have certainly seen more end market pressure than we had previously anticipated in some of our markets.

Providing them a greater range of options to choose from that are fully supported by both companies.

All these recent collaborations are great examples of how we seek to provide our customers.

Most cutting edge and efficient solutions.

Even if sometimes they may not fully decided within the walls of remedying itself.

Prahlad Singh: Train. We would expect this analysis to be completed by the end of this calendar year. While the future of our end markets remain bright, and we expect global investment levels into science to rebound, we have certainly seen more end market pressure than we had previously anticipated in some of our markets. As we've highlighted in the past, while we are likely more insulated from the macro and industry pressures than many of our peers, we are not immune to the current software, spending environment from farmer and biotech customers.

Our recently released 2023 ESG report also highlights how we are having a meaningful impact on society.

This year's report shows how we have dramatically expanded our environmental data collection efforts across the new company.

To provide us with an even more solid footing to build on in the years to come.

Based on stakeholder feedback from our large materiality assessment.

Prahlad Singh: As we've highlighted in the past, while we are likely more insulated from the macro and industry pressures than many of our peers, we are not immune to the current software, spending environment from farmer and biotech customers. Our ability to still post positive organic growth in the quarter, despite these headwinds will likely stand out as earning season continued to progress, as we prudently managed those items that are fully within our control, particularly as it relates to our margins.

Also highlights our continued focus on top employee issues and.

And how do we have introduced many new company policies.

Targeting emerging topics, such as bioethics animal welfare and sustainable procurement amongst others.

Prahlad Singh: Our ability to still post positive organic growth in the quarter, despite these headwinds will likely stand out as earning season continued to progress, as we prudently managed those items that are fully within our control, particularly as it relates to our margins. While we persevered through this current market, I believe we are making good progress on coming together as gravity by focusing on our operational, commercial, and R&D priorities as a new company.

Finally, we have provided a new external ESG goals.

We plan to pursue going forward.

These include a 50% reduction in our scope, one and two emissions over the next decade.

Prahlad Singh: While we persevered through this current market, I believe we are making good progress on coming together as gravity by focusing on our operational, commercial, and R&D priorities as a new company. This focus and progress sets us up very well to prosper in the future once this period is over. A few recent examples of this were the launch of two new NVO imaging platforms, the IWIS Spectrum II and the Quantum GX-3. These launches represent a nearly complete refresh of our market leading NVO imaging portfolio.

Maintaining greater than 40% of senior leadership roles held by females.

And achieving a 75% or greater employee satisfaction rate.

In closing before handing it to Max.

Prahlad Singh: This focus and progress sets us up very well to prosper in the future once this period is over. A few recent examples of this were the launch of two new NVO imaging platforms, the IWIS Spectrum II and the Quantum GX-3. These launches represent a nearly complete refresh of our market leading NVO imaging portfolio. The Quantum GX-3, for example, with its market leading resolution, allows us to now have a competitive solution for the bone market, which is a field we have not previously meaningfully participated in.

Our industry is currently going through one of its most difficult periods in the last two decades.

Prahlad Singh: The Quantum GX-3, for example, with its market leading resolution, allows us to now have a competitive solution for the bone market, which is a field we have not previously meaningfully participated in. It was also great to see our initial set of pinpoint based editing reagents debut following a recent first license of our technology to a major farmer customer earlier this year. These new reagents provide customers for the first time ready to use consumables to allow them to begin exploring the scientific potential upon novel based editing technology and its unique ability to perform complex and multi gene editing.

While this period does not enjoyable for anyone I am thankful for the transformation that has occurred at the company over the last three years.

Including a successful divestiture back in March.

As I mentioned, we are not immune to the current pressures.

But I think you will see that revenue has been built to perform better than most to macroeconomic environments.

Including tough ones like we are now in.

We are focused on maintaining a strong relative margin profile and are making good progress on our operational commercial and R&D initiatives.

Prahlad Singh: It was also great to see our initial set of pinpoint based editing reagents debut following a recent first license of our technology to a major farmer customer earlier this year. These new reagents provide customers for the first time ready to use consumables to allow them to begin exploring the scientific potential upon novel based editing technology and its unique ability to perform complex and multi gene editing. Our ability to now offer these two customers is another proof point for how we are leading with science and working to democratize based editing technology for all.

We also have a strong balance sheet.

We believe the likely to come in even greater asset to us in the coming quarters.

I am excited about our future and nobody will come out of this period, an even stronger and more efficient company than we are already today.

With that I will now turn the call over to Max.

Thanks, Rod and good morning, everyone.

Prahlad Singh: Our ability to now offer these two customers is another proof point for how we are leading with science and working to democratize based editing technology for all. You may have also seen recently that we've entered into two new important commercial collaborations. First, we announced a collaboration with element biosciences to use their cutting edge of a T sequencer system combined with a significant portfolio of sample prep instruments and congewables to jointly offer unique complete NGS workflows.

The company has gone through a significant amount of change over the past year and has continued to execute at a high level as our employees have risen to the occasion to overcome the dynamic environment, we've been facing so far this year.

Prahlad Singh: You may have also seen recently that we've entered into two new important commercial collaborations. First, we announced a collaboration with element biosciences to use their cutting edge of a T sequencer system combined with a significant portfolio of sample prep instruments and congewables to jointly offer unique complete NGS workflows. We expect this collaboration to initially focus on continuing to expand our NGS presence in newborn screen. Secondly, we also recently announced an agreement with Danahar Sykes' business to begin providing their mass specs in select markets as a new option to be used with a new base, new bond screening reagents in our customers workflows.

We are now in the midst of our next challenge as we saw a noticeable step down in demand from our pharma and biotech customers as we progressed through the quarter, especially in September.

Prahlad Singh: By expanding the breadth of instruments we offer our customers in a new bond screening business, we are providing them a greater range of options to choose from that are fully supported by both companies. Both these recent collaborations are great examples of how we seek to provide our customers the most cutting-edge and efficient solutions, even if sometimes they may not fully reside within the full walls of Revvity itself.

Although we expect these headwinds to continue we remain focused on the items that are within our control and remain excited about the opportunities that lie ahead for our new company.

As <unk> mentioned, we continue to make progress on our strategic initiatives across R&D operations and sales and marketing while continuing to right size. The business. In addition to the previously discussed 60 million of cost actions. We have taken so far this year given the softer top line trends, we experience at the third quarter progress.

Prahlad Singh: We expect this collaboration to initially focus on continuing to expand our NGS presence in newborn screen. Secondly, we also recently announced an agreement with Danahar Sykes' business to begin providing their mass specs in select markets as a new option to be used with a new base, new bond screening reagents in our customers workflows. By expanding the breadth of instruments we offer our customers in a new bond screening business, we are providing them a greater range of options to choose from that are fully supported by both companies.

We have identified another $20 million of further cost reductions that will impact the remainder of this year.

Since we currently expect the software pharma biotech spending to be in place for at least a few more quarters. We are also working to take additional actions to properly align our cost structure as we head into next year to ensure we appropriately balanced strategic investments, while preserving our elevated margin profile.

Prahlad Singh: Both these recent collaborations are great examples of how we seek to provide our customers the most cutting-edge and efficient solutions, even if sometimes they may not fully reside within the full walls of Revvity itself. Our recently released 2023 ESC report also highlights how we are having a meaningful impact on society. This year's report shows how we have dramatically expanded our environmental data collection efforts across the new company to provide us with an even more solid footing to build on in the years to come.

Now moving on to our third quarter results the company generated 1% non COVID-19 organic growth overall in the quarter, which resulted in total revenue of $671 million, which was down 6% due to the drop in COVID-19 related revenues compared to a year ago.

Prahlad Singh: Our recently released 2023 ESC report also highlights how we are having a meaningful impact on society. This year's report shows how we have dramatically expanded our environmental data collection efforts across the new company to provide us with an even more solid footing to build on in the years to come. Based on stakeholder feedback from our last materiality assessment, the report also highlights our continued focus on top-of-bloi issues and how we have introduced many new company policies targeting emerging topics such as bioethics, animal welfare and sustainable procurement, amongst others.

Of the 400 basis points lower than anticipated organic growth, we experienced in the quarter versus the midpoint of our guidance approximately 300 basis points of the shortfall was pressure related to our instrument and software businesses.

100 basis points was from softer reagent and consumable demand, particularly in September.

Prahlad Singh: Based on stakeholder feedback from our last materiality assessment, the report also highlights our continued focus on top-of-bloi issues and how we have introduced many new company policies targeting emerging topics such as bioethics, animal welfare and sustainable procurement, amongst others. Finally, we have provided a new external ESG goal that we plan to pursue going forward. These include a 50% reduction in our scope one and two emissions over the next decade, maintaining greater than 40% of senior leadership roles held by females and achieving a 75% of greater employee satisfaction rate.

<unk> added 1% to our third quarter revenue and we again had no incremental contribution from acquisitions.

As it relates to our P&L, we generated 27, 5% adjusted operating margins in the quarter overall, which were largely in line with our 28% expectation. Despite the late fall off of revenue in the quarter.

Prahlad Singh: Finally, we have provided a new external ESG goal that we plan to pursue going forward. These include a 50% reduction in our scope one and two emissions over the next decade, maintaining greater than 40% of senior leadership roles held by females and achieving a 75% of greater employee satisfaction rate.

Our gross margin to 61% were down from last quarter due to a combination of less volume leverage and an unfavorable mix shift.

We incurred a favorable pricing impact of approximately 150 basis points in the quarter, which is helping to offset the continued inflation, we are seeing across parts of the business.

For the full year, we now expect at least 125 basis points of net pricing realization for the company overall.

Prahlad Singh: In closing, before handing it to Max, our industry is currently going through one of its most difficult periods in the last two decades. While this period is not enjoyable for anyone, I'm thankful for the transformation that has occurred at the company over the last three years, including our successful damage teacher back in March. As I mentioned, we are not immune to the current pressures, but I think you will see that gravity has been built to perform better than most to macroeconomic environments, including tough ones like we are now in.

Looking below the line, we had net interest expense of $7 million, which was again favorable by a couple of million dollars compared to our expectations.

This favorability was primarily driven by better than expected interest income as we get a better than anticipated job repatriating our cash so far this year.

Our adjusted tax rate was 18% in the quarter, which was favorable to our expectations. We also continue to repurchase shares in the quarter buying back a $111 million in total, bringing our year to date repurchase activity to $384 million.

We averaged $124 2 million shares in the quarter and exited the quarter with $123 5 million shares outstanding.

Prahlad Singh: We are focused on maintaining a strong relative margin profile and are making good progress on our operational commercial and R&D initiatives. We also have a strong balance sheet, which we believe will likely become an even greater asset to us in the coming quarters. I'm excited about our future and know we will come out of this period and even stronger and more efficient company than we are already today.

Moving beyond the P&L, we generated adjusted free cash flow of $8 million in the quarter, which on a year over year basis continue to be pressured from the drop in COVID-19 revenues and roughly $21 million of outflows associated with one time divestiture related costs and rebranding activities.

Prahlad Singh: I'm excited about our future and know we will come out of this period and even stronger and more efficient company than we are already today.

We expect some of these outflows to reverse over the coming months and positively impact our investing cash flow when they come back to us.

Max Krakowiak: With that, I will now turn the call over to Max. Thanks for a lot.

On a year to date basis, our adjusted cash flow has been $2 million, which includes a headwind of nearly $200 million from one time divestiture and rebranding related activities.

Max Krakowiak: Good morning, everyone. The company has gone through a significant amount of change over the past year and has continued to execute at a high level as our employees have risen to the occasion to overcome the dynamic environment we've been facing so far this year. We are now in the midst of our next challenge as we saw noticeable step down in demand from our pharma and biotech customers as we progress through the quarter, especially in September.

As for capital deployment, we continue to remain active in the quarter as mentioned, we bought back another $111 million of stock and we paid off the remaining $467 million of our 2023 bond, which matured in mid September.

We have significant cash and equivalents on our balance sheet and are well positioned to pay off the 800 million bond we have coming due next September.

Max Krakowiak: Although we expect these headwinds to continue, we remain focused on the items that are within our control and remain excited about the opportunities that lie ahead for our new company. As for a lot as mentioned, we continue to make progress in our strategic initiatives across R&D operations and sales and marketing while continuing to rightsize the business. In addition to the previously discussed 60 million of cost actions we have taken so far this year, given the softer top line trends we experience as the third quarter progressed, we have identified another 20 million of further cost reductions that will impact the remainder of this year.

With this activity we finished the quarter with a net debt to adjusted EBITDA leverage ratio of two eight times.

I will now provide some commentary on our third quarter business trends, which is also included in the quarterly slide presentation on our Investor Relations website.

But 1% non COVID-19 organic growth in the quarter was comprised of a 3% decline in our life Sciences segment and 4% growth in diagnostics.

Geographically, we declined in the low single digits in the Americas grew low single digits in Europe and grew mid single digits in Asia with China growing in the high single digits overall.

Max Krakowiak: Since we currently expect to offer pharma biotech spending to be in place for at least a few more quarters, we are also working to take additional actions to properly align our cost structure as we head into next year to ensure we have probably balanced strategic investments while preserving our elevated margin profile. Moving on to our third quarter results, the company generated 1% non-COVID organic growth over on the quarter, which resulted in total revenue of 671 million, which was down 6% due to the drop in COVID-related revenues compared to a year ago.

Within China, we saw our diagnostics segment grow in the low double digits driven by high teens growth in immuno diagnostics. This was offset by low single digit growth in life Sciences.

Looking ahead to the fourth quarter, we continue to expect our immuno diagnostics business to grow well in China, but likely more at a low double digit rate as comps continued to strengthen.

From a segment perspective, our life Sciences business generated total adjusted revenue of $308 million in the quarter.

Max Krakowiak: Of the 400 basis points lower than anticipated organic growth we experienced in the quarter versus the midpoint of our guidance, approximately 300 basis points of the shortfall was pressure related to our instrument and software businesses, while 100 basis points was from softer reagent and consumable demand, particularly in September. APEC added 1% to our third quarter revenue, and we again had no incremental contribution from acquisitions. As it relates to our P&L, we generated 27.5% adjusting, operating margins in the quarter overall, which were largely in line with our 28% expectation despite the late fall off of revenue in the quarter.

This was down 2% on a reported basis and 3% on an organic basis.

From a customer perspective sales into pharma biotech declined in the high single digits organically, which was offset by low double digit growth from academic and government customers.

Our life Sciences instrument revenue was down high single digits, while our reagent licensing and specialty pharma services revenue declined low single digits year over year.

A step down in region growth was driven by as anticipated lower licensing in pharma services revenue year over year, and some pressure from the pharma biotech customer weakness.

Reagent sales has been largely immune from some of the softer trends we started to see in the first half of the year as we progressed through the third quarter. We did begin to see some pullback on consumable spending from these customers as well.

Max Krakowiak: Our growth margins of 61% were down from last quarter due to a combination of less volume leverage and an unfavorable mix shift. We incurred a favorable pricing impact of approximately 150 basis points in the quarter, which is helping to offset the continued inflation we are seeing across parts of the business. For the full year, we now expect at least 125 basis points of net pricing realization for the company overall. Looking below the line, we had net interest expense of 7 million, which was again favorable by a couple million compared to our expectations.

Our revenue signal software business grew in the low double digits as it benefited from the timing of renewals year over year. We continue to expect this business to be down double digits in the fourth quarter as we assume minimal new contract sales and you were multiyear contract renewals this quarter.

And our diagnostics segment, we generated $363 million of total adjusted revenue in the quarter, which was down 9% on a reported basis and 10% on an organic basis on a non COVID-19 basis. The segment grew 4% versus a year ago.

Max Krakowiak: This favorability was primarily driven by better than expected interest income as we did a better than anticipated job of repatriating our cash so far this year. Our adjusted tax rate was 18% in the quarter, which was favorable to our expectations. We also continued to repurchase shares in the quarter, buying back 111 million in total, bringing our year-to-date repurchase activity to 384. Billion. We averaged 124.2 million shares in the quarter and exited the quarter with 123.5 million shares outstanding.

Our immuno diagnostics business grew in the high teens organically excluding COVID-19. It is great to see this business in China continued to normalize and I would again reiterate how important and impressive. It is that there is significant franchise continues to grow at a very high rate outside of China as well.

We expect this business, which represents more than 25% of our total company revenue to continue to grow in the double digits globally in the years to come.

And our reproductive health business overall organic revenue declined in the mid single digits year over year.

We experienced mid single digit positive growth in our newborn business, which was offset by weaker trends in prenatal and continued known headwinds in our revenue mix genomics lab business, which should subside by the end of this year.

Max Krakowiak: Moving beyond the P&L, we generated adjusted free castle of 8 million in the quarter, which on a year-over-year basis continued to be pressured from the draft in COVID revenues and roughly 21 million of outflows associated with one-time divestiture-related cost and rebranding activities. We expect some of these outflows to reverse over the coming months and positively impact our investing cashflow when they come back to us. On a year-to-date basis, our adjusted cashflow has been 2 million, which includes a headwind of nearly 200 million from one-time divestiture and rebranding-related activities.

Our applied genomics business incurred increased pressure from the slowdown in pharma biotech spending and declined organically in the low double digits, when excluding COVID-19 across both instruments and consumables.

<unk> has already provided some high level commentary as it pertains to our guidance expectations I thought I would provide some additional color.

End market demand has been a very fluid and somewhat volatile issue to contend with throughout this year.

Max Krakowiak: As for capital deployment, we continue to remain active in the quarter. As mentioned, we bought back another 111 million of stock and we paid off the remaining 467 million of our 2023 bond, which matured in mid-September. We have significant cash and equivalents on our balance sheet and our wealth position to pay off the 800 million bond we have coming due next September. With this activity, we finished the quarter with a net debt to adjusted EBITDA leverage ratio of 2.8 times.

For the fourth quarter, we expect our non COVID-19 organic growth to decline in the mid single digits year over year as we expect our life sciences business to decline in the low double digits in our diagnostics business to decline in the low single digits.

For your modeling purposes, we would point you to the lower end of our total company organic growth range and highlight that we expect our operating margins to be similar to this past quarter.

Net interest and other expense is expected to be approximately $15 million as we will have less interest income going forward after paying off the remainder of our 500 million bond in mid September resulting in less cash available to invest.

Max Krakowiak: I will now provide some commentary on our third quarter business trends, which is also included in the quarterly slide presentation on our investor relations website. The 1% non-COVID organic growth in the quarter was comprised of a 3% decline in our life sciences segment and 4% growth in diagnostics. Geographically, we declined in the low single digits in the Americas, grew low single digits in Europe, and grew mid single digits in Asia with China growing in the high single digits overall.

With a 16% tax rate, we expect adjusted EPS in the fourth quarter of $1 14 to $1 18.

When combined with our year to date performance. This fourth quarter outlook equates to full year 2023, non COVID-19 organic growth of approximately 2%.

FX to be a 1% headwind in M&A to have no impact on the full year.

Max Krakowiak: Within China, we saw our diagnostic segment grow in the low double digits driven by high-teens growth and immunodagnostic. This was offset by low single digit growth in life sciences. Looking ahead to the fourth quarter, we continue to expect our immunodagnostic business to grow well in China, but likely more at a low double digit rate as cons continue to strengthen. From a segment perspective, our life sciences business generated total adjusted revenue of 308 million in the quarter.

This results in our 2023 total revenue now expected to be in the range of $2 72 to $2 74 billion.

With the lower expected volumes, we now expect 28% adjusted operating margins this year down from our 29% prior outlook.

Below the operating line, we do have some favorability that we expect to drive our adjusted net interest and other expense to be approximately $57 million. This year in total down slightly from our prior outlook.

Max Krakowiak: This was down 2% on a reported basis and 3% on an organic basis. From a customer perspective, sales into pharma biotech declined in the high single digits organically, which was offset by low double digit growth from academic and government customers. Our life sciences instrument revenue was down high single digits, while our reagent licensing and specialty pharma services revenue declined low single digits year over year. The step down in reagent growth was driven by as anticipated lower licensing and pharma services revenue year over year, and some pressure from the pharma biotech customer weakness.

We experienced some favorability in the third quarter, which we expect to continue into the fourth. So we are now looking for a full year adjusted tax rate of 20% down from our prior 21% outlook.

Given our additional share repurchases in the quarter. We now expect our full year average fully diluted share count of a little under 125 million shares.

Slightly from our prior assumption.

This guidance now reflects an expected adjusted EPS to be in the range of $4 53 to $4 57.

Max Krakowiak: While reagent sales has been largely immune from some of the software trends we started to see in the first half of the year, as we progressed to the third quarter, we did begin to see some pull back on consumable spending from these customers as well. Our revenue single software business grew in the low double digits as it benefited from the timing of renewals year over year. We continue to expect this business to be down double digits in the fourth quarter as we have assumed minimal new contract sales and we have fewer multi-year contract renewals this quarter, at our diagnostic segment we generated 363 million of total adjusted revenue in the quarter which was down 9% on a reported basis and 10% on an organic basis on a non-COVID basis the segment grew 4% versus a year ago.

For the full year overall and as detailed in the second to last page of our earnings presentation.

While prolonged already provided some high level thoughts on 2024.

The only two things I would add are that while there are a wide range of potential outcomes for our organic growth next year. If growth did end up looking similar to what we now expect for this year, we would expect to have nominal margin expansion as the further cost actions. We plan to take will be partially offset by general inflation and some cost.

Returning.

Secondly, we would expect our net interest and other expense to be up approximately 40% next year as we will have significantly less interest income after paying off the remainder of the 500 million bond a month ago and the 800 million bond this upcoming September.

Max Krakowiak: Our immunodagnostic business grew in the high teams organically excluding COVID. It is great to see this business in China continue to normalize and I would again reiterate how important and impressive it is that this significant franchise continues to grow at a very high rate outside of China as well. We expect this business which represents more than 25% of our total company revenue to continue to grow in the double digits globally in the years to come.

While we are currently going through a challenging market environment that may extend for at least a few more quarters. We are confident in our ability to continue rising to the occasion as we have done over the past couple of years.

We remain focused on the items in our control such as our significant cost control actions and executing on our operational initiatives.

These actions will allow us to be well positioned to capitalize on the exciting future opportunities in front of us as we continue to shape remedy to realize its full potential.

Max Krakowiak: And our reproductive health business overall organic revenue declined in the mid single digits year over year. We experienced mid single digit positive growth in our newborn business which was offset by weaker trends in prenatal and continued known headwinds in our Revvity Olmics Genomics Lab business which should subside by the end of this year. Our applied genomics business incurred increased pressure from the slowdown in pharma biotech spending and declined organically in the low double digits when excluding COVID across both instruments and consumables.

With that operator, we would now like to open up the call for questions.

As a reminder, if you'd like to ask a question press star one on your telephone keypad.

You can show you on mute locally when asking your question.

First question for state control, Patrick Donnelly of Citi.

Mike Your line is now open. Please go ahead.

Thank you for taking the questions.

Max Krakowiak: While Kroat has already provided some high level commentary as it pertains to our guidance expectations, I thought I would provide some additional color. End market demand has been a very fluid and somewhat volatile issue to contend with throughout this year. For the fourth quarter we expect our non-COVID organic growth to decline in the mid single digits year over year as we expect our life sciences business to decline in the low double digits and our diagnostics business to decline in the low single digits.

<unk>, maybe one for you just in terms of the cadence of the quarter. It sounds like you flagged September being quite a bit worse could you just talk about I guess, what you saw is kind of that exit rate and what you've seen so far in October and maybe specifically on reagents. It seems like those softened maybe more than others. Just what you saw from customers and what Youre hearing.

On a go forward on that piece.

Sure Patrick as we entered September what we realized is that.

Max Krakowiak: For your modeling purposes we would point you to the lower end of our total company organic growth range and highlight that we expect our operating margins to be similar to this past quarter. Net interest and other expenses expected to be approximately 15 million as we will have less interest income going forward after paying off the remainder of our 500 million bond in mid September resulting in less cash available to invest. For the 16% tax rate we expect adjusted EPS in the fourth quarter of $1.14 to $1.18.

The pressure on the reagent side was more than we anticipated and some of it was what we realized as the site consolidations and the closure of some side from Big pharma, which obviously impacted the reagents numbers and we saw that impact second one was the <unk>.

Syed.

China.

That continued to see more pressure than anticipated as we came closer.

Towards the end of the quarter.

Max Krakowiak: When combined with our year-to-day performance this fourth quarter outlook acquies the full year 2023 non-COVID organic growth of approximately 2%. We expect FX to be a 1% headwind and M&A to have no impact on the full year. This results in our 2023 total revenue now expected to be in the range of 2.72 to 2.74 billion. With the lower expected volumes we now expect 28% adjusted operating margins this year down from our 29% prior outlook.

Also if you keep in mind.

On licensing comp revenue shows up.

In our reagents number so if you went to ex licensing revenue for the reagents would have been flat.

Okay. That's helpful. And then maybe one just as we think about can we ended this year into early next.

It was helpful to hear you talk about the first half next year, maybe some of these headwinds lingering.

It sounds like <unk>, maybe down mid single non Covid and Max kind of framing up maybe next year does look similar to this year, you're kind of in that low single range is it the right way to think about.

Max Krakowiak: Below the operating line we do have some favorability that we expect to drive our adjusted net interest and other expense to be approximately 57 million this year in total down slightly from our prior outlook. We experience some favorability in the third quarter which we expect to continue into the fourth so we are now looking for a full year adjusted tax rate of 20% down from our prior 21% outlook. Given our additional share we purchased in the quarter we now expect a full year average fully diluted share count of a little under 125 million shares down slightly from our prior outlook. This guidance now reflects an expected adjusted EPS to be in the range of $4.53 to $4.57 for the full year overall, and is detailed on the second and last page of our early presentation.

The first half.

As we model may be thinking about something in that down mid single range and then ramping and is it just going to be easier comps in the second half is there any visibility into the level of improvement or for now given that you saw.

The range of outcomes and just just uncertainty.

Yes, I think it's a fair question Patrick I think what we wanted to say no as we said in our prepared remarks, we wanted to take the time to see how the macro evolves over the next couple of months and provide a more complete update towards the year end.

As we look at the line.

We and our peers have pointed out and as we look into <unk> and especially on the instrument side of the business generally if you recall <unk> generally tends to have a budget flush that budget flush.

Max Krakowiak: While Prahlad already provided some high-level thoughts on 2024, the only two things I would add are that while there are a wide range of potential outcomes for our organic growth next year, if growth did end up looking similar to what we now expect for this year, we would expect to have nominal margin expansion. As the further cost actions we plan to take will be partially offset by general inflation and some cost returning.

Comfortable saying that thats not there is no visibility into that.

More importantly, I think as we look also into the first half of the year, we are not assuming a ramp up in the first half but in the second half as you pointed out obviously because of lower com, but also as things start coming back our expectation is that it definitely would be better than as we would see in the.

Max Krakowiak: Secondly, we'd expect our net interest and other expense to be up approximately 40 percent next year as we will have significantly less interest income after paying off the remainder of the 500 million bond a month ago and the 800 million bond this upcoming September. While we are currently going through a challenging market environment that may extend for at least a few more quarters, we are confident in our ability to continue rising to the occasion as we have done over the past couple of years.

First time buyers or anything I'm missing.

No.

Ed.

Okay. Thank you guys.

Thank you our.

Our next question comes from Vijay Kumar of Evercore. Your line is now open. Please go ahead.

Hey, guys. Thanks for taking my question.

Maybe just one on.

Max Krakowiak: We remain focused on the items in our control, such as our significant cost-control actions and executing on our operational initiatives. These actions will allow us to be well positioned to capitalize on the exciting future opportunities in front of us as we continue to shape revenue to realize its full potential.

September commentary on the guidance, so the guidance Shane by $90 million.

Is that all a farmer.

What is that assuming for China at $90 million change in guidance and implied.

Implied minus 5% for Q4.

Is that is that the trend you guys saw in September and Thats, what the guidance is for Q4.

Operator: But as that operator, we would now like to open up the call for questions.

I think the majority of the majority of that obviously is on the life sciences side of the business Vijay.

Operator: Thank you. As a reminder, if you would like to ask a question, you can press star five by one on your telephone keypad. Please ensure you are unmuted locally when asking your question.

Our assumption around instruments is that they would be down double digits.

Assumption around reagents is that it would be flat.

Patrick Donnelly: Our first question for today comes from Patrick Donnelly of City. Patrick, your line is now open, please go ahead. Thank you for taking the questions. Pralad, maybe one for you, just in terms of the cadence of the quarter, however, you know, it sounds like you flagged September as being quite a bit worse. Can you just talk about against what you saw as it's kind of that exit rate and what you've seen so far in October and maybe specifically on reagents, you know, things like those softened maybe more than others, just what you saw from customers and what you're hearing on the go forward on that piece.

<unk> I think also to keep in mind.

On the diagnostics side.

Applied genomics is getting impacted because it's the overlap of customers that we see on pharma.

<unk> pharma biotech.

<unk> Dx business in China, and everywhere as while it continues to grow.

<unk>.

<unk> got a much tougher comp in <unk> versus what we had in <unk>. So.

It's probably a combination of all the three things that I pointed out which is what is leading us to what we have guided in <unk>.

Patrick Donnelly: Sure Patrick, you know, as we entered September, you know, what we realized is that, you know, the pressure on the reagent side was more than we anticipated. And some of it was what we realized is the site consolidations and the closure of some site from big pharma, which obviously impacted the reagents numbers and we saw that impact. Second one was the CRO site in China that continued to see more pressure than anticipated as we came closer towards the end of the September. So if you want to, you know, ex licensing revenue for the reagents would have been flat.

Understood.

Matt one for you.

Sure.

The.

I just wanted to understand your 24 comments here.

But did you say did I hear you correctly, when you said no operating leverage.

<unk> revenue outlook.

Similar to fiscal 'twenty, it's kind of base organic basis, and I think you said net interest and other 40% can you can you just put a dollar number please.

What's the right base, when you said up 40%.

Yes.

A couple of points there Vijay one I would say for 2024 right. I think we were saying there is a wide range of potential outcomes for next year and we're going to take the next couple of months to further refine it.

In the event that organic growth did look similar to this year. You are correct. We said that there will be nominal margin expansion rate very low single digit growth year over year.

Prahlad Singh: Okay, that's helpful. And maybe one just as we think about kind of the end of this year into early next, you know, Pralad is helpful here. You can talk about the first half next year, maybe some of these headwind lingering, you know, it sounds like four cues, maybe down mid single non-COVID. And max kind of framing up maybe if it actually does look similar to this year, you're kind of in that low single range.

In terms of your interest in other question the 40% growth is off of $57 million number this year, which we provided in our prepared remarks and the reason for the increase year over year is because of the lower cash balance we have on average in 'twenty four as we mentioned we paid off the $500 million note in Q3 of this year and we've got it.

Prahlad Singh: Is it the right way to think about, you know, the first half, as we model, you know, maybe thinking about something in that down mid single range and then ramping. And is it just going to be easier comes in the second half? Is there any visibility into a level of improvement or for now given? And you said the range of outcomes will just, just uncertain. Yeah, I think it's a fair question, you know, Patrick, I think what we want to do is, you know, as we said in our prepared remarks, you want to take the time to see how the macro evolves over the next couple of months and provide a more complete update towards the year end.

Another $800 million and we have to pay off at September of next year.

Alright, Thank you guys.

Thank you next.

Our next question comes from Derik Debruin of Bank of America. Your line is now open. Please go ahead.

Hi, good morning, and thank you for taking the question.

Just to put a point on it on the 24 outlook I mean can you hold EPS flat or with the cost cutting or should we think about it as potentially being down year over year.

Prahlad Singh: I think, you know, as we look at the line, you know, as we, as we, and our peers have pointed out, you know, as we look in the 4Q, especially on the instrument side of the business, you know, generally, if you recall, 4Q generally tends to have a budget flow. You know, that budget flush, you know, we are very, you know, comfortable saying that that's not, you know, there is no visibility into that.

Yes, I think as we mentioned Derek right, we are not providing a guidance here for 2024, if we sit there as a potential range of outcomes.

In the event that organic growth did look similar we've given you enough pieces to go ahead and model down to the EPS, but again, we're going to take the next couple of months. It really refine what the organic growth assumption is which will have a big impact on what our ultimate EPS is for next year.

Prahlad Singh: For more importantly, I think, you know, as we look also into the first half of the year, you know, we are not assuming and a ramp up in the first half. But in the second half, as you pointed out, obviously because the lower comp, but also as things start coming back, our expectation is that it definitely would be better than as we would see in the first half. Right, so anything I'm missing. No, I'm just for that.

Got it.

Just a little bit more color on what's going on at <unk> and horizon and just.

Unknown Executive: Okay, thank you. Well, thank you.

Talk about sort of like some of the trends in farmer they just.

Our data is hesitating on spending are they doing it.

Just any more incremental color you can sort of like give us on what's going on with that end market. Thank you.

Further let me talk about Jim Barr religion did better than our overall reagents business that we've talked about.

Vijay Kumar: Our next question comes from the VJ Kumar of Evercourse. The line is now open. Please go ahead. Hey guys, thanks for taking my question. Pralad may be just one on now. Yes, September commentary on the guidance, so the guidance chain by 90 million. Is that all a farm home? What is it assuming for China that 90 million chain guidance in that? Yeah, that people are minus 5% for Q4. Is that is that the trendy guy saw in September?

It did quite quite good.

Obviously it also has seen some softening in primarily that is what we're seeing especially as we look at China, given the CRM business depression in that marketplace I think on the horizon side, we get a lot of service business that comes there.

From pharma biotech, which has started which has seen softening. So on the horizon side on the reagent side violates okay, but the service revenue that comes from horizon because of the cell line development work et cetera that they do that has seen softening so any spending coming out of pharma biotech has seen softening.

Vijay Kumar: And then that's what the guidance is. I think majority of the majority of that obviously is on the life sciences side. As a business, Vijay, you know, our assumption around instruments is that they would be down double digits. Our assumption around reagents is that it would be flat versus 3Q. I think also to keep in mind, you know, on the diagnostic side, you know, applied genomics is getting impacted because it's the overlap of customers that we see on my farmer biotech.

As the agenda has been that we have observed.

Got it and services in general being more so than just than the consumables.

Yes, absolutely.

Got it thank you very much.

Yes.

Thank you.

Next question comes from Andrew Cooper of Raymond James Your line is now open. Please go ahead.

Vijay Kumar: Our IDX business in China and everywhere else, while it continues to grow, you know, it's got a much tougher comp in 4Q versus what we had in 3Q. So, you know, it's probably a combination of all the 3 things that I pointed out, which is what is leading us to what you've guided in 4Q. I'm certain in that max one for you.

Hey, everybody thanks for the questions.

Let me first just on some of the cost actions you called out I think it was $60 million up to $80 million now with the <unk> coming just can you clarify are those annualized numbers are for the year and then how much should we think about that being a tailwind as we think about moving into 2020 for some of what you pulled out this year that.

To benefit even if you don't necessarily pull out incremental dollars.

Vijay Kumar: The I just want to understand you are 24 comments here, but did you say I did not hear correctly when you said no operating leverage if revenue outlook was similar to fiscal 23 on a base organic basis. And I think you said negative interest in other 40% can you just put a dollar number please. You know, what's the right base when you say a 40%? Yes, so a couple of points there, Vijay.

Yeah, Hey, Andrew So the way I would think about the cost of the $80 million number is the reduction that we have in our P&L and financials for this year.

As you think about it for next year, you mentioned a little bit in the prepared remarks, we will have some costs that were.

Tailwind for us this year that are going to come back.

Into our financials for next year, which is kind of getting offset by some of the annulus nation of the cost actions we have taken this year.

Vijay Kumar: One, I would say for 2024, right. I think we were saying there's a wide range of potential outcomes for next year. And we're going to take the next couple months to further refine it. You know, in the event that organic growth did look similar to this year, you are correct. We said there will be nominal margin expansion, right, very low single digit growth year over year. In terms of your interest in other question, the 40% growth is also 57 million dollar number this year, which we provided in our prepared remarks.

And so that is kind of kind of kind of balance each other out and then again as I mentioned in one of the previous Q&A that's going on.

Ultimately depend on what our organic growth looks like for next year as well.

Okay helpful and then.

Maybe just can you give us a sense for a little bit of a sizing of how you might break up the end market.

Within the diagnostics business really with the intent of how much of that business is more exposed to pharma biotech versus what is sort of true clinical and probably not impacted by the same.

Vijay Kumar: And the reason for the increase year over year is because of the lower cash balance we have on average in 24 as we mentioned, we paid off the 500 million dollar note in Q3 of this year. And we've got another 800 million that we have to pay off in September of next year. Thank you. Very clear. Thank you guys. Thank you.

And market headwinds that we've talked about for pharma biotech.

Yes, it's a great question and so I think you've heard about us talk about the diagnostics business being impacted by pharma biotech in really two of our business lines. The first is the applied genomics business, which as a reminder is roughly $250 million of revenue per year about 60% of that business goes in.

Derik Bruin: Next question comes from Derik De Bruin. I'll find a couple of America. You're on sale open.

Derik Bruin: Please go ahead. Hi, good morning. Thank you for taking the question. Just to put a point on it on the 24 outlook, I mean, can you hold EPS flat or with the cost-cutting, or should we think about it as potentially being down your rear? Yeah, I think as we mentioned, Derik, right? We are not, you know, providing a guidance year for 2024. If we said there's a potential range of outcomes, I think in the event that our granite growth did look similar, we've given you enough pieces to go ahead and model down to the EPS.

The pharma biotech.

Customer base and then you've got the second piece is our <unk> <unk> business.

Which is last year that was roughly an $80 million business for us I would say more than half of that business is related to the pharma biotech customers as well.

Okay great.

I'll stop there thanks.

Thank you our next.

Next question comes from <unk> funds.

Bernstein of Bernstein research.

Please go ahead.

Derik Bruin: But again, we're going to take the next couple months is really refined with the organic growth assumption is, which will have a big impact on what our ultimate EPS is for next year. Got it. And just a little bit more color on what's going on at Biowegend and Horizon and just, you know, talk about sort of like some of the trends in Farmer. They just, mean, are they hesitating on spending? Are they doing it?

Great. Good morning, Thanks, a lot for the question.

So as part of your portfolio transformation, you've talked a lot about how the new portfolio should allow you to grow well above market range and I know that.

Derik Bruin: I just any more incremental color you can sort of like give us on what's going on with that end market. Thank you. So, Derik, you know, let me talk about Biowegend. Biowegend did better than our overall reagents business that we talked about, you know, and they did quite good. I think obviously, it also has seen some softening in and primarily that is what it is seeing, especially as we look at China, we've given the CRO business depression in that marketplace.

Youre going to revisit your midterm outlook and we'll wait to share specific numbers on 24 and longer term view.

Two questions. One is just can you expect to be more resilient than your peers on average next year.

To grow significantly.

Market growth next year whatever that averages.

Yes.

Good morning, Hugh I think there are two ways to look at it right.

Definitely feel very confident our portfolio continues to remain differentiated.

Derik Bruin: I think on the horizon side, you know, we get a lot of service business that comes there from Farmer Biotech, which has started, you know, which has seen softening. So, on the horizon side, on the reagent side while it's okay, but the service revenue that comes from Horizon because of the cell line development work, etc., that they do, that has seen softening. So, any spending coming out of Farmer Biotech has seen softening, which is the general trend that we have observed. Got it. And services in general being more so than just than the consumables. Yes, absolutely. Got it. Thank you very much.

Even in this tough market environment, let me point out to a couple of things that that we feel are bright spots, our immuno diagnostics business globally.

Andrew Cooper: Thank you.

<unk> in the high teens, especially in China. It has continued to grow in the high teens and will grow 10% China performance.

Low double digits growth there over the year for the full year, we will expect mid single digit growth. There. So I think if you look at China. If you look at our immuno diagnostics business that continues to be resilient on neonatal business. Despite pressure from both rate continues to do very well even in the even in the life.

Sciences side, despite the depression that we saw in Q, our reagents business will still grow mid single digits for the year. Even when you include the licensing comp headwinds that we have for this year.

Andrew Cooper: Our next question comes from Andrew Cooper of Raymond James. Your line is not open, please go ahead. Hey everybody, thanks for the questions. Maybe first, on some of the cost actions you called out, I think it was $60 million up to $80 million now with the 20 coming. Just do you clarify, are those annualized numbers are for the year? And then how much should we think about that being a tailwind as we think about moving into 2024, some of what you pulled out this year that that continues to benefit even if you don't necessarily pull out, you know, incremental dollars?

And going forward also we expect our reagents business to be resilient and continued to do very well.

At the end of the day, what it comes down to is the pressure from bar pharma biotech on Capex spending which is on the life Sciences instrument side and also on some on the software renewal side that we had so that pressure, we expect as I pointed out to sort of elongate into the first half of next.

Andrew Cooper: Yeah, Andrew. So, the way I would think about the cost of the $80 million numbers, the reduction that we have in our P&L and financials for this year, you know, as you think about it for next year, we mentioned a little bit in the prepared remarks. We will have some costs that were, you know, a tailwind for us this year that are going to come back into our financials for next year, which is kind of getting off step by some of the annualization of the cost actions we have taken this year.

Here.

But from a portfolio perspective, we feel very confident that we will be a differentiator.

Got it. Thank you and then maybe just one follow up you talked about.

Six in China, being quite strong and a high point for your portfolio. Some of your peers have also had positive things to say about the market environment for diagnostics in China.

Andrew Cooper: And so, that is kind of kind of balance each other out. And then again, as I mentioned in one of the previous Q&A, you know, it's going to ultimately depend on what our grant of growth looks like for next year as well.

Volume being at thanks, Aaron by anti corruption crackdown.

Has there been any signs of weakness or of the crackdown scope expanding to include diagnostics or from where you're standing today. It just looks like the Sally.

Max Krakowiak: Okay, helpful. And then maybe just can you give us a sense for a little bit of the sizing of how you might break up the end market within the diagnostics business, really with kind of the intent of how much of that business is more exposed to pharma biotech versus what is sort of true clinical and probably not impacted by the same same end market headwinds that we talked about for pharma biotech.

From a business perspective, we have seen no to very minimal impact.

In our business if anything is just more delays versus any cancellation I think in the longer term this will probably benefit multinationals more given given the.

Max Krakowiak: Yeah, it's a great question. And so I think you've heard about it. Let's talk about the diagnostics business being impacted by pharma biotech in really two of our business times. The first is the applied genomic business, which is a reminder is roughly 250 million dollars of revenue per year, about 60% of that business goes into the pharma biotech customer base. And then you've got the second piece is our revenue omics business, which is last year, that was roughly an 80 million dollar business for us. You know, I would say more than half of that business is related to the pharma biotech customer as well.

Unknown Executive: Okay, great.

Unknown Executive: I'll stop there. Thanks.

Anticorruption initiative that the government has going on.

Eve Burstein: Thank you.

Great. Thank you.

Thank you.

Question comes from Jack Meehan of Nephron research. Please.

Please go ahead.

Thank you good morning.

Wanted to ask the diagnostics business.

So I think I heard down low single digits forecast for the fourth quarter I just wanted to confirm that's on a non COVID-19 basis, and then if you compare it versus the third quarter results, it's a bit of a moderation just talk about.

Whats changing kind of into year end.

Eve Burstein: Our next question comes from Eve birth, Bernstein of Bernstein Research. You'll find it's now open. Please go ahead. Great. Good morning. Thanks a lot for the question. So as part of your portfolio transformation, you've talked a lot about how the new portfolio should allow you to grow well above market average.

Yeah, sure Hey, Jack.

So actually for the fourth quarter guidance for our diagnostics business will be roughly flat.

For the fourth quarter.

And so when you then look at it versus the third quarter really the drop versus the mid single digits growth in the third quarter was driven by the fact that our applied genomics business as I. Previously mentioned continues to face increased headwinds from the pharma biotech that is really the only thing that I would say is changing dramatically from.

Eve Burstein: I know that you're going to revisit your midterm outlook and we'll wait to hear specific numbers on 24 longer term from you, but two questions. One is to do expect to be more resilient than your peers on average next year. And you expect to grow significantly above market growth next year, whatever that average is. Yeah, good morning. I think you know, there were two ways to look at it. Right. We are definitely feel very confident that our portfolio continues to remain differentiated.

The third quarter to the fourth quarter.

The other two pieces of it, albeit they are smaller is one we have a heavier capex instrumentation comp in our reproductive health business in the fourth quarter and the second is a immuno diagnostics, China does have a tougher comp in the fourth quarter. If you remember third quarter of last year was down high teens in the fourth quarter was down mid single digits.

So.

I would say those are the kind of the three key pieces quarter over quarter.

Eve Burstein: You know, as we even in this stuff market environment, you know, let me point out to a couple of things that that we feel are bright spots are amino diagnostics business globally. We, you know, grew in the high teens, especially in China, it has continued to grow in the high teens and will grow 10%. China performance, you know, we had low double digits growth there over the year for the full year, we will expect mid single digits growth there.

Great, Okay, and then sticking on diagnostics in China.

Getting a lot of questions about the volume based procurement initiatives in the region.

Prolonged or Max just curious how you kind of frame any exposure there for your diagnostics business and.

Kind of thoughts on what that can mean for pricing over the coming years.

Eve Burstein: So I think you know, if you look at China, if you look at them, you know, diagnostics business that continues to be resilient, a neonatal business despite pressure from both rate, continues to do very well. Even on the guy, even on the life sciences side, you know, despite, you know, the depression that we saw in 3 queue, our reagents business will still grow mid single digits for the year. Even when you include the licensing comp headwinds that we have for this year and going forward also we expect a reagents business to be resilient and continue to do very well.

And Jack you've talked about this earlier I think our NPI is differentiated enough I mean, I think if you just to frame it.

Roughly high single to probably 10% of our Dx business will see some impact from value based pricing.

And over the years, we've continued to see mid single digit price declines in China and our portfolio. However, we have continued to compensate for that with newer NPI and increased volume, but we have seen and we expect to continue to see that more than offset the price decline and result in double digits immuno diagnostic.

Eve Burstein: You know, at the end of the day, what it comes down to is the pressure from barma farmer biotech on cap expanding, which is on the life sciences instrument side and also on some on the software renewal side that we had. So that pressure, we expect as that pointed out to sort of elongate into the first half of next, in the last year. But from a portfolio perspective, we feel very confident that we will be differentiated. Got it. Thank you.

<unk> growth for our portfolio that into the future.

We assume sort of flat growth for reproductive health applied genomics in China Dx.

Mid single digits overall for the whole year ago.

Thank the future potential impact from the BP price expanding.

We will see it will decline each year given the mid single digit gradual price decline that we currently continue to see in China.

Eve Burstein: And then maybe just one follow up. You talked about the diagnostics in China being quite strong and a high point for your portfolio. Some of your peers have also had positive things to say about the market environment for diagnostics in China. Volume being up being spared by anti-corruption crackdowns. Have there been any signs of weakness or of the crackdown scope expanding to include diagnostics or from where you're standing today to just look like smooth sailing.

Keith.

Next question comes from Matt <unk> of Goldman Sachs. Your line is now open. Please go ahead.

Thanks for taking my questions. Good morning, maybe just to start on the academic government end market you showed pretty solid growth in the quarter. How are you thinking about that end market in the context of some of the budgets being set.

Over time, whether it's NIH or others in terms of the stability of that end market as we move into 'twenty four.

Eve Burstein: From our business perspective, we have seen no two very minimal impact in our business. But if anything is just more delays versus any cancellation, I think in the longer term, if this will probably benefit multinational's more given given the anti-corruption initiative that the government has going on. Great. Thank you.

Yeah, Hey, Matt has gone so as we look at our academic and government customer base.

Minor that's about 25% of our life sciences portfolio and in the quarter. It did grow low double digits.

Other point I would call out is that instruments makes up about 50% of that while reagents makes up the other 50%. Our reagents business has continued to kind of grow at a mid teens level year to date in the academic and government portfolio.

Expect that to continue really maybe the I would say unique dynamic. This year is really more around the instrument growth in academic and government. If you remember they had much easier comps in 2022, they were coming off of so instruments are posting I would say a healthier growth rate than what we would probably suspect long term, but again you are only talking about.

Jack Meehan: On the next question comes from the attack me and open that from research. One to ask the diagnostics business max. I think I heard down low single digits forecast for the fourth quarter. I just want to confirm that's on a non-COVID basis. And then if you compare it versus the third quarter results, it's a bit of a moderation. Just talk about what's changing kind of your end. Yes, sir. Hey, Jack. So actually for the fourth quarter guidance for our diagnostics business will be roughly flat for the fourth quarter.

Half of that portfolio is really instrumentation.

Got it thanks, Max and then just more of a high level question as you saw some of that demand.

From pharma biotech dropoff in September could you maybe characterize the nature of that slowing in spend just given the fact that a lot of these large pharma companies have big budget decisions to make and turning that around and re spending sometimes takes a lot of time I'm. Just wondering do you see the sort of the slowdown in spending is sort of a transitory.

Jack Meehan: And so when you then look at it versus the third quarter, really the drop versus the mid single digits growth in the third quarter was driven by the fact that our applied genomics business as I previously mentioned continues to face increased headwinds from the pharma biotech that is really the only thing that I would say is changing dramatically from the third quarter to the fourth quarter. The other two pieces of it albeit they're smaller is one, we have a heavier capex instrumentation comp and our reproductive health business in the fourth quarter.

In terms of 'twenty three budgets or do you think there is some bigger re prioritization and spending and budget decisions moving forward 24.

I think from my perspective, and just looking at the customer buying behavior.

It's not that.

And third September.

So more of a pausing or a cancellation rather than saying that this is going to be continuous I think just given the IRI.

Jack Meehan: And the second is a immunodagnostic China does have a tougher comp in the fourth quarter. If you remember, third quarter of last year was down high teens and the fourth quarter was down mid single digits. So I would say those are the kind of three key pieces quarter recorder. Right. Okay. And then sticking on diagnostics in China, getting a lot of questions about the volume based procurement initiatives in the region. Prologue or max just curious how you kind of frame any exposure there for your diagnostics business and kind of thoughts on what that can mean for pricing over the coming years.

Act customer.

Customers.

More than anything just ensuring that they calibrate and get their costs in line now. So I think it's just more planning and ensuring that their cost structure is ready to address the Iot as it comes into play into 2025, so from our perspective. It is transitory and it will be there for a few quarter.

<unk>.

Thanks, Paul I appreciate it.

Thank you. Our next question comes from Josh Movement of Cleveland Research. Your line is now open. Please go ahead.

Jack Meehan: Thanks. Yeah, and we've talked about this earlier, right. I think our NPI's are differentiated enough. I mean, I think if you just to frame it, you know, roughly high single to probably 10% of our DX business, you know, will see some impact from value based pricing. And you know, over the years, we've continued to see mid single digit price rate declines in China on a portfolio. However, we've continued to compensate for that with newer NPI's and increased volume.

Good morning, Thanks for taking my questions two for you.

First Max can you help us think about the right earnings base for 'twenty four I mean, you have $80 million of cost reductions. This year I guess, how much of that is discretionary comp that will be coming back into the business and then it sounds like you have higher interest expense, maybe tax rate and share count are tailwind just curious if you take the $4 55.

Jack Meehan: But we have seen and we expect to continue to see that more than offset the price decline and result in double digits immunodagnostic growth for a portfolio there into the future. You know, as we assume sort of flat growth for reproductive health and applied genomics in China DX are in mid single digits overall for the whole year though. I think the future potential impact from VBP price expanding, you know, we will see it will decline each year given the mid single digit gradual price decline that we currently continue to see in China. Thank you.

Good.

For this year is the right way to think about the base entering next year or is it below that.

Yeah, Hey, Josh.

Look I appreciate the question I think for as I mentioned before on 2024, we are not giving guidance on EPS or anything of that nature getting specific we're going to take the next couple of months to really refine our organic growth outlook of what we anticipate for next year. I think we were trying to get ahead and saying in one of the possible scenarios. If it did look similar to this year.

We wanted to kind of get out front in terms of some of the margin commentary on what that would look like but again, we're going to take the next couple of months to really refine what we expect.

Our organic growth to be for 2024.

And again I'll just add to this Josh because I know I'm. Obviously people are curious on 2024, we really need to take the time to ensure that we understand what customer buying behavior looks like and how it evolves the macro evolves over the next few months, but I think more importantly, as Mac said art.

Matt Fykes: Our next question comes from Matt Fykes of Golden Science. Your line is now open. Please go ahead. Thanks for taking my questions. Good morning. Maybe just to start on the academic government and market, you should pretty solid growth in the quarter.

Matt Fykes: How are you thinking about that and market in the context of some of the budgets being set over time, whether it's NIH or others in terms of the stability of that and market as we move into 24? Yeah, hey, Matt. How's it going? You know, so as we look at our academic and government customer base, you know, as a reminder, that's about 25% of our life sciences portfolio. And in the quarter, it did grow low, double digits.

Taking the right measures, we are taking action to protect our top quartile margin profile. Despite revenue growth weakness and that includes the cost cutting measures that we've already taken and we will continue to take to protect and even expand our margins.

Got it Okay and then.

I was wondering if you could provide more context on how the quarter progressed within the life Science business, you, obviously mentioned tighter reagents, but curious how instrument demand progressed and then I guess, how confident are you that you've fully capture the potential downside I think Mack said the life science business is expected to be down double.

Matt Fykes: The other point I would call out is that instruments makes up about 50% of that while reagents makes up the other 50%. Our reagents businesses continue to kind of grow at a mid teens level year to date and the academic and government portfolio. We can expect that to continue. Really, maybe the, I would say, unique dynamic to this year is really more around the instrument growth in academic and government. If you remember, they had much easier comps in 2022.

<unk> in the fourth quarter, it's a wide range I guess any more context, you can provide on.

Kind of the right.

The right landing point for the life Science business.

Matt Fykes: They were coming off of so instruments are posting. I would say a healthier growth date than what we would probably suspect long term. But again, you're only talking about, you know, half of that portfolio is really instrumentation. Got it.

Look I mean, I think on the life Sciences instrument side, we've assume double digit decline.

In the fourth quarter, and we've kept our reagents flat versus our chief at quarter end.

Matt Fykes: Thanks, Max. And then just more of a high level question. As you saw, some of that demand from pharma biotech drop off in September, because you may be characterized in nature of that slowing and spending, just given the fact that a lot of these large pharma companies have big budget decisions to make and turning that around and respending sometimes takes a lot of time. I'm just wondering, do you see these sort of this slow down and spending a sort of a transitory in terms of 23 budgets, or do you think there's some bigger reprioritizations and spending and budget decisions moving forward in 24?

Essentially the way I would say it is that the pattern that based on the buying behavior of our customer.

Towards the end of the quarter.

Which was.

As we said on both Max and I pointed out it was more of a steeper decline in the second half of the quarter.

Yes.

One other piece I would add Josh is that normally we do see sort of a sequential dollar step up in the fourth quarter from our life Sciences instrumentation, usually thats about a 20% volume step up quarter over quarter, we have taken that now fully out of our guidance for the fourth quarter I think the last time, we spoke on our third our second quarter earnings call we have reduced.

Matt Fykes: You know, Matt, I think, you know, from my perspective, I'm just looking at the customer buying behavior, you know, it's not that, you know, as we entered September, we saw more of a pausing or a cancellation, rather than saying that this is, you know, going to be continuous. I think just given the IRA act customers more than anything, just ensuring that they calibrate and get their costs in line now. So I think it's just more planning and ensuring that their cost structure is ready to address the IRA act as it comes into play into 2025. So from our perspective, it is transitory and it will be there for a few quarters.

But we had not fully eliminated the step up between the third and the fourth quarter and now we have we are fully taken out any sequential step up on instrumentation.

Got it that's helpful. Thanks, guys.

Thank you next question comes from Dan Brennan of TD Cohen.

Your line is now open. Please go ahead.

Great. Thanks, Thanks for taking the questions guys, maybe on the immuno diagnostics business since that's been such a driver here.

You guys sounded very positive on the continuation can you just give us a little color on kind of what you're seeing globally and the confidence that that kind of double digit growth continues here in the 'twenty four.

Matt Fykes: Thanks for all I appreciate it. Thank you.

Hey, Dan Good morning, Yes.

Josh Woodman: Our next question comes from Josh Woodman of Cleveland Research. The line is now open. Please go ahead. Good morning. Thanks for taking my questions to for you. Hey, first, Max, can you help us think about the right earnings base for 24? I mean, you have 80 million of cost reduction this year. I guess how much of that is discretionary comp that will be coming back into the business and it sounds like you have higher interest expense, maybe tax rate and share count or tailwinds.

Again that has been a bright spot as you pointed out and we continue to expect that to do better.

Look as we've said about euro immune and Max pointed out today.

You should assume that our European business is going to continue to grow in the double digits immune under two key reasons our growth drivers that we've pointed out one is obviously the awareness of our auto immune disease and the continued growth of that especially as we see that in emerging markets launch of <unk>.

Josh Woodman: Just just carry to do you think the 455 guide for this year is the right way to think about the base entering next year or is it below. Yeah, hey, Josh, look, appreciate the question. I think for as I mentioned before on 2024, we are not giving guidance on EPS or anything of that nature getting specific. We're going to take the next couple months to really refine our organic growth outlook of what we anticipate for next year.

More specifically in the United States, but also in other markets. They have come out with a few new assays and instruments.

Starting to see traction and they have a very healthy pipeline and more importantly, as we look going forward, which is what gives us the confidence in the growth of that business.

Josh Woodman: I think we were trying to get ahead and saying, you know, in one of the possible scenarios, if it did look similar to this year, we wanted to kind of get out front in terms of some of the margin commentary and what that would look like. But again, we're going to take the next couple months to really refine what we expect our organic growth to be for 2024, you know, and again, I'll just add to this, Josh, because I know, obviously people are curious on on 2024.

Great. Thanks, and then maybe just on the free cash flow you talked about some of the one off headwinds here with the divestiture and also some of the rebranding how should we be thinking about today. If we think about conversion into 24 at this point on free cash flow.

Yeah, Hey, Dan, Yes, so I think starting with the free cash flow number Brennan, we mentioned a little bit in the prepared remarks, if you were to sort of normalize for some of these aes outflows et cetera, our year to date conversion.

Josh Woodman: We really need to take the time to ensure that we understand what customer buying behavior looks like, you know, and how it evolves. The macro evolves over the next few months, but I think more importantly, you know, as Max said, we are taking the right measures. You know, we are taking action to protect our top portal margin margin profile, despite revenue growth weakness. And that includes the cost-cutting measures that we've already taken, and we will continue to take to protect and even expand our margins. Got it. Okay.

It's roughly about 160% on a free cash flow conversion basis, we would expect to finish this year above 100%.

Once you adjust for those items and I think we do feel confident that our new portfolio is remedy will enable us to do better cash flow performance than we have done historically.

So we remain encouraged that we're going to continue that strong performance into 2024.

Alright, Thanks, Greg.

Okay.

Thank you.

Josh Woodman: And then for a lot of wondered if you could provide more context on how the quarter progressed in the life science business. You obviously mentioned tighter reagents, but curious how instrument demand progressed. And then I guess how confident are you that you fully captured the potential downside. I mean, I think Max said the life science business is expected to be down double digits in the fourth quarter. It's a wide range. I guess any more context you can provide on kind of the right, the right landing point to the life science business.

Question comes from Lucas cycles of Barclays. Your line is now open. Please go ahead.

Great. Thanks, Good morning, I have.

Two quick cleanups, and then I have a.

Question on the quarter. So can you you talked earlier about the instruments being down double digits in the quarter or was that year over year or quarter over quarter, and then can you update us where you are.

Jerome you did.

Yes.

Hey, Luke so from an instrument standpoint that is a year over year stat. When you look at it again quarter over quarter as I think I just mentioned, it's relatively flat volumes from a sequential standpoint versus the third quarter for the instrumentation.

Josh Woodman: So, I mean, I think you know, on the life sciences instrument side, we assume double digit decline and in the fourth quarter. And we kept our reagents flat versus our third quarter. And you know, and essentially the way I would say it is that we pattern that based on the buying behavior of a customer towards the end of the quarter, which was, you know, in a, in a, as I as we said, and both Max and I pointed out it was more of a steeper decline in the second half of the quarter.

In terms of euro immune.

I think that we have.

We don't necessarily disclose individual business lines, but our overall immuno diagnostics business as we mentioned grew in the high teens in the third quarter and Euro man is the by far the largest piece of that of that business.

Gotcha and then so.

I'm just trying to figure out here.

Josh Woodman: Yeah, the one other piece I would add Josh is that normally we do see sort of a sequential dollar step up in the fourth quarter from our life sciences instrumentation. Usually, that's about a 20% volume step up quarter over quarter. We have taken that now fully out of our guidance for the fourth quarter. I think the last time we spoke on our third, our second quarter earnings call. We have reduced it, but we had not fully eliminated the step up between the third and the fourth quarter. And now we have, we have fully taken out any sequential step up on instrumentation. Got it. It's helpful. Thanks, guys.

Quarter sounded like it can continue to get worse and so is it safe to assume like the step down in September was something like 25%, 30% and then does your current guide contemplate.

The demand environment getting worse or is it just kind of steady state at these levels that you exited the September end.

Yes, so I think it depends on what piece of the portfolio Youre really talking about in terms of the September.

Performance I would say just overall for our guidance and the way that we've thought about the fourth quarter is contemplating those exit rates. We saw in September and October and that is what we have sort of baked into our guidance here for the fourth.

Dan Brennan: Thank you. Well, next question comes from Dan Brennan of TD Cohen. Your line is now open. Please come ahead. Great. Thanks. Thanks for thinking to questions, guys.

Alright thats helpful. Thanks.

Dan Brennan: Maybe on the amino diagnostic business since that's been such a driver here. You guys sounded very positive on the continuation. Can you just give us a little color? I'm kind of what you're seeing there globally in the confidence that that kind of double digital continues sharing the 24. Hey, Dan, good morning. Yeah, I mean, you know, again, that has been a bright spot as you pointed out and we continue to expect that to do well.

Thank you. Our next question comes from Dan Leonard of UBS. Your line is now open. Please go ahead.

Thank you very much.

I just wanted to make sure I understand all the moving pieces in China.

I think you said the expectation is mid single digit growth for the year, how would you break that down between life Sciences diagnostics.

Dan Brennan: Yeah, you know, look, as we've said about Euroimmune and Max pointed out today, you know, you should assume that our Euroimmune business is going to continue to grow in the double digits. And you know, there are two, three reasons. Our road drivers that we've pointed out, one is obviously the awareness of autoimmune business. And the continued growth of that, especially as we see that in emerging markets, launch of new NPIs are more specifically in the United States, but also in other markets, they have come out with a few new assays and instruments that are starting to see traction and they have a very healthy pipeline more importantly, as we look going forward, which is what gives us the confidence in the growth of that business.

Yeah, So for China, you're right mid single digits for the full year life Sciences will be roughly low single digits growth in diagnostics will be high single digit growth.

Max Krakowiak: Great, thanks.

I appreciate that and then on diagnostics in China specifically.

You had that high teens result growth result in immuno diagnostics, but that was off of a high teens decline. So in aggregate. It doesn't seem like the business is growing a whole lot, but youre not overly concerned about volume based procurement. It sounds like there are several offsets and you're bullish on the long term. So I was hopeful that maybe hopefully you can help me reckon.

<unk> some of those comments thank you.

Yes, I think thats right. It we do remain very bullish on our immuno diagnostics franchise, not only in China, but globally to your point on the comp that's that's correct.

Max Krakowiak: And then maybe just on the free cash flow, you need to talk about some of the one off headwinds here with the divestiture and also some rebranding. How should we be thinking about today, if you think about conversion to 24 at this point on free cash flow? Yeah, hey, Dan. Yeah, so I think starting with the free cash flow number, Brett and we mentioned a little bit in prepared remarks. If you were to sort of normalize for some of these AES outflows, et cetera, our year-to-date conversion is roughly, you know, about 160% on a free cash flow conversion basis.

Those two kpis, where the right numbers to think I would mention though as we've been pretty consistent in saying that we were not expecting a huge jump from pent up demand right. There is still only a certain amount of volume that can go through the hospitals from a testing perspective.

Max Krakowiak: We would expect to finish this year above 100% once you adjust for those items. And I think we do feel confident that our new portfolio as revenue will enable us to do better cash flow performance than we have done historically. And so we remain encouraged that we're going to continue that strong performance into 2024. Thanks, Max.

Luke Fergot: Thank you.

So what we have seen is that the third quarter does return to sort of normalized growth normalized volumes.

From our testing business.

And even if you look at all your China immuno diagnostics, China will continue to grow double digits.

Understood. Thank you.

Okay.

Thank you.

Next question comes from Dan <unk> of Stifel.

Your line is now open. Please go ahead.

Good morning, guys. Thanks for getting me in here, Max just going back to applied genomics the cockpit several points easier in the coming quarter. I think you were down year over year in <unk> last year, but obviously you are talking about these incremental pharma headwinds. So what's sequentially are you expecting there.

Luke Fergot: Our next question comes from Luke Fergot of Barclays. The line is now open. Please go ahead. Great. Thanks. Good morning.

Luke Fergot: I have two quick cleanups and then I have a better question on the quarter. So can you talk earlier about the instruments being down double digits on the quarter? Is that year over year or quarter over quarter? And then can you update us what your immune did? Yeah. So from an instrument standpoint, that is a year over year stat. When you look at it, again, quarter over quarter. I think I just mentioned, you know, it's relatively flat volumes from sequential standpoint versus the third quarter for the instrumentation.

There is a low double digit decline this quarter moved to something lower or can you kind of be in that same neighborhood neighborhood, just given the easier comp.

Hey, Dan No I think it will similar to the life Sciences instrument side, we are not expecting much of a volume step up if anything maybe in the applied genomics side, there might be a little bit of pressure quarter over quarter from a sequential volume standpoint.

And so I do think it will continue to be pressured here in the fourth quarter, maybe even so a little bit more than what we saw in the third quarter.

Okay.

Luke Fergot: In terms of your immune, I think that we have a, you know, we don't necessarily disclose individual business minds, but our overall immunodagnostic businesses, we mentioned, grew in the high teens in the third quarter. And your immune is the by far the largest piece of that of that business. Gotcha. And then so, you know, just trying to figure out here how, you know, the quarter sounded like it continued to get worse.

And then maybe prolong just big picture I mean is this state of the end market environment right now impacting your view on M&A are you more or less enthused about doing another deal.

It is the priority list of the preference list.

Does it change at all just given the way that things are moving around in there just curious about your appetite for additional M&A here.

Sure. It's a great question, we continue to.

Luke Fergot: And so, is it safe to assume like the step down in September or was something like 25, 30% and then does your current guide contemplate the, the, the man environment getting worse or is it just kind of steady state at these levels that you actually September? John. Yeah, so I think it depends on what piece of the portfolio you're really talking about in terms of the September performance. I would say just overall for our guidance and the way that we thought about the fourth quarter is contemplating those exit rates we saw in September and October and that is what we have sort of baked into our guidance here for the fourth. All right, that's helpful. Thanks. Thank you.

To keep our M&A pipeline.

And we continue to look for opportunities. Obviously, we are going to be very diligent in terms of.

The valuation etcetera, but strategically and that the fundamentals of the business that you've established are focused on on growth, which is differentiated and obviously the market has shifted in the short term, but we are focused on ensuring that we can control what we can right now and also.

We continue to build for the future. So we will continue to be active I think the timing is something that is not predictable because as you know we are not really always looking for.

For targets, which are out in the public environment.

Okay helpful. Thank you.

Thank you.

Catherine Schulte: Next question. Thank you very much. I just want to make sure I understand all the moving pieces in China. I think you said the expectation is mid single digit growth for the year. How would you break that down between life sciences and diagnostics? Yep, so for China, you're right, mid single digits for the full year. Life sciences will be roughly low single digits growth and diagnostics will be high single digits growth.

Final question for state comes from Catherine Schulte of beds.

Your line is now open. Please go ahead.

Hey, guys. Thanks for taking the question maybe just on the comments on Reexamining your midterm growth outlook does that.

The comment on the lifestyle group.

Thank you thank the diagnostic side.

At this time.

I think the way I would look at it got some news on the diagnostic side, obviously, the applied genomics side of the business, where there is overlap with pharma biotech.

Catherine Schulte: Appreciate that. And then on diagnostics in China specifically, and I appreciate you had that high teens result growth result in immunodagnostics, but that was off of a high teens decline. So in aggregate, it doesn't seem like the business is growing a whole lot, but you're not overly concerned about volume based procurement. It sounds like there are several offsets in your bullish on the long term. So I was hopeful that maybe you can help me reconcile some of those comments.

I'd say that I would call out that thats, probably a component that we would look at but outside of that the immuno diagnostics the neonatal business.

Pat.

It's not something that we would see any impact on.

Okay, and then I just want to clarify your comments on reagents for the fourth quarter I think you both said that dose.

Versus the third quarter is that on a dollar basis sequentially, how should we think about regions year over year growth rate in that quarter.

Catherine Schulte: Thank you. Yeah, I think that's right. We do remain very bullish on our immunodagnostics franchise, not only in China, but globally. To your point on the comp that's correct, those two KPIs were the right numbers. The thing I would mention though is we've been pretty consistent in saying that we were not expecting a huge jump from pent up demand. Right, there's still only a certain amount of volume that can go through the hospitals from a testing perspective.

Yeah, Hey, Catherine so for the reagent standpoint.

That is actually the growth performance year over year in terms of a dollar change versus the third quarter, it'll be slightly up versus the third quarter.

Alright, thank you.

Catherine Schulte: And so what we have seen is that the third quarter does return to sort of normalized growth normalized volumes from our testing business. You know, even if you look at the whole year, you know, China immunodagnostics China will continue to grow with double digits. Understood. Thank you.

Thank you.

I'll now hand back to Steve who will it be for any further remarks.

Thank you Alex I hope everyone has a good day and were here all week take care.

Yeah.

Thank you for joining today's call you may now disconnect your lines.

[music].

Dan Brennan: All night question comes from a man, a virus. I'll see for you on it. It's not open. Please go ahead. More guys, thanks for getting me in here. Max, just going back to applaud genomics. The comp gets several points a year in the coming quarter. I think you were down. You are rearing for a few last year. But obviously you are talking about these incremental farm ahead when so what's the quenchally are you expecting there?

Yes.

Dan Brennan: There's a low double digit decline. This quarter moved to something lower. Can you kind of be in that thing neighborhood? Just give an easier comp. Hey, Dan. No, I think it will, you know, similar to the life science is instrument side. We are not expecting, you know, much of a volume step up. If anything, maybe they applied genomics. There might be a little bit of pressure quarter recorder from a sequential volume standpoint. And so I do think it will continue to be pressured here in the fourth quarter, maybe even so a little bit more than what we saw in the third quarter.

Prahlad Singh: Okay. And then maybe Prahlad, just a big picture. I mean, is the state of the end-marketing environment right now impacting your view on M&A? Are you more or less enthused about doing another deal? And, you know, does the priority list or the preference list? You know, does it change at all? Just given the way that things are moving around in here. Just curious about your appetite for additional M&A here. That's a great question.

Prahlad Singh: We continue to, you know, keep our M&A pipeline ripe and we continue to look for opportunities. Obviously, we are going to be very diligent in terms of the valuation, etc. But, you know, strategically, you know, the fundamentals of the business that you've established are focused on on growth, which is differentiated. Obviously, the market has shifted in the short term, but we are focused on ensuring that any we can control what we can right now and also we continue to build for the future. So, we will continue to be active. I think the timing is something that is not predictable because as you know, we are not really always looking for targets which are out in the public environment.

Unknown Executive: Okay.

Unknown Executive: Thank you.

Catherine Schulte: I'll find a question for state comes from a capturing short of that.

Catherine Schulte: Your line is now open. Please go ahead. Hey guys, thanks for taking the questions. Maybe just on the comments on re-examining your midterm growth outlook. Is that more of a comment on the life sciences side of the business? Or do you think the diagnostic side needs to be re-evaluated as well? I think the way I would look at it, Catherine is on the diagnostics are obviously the applied genomics side of the business where there is overlap with pharma biotech.

Catherine Schulte: I would say that I would call out that that's probably a component that we would look at, but outside of that, you know, the immunodynamics, the neonatal business that that that there is not something that we would see any impact on.

Catherine Schulte: Okay. And then I just want to clarify your comments on reagents for the fourth quarter. I think you both said that those would be flat versus the third quarter. Is that on a dollar basis, the contrary, how should we think about reagents year over year growth rate in the quarter? Yeah, hey, Catherine. So for the reagents standpoint, the flat is actually the growth performance year over year. In terms of a dollar change versus the third quarter, it'll be slightly up versus the third quarter.

Catherine Schulte: Thank you.

Steve Willoughby: I will now hand back to Steve Willoughby for any further remarks.

Steve Willoughby: Thank you, Alex. Hope everyone has a good day and we're here all week.

Unknown Executive: Take care.

Operator: Thank you for joining save school. You may now disconnect your lines. Thank you.

Q3 2023 Revvity Inc Earnings Call

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