Q4 2023 Thermo Fisher Scientific Inc Earnings Call

Yeah.

Speaker Change: Good morning, ladies and gentlemen, and welcome to the Stanley Fisher Scientific 2023 fourth quarter Conference call.

Ms Bailey: Ms Bailey and I'll be your moderator for today's call.

Ms Bailey: All lines will be muted during the presentation portion with an opportunity for questions and answers at the end. If you would like to ask a question. Please press star followed by one on your telephone keypad.

Ms Bailey: I'd like to introduce a motivator for the call Mr. Rafael Tejada, Vice President of Investor Relations. Mr. <unk>, you may begin your call.

Rafael Tejada: Good morning, and thank you for joining us on the call with me today is Marc Casper, Our chairman, President and Chief Executive Officer, and Stephen Williamson Senior Vice President and Chief Financial Officer.

Rafael Tejada: Please note this call is being webcast live and will be archived on the investors section of our website Thermo Fisher dot com under the heading news events and presentations until February 16 2024.

Rafael Tejada: A copy of the press release of our fourth quarter and full year 2000 through 2023 earnings.

Rafael Tejada: <unk> in the investors section of our website under the heading financials.

Speaker Change: So before we begin let me briefly cover our safe Harbor statement.

Speaker Change: Various remarks that we may make about the company's future expectations plans and prospects constitute forward looking statements for purposes of the safe Harbor provisions under the private Securities Litigation Reform Act of 1995.

Speaker Change: Actual results may differ materially from those indicated by these forward looking statements.

Speaker Change: As a result of various important factors, including doses costs in the company's most recent annual report on Form 10-K, and subsequent quarterly reports on Form 10-Q, which are on file with the SEC and available in the investors section of our website under the heading final.

Speaker Change: <unk> SEC filings.

Speaker Change: While we may elect to update forward looking statements at some point in the future, we specifically disclaim any obligation to do so.

Speaker Change: Even if our estimates change therefore, you should not rely on these forward looking statements as representing our views as of any date subsequent to today.

Speaker Change: Also during this call we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP.

Speaker Change: A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release of our fourth quarter and full year 2023 earnings and also available in the investors section of our website under the heading financials.

Bailey: Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2023 fourth quarter conference call. My name is Bailey, and I'll be your moderator for today's call.

Speaker Change: So with that I'll now turn the call over to Mark.

Mark: Thank you Ralph good morning, everyone and thanks for joining us today for our fourth quarter call.

Bailey: All lines will be muted during the presentation portion, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by 1 on your telephone keypad. I'd now like to introduce our moderator for the call, Mr. Rafael Tejada, Vice President of Investor Relations. Mr. Tejada, you may begin your call.

As you saw on our press release, our fourth quarter results were ahead of the guidance we provided on our call in October and demonstrates strong execution.

Mark: As I reflect on our performance for the full year I'm very proud of our team as they operated with speed at scale to enable the success of our customers, while demonstrating incredibly strong operational discipline and commercial execution.

Rafael Tejada: Good morning, and thank you for joining us. On the call with me today is Marc Casper, our chairman, president, and chief executive officer, and Stephen Williamson, senior vice president and chief financial officer. Please note this call is being webcast live and will be archived on the investor section of our website, thermofisher.com, under the heading, News, Events, and Presentations, until February 16, 2024. A copy of the press release for our fourth quarter and full year 2023 earnings is available in the investor section of our website under the heading financial. So, before we begin, let me briefly cover Safe Harbor's statement and various remarks that we may make about the Plans and Processes constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

Mark: 2023, we deliver differentiated short term performance while at the same time strengthening our long term competitive position.

Mark: I will get into more detail in my remarks later, but first let me recap the financials, starting with the quarter. Our revenue was 10 eight 9 billion.

Mark: Our adjusted operating income was $2 $55 billion.

Mark: We expanded our adjusted operating margin by 100 basis points to 23, 4% and we delivered another quarter of strong adjusted EPS performance growing adjusted EPS, 5% to $5 67 per share.

Mark: Then in terms of our full year results. Our revenue was $42 $9 billion in 2023, adjusted operating income was $9 eight 1 billion.

Mark: And adjusted EPS was $21 55 per share <unk>.

Mark: Last year, we once again delivered meaningful share gain with our industry, leading products services and expertise, we leveraged our PPI business system to enable outstanding execution.

Rafael Tejada: Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, which are on file with the SEC and available in the investor section of our website under the heading Financials SEC 5. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. Also, during this call, we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles, or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the fresh release of our fourth quarter and full year 2023 earnings and also available in the investor section of our website under the heading financial. So with that, I'll now turn the call over to Marc. Thank you, Raf. Good morning, everyone.

Mark: Including aggressively addressing our cost base to effectively navigate a challenging macroeconomic environment.

Mark: At the same time, we strengthened our long term competitive position with high impact innovation exciting and complementary acquisitions additional investments in our capabilities and further strengthening our trusted partner status with our customers.

Mark: Turning to our performance by end market in the fourth quarter underlying market conditions largely played out in line with our expectations. Our continued strong execution resulted in revenue performance that was slightly ahead of our expectations now let me provide you some color on our performance.

Mark: In the context of each of our end markets.

Mark: Starting with pharma and biotech as expected growth declined in the high single digits for the quarter and approximately 1% for the full year.

Mark: In 2023 vaccine and therapy runoff resulted in a seven point headwind in this customer segment, which was effectively offset through share gains as a result of our trusted partner status.

Mark: We've made strong progress in transitioning COVID-19 related capacity to other therapies and that's very exciting for the future.

Marc N. Casper: And thanks for joining us today for our fourth quarter call. As you saw in our press release, our fourth quarter results were ahead of the guidance we provided on our call in October and demonstrated strong execution. As I reflect on our performance for the full year, I'm very proud of our team as they operated with speed at scale to enable the success of our customers while demonstrating incredibly strong operational discipline and commercial execution. In 2023, we will deliver differentiated short-term performance while at the same time strengthening our long-term competitive position. I'll get into more detail in my remarks later, but first, let me recap the financials. Starting with the quarter, our revenue was $10.89 billion. Our adjusted operating income was $2.55 billion.

Mark: In academic and government we grew in the mid single digits for the quarter and then high single digits for the full year.

In 2023, we delivered strong growth across a range of our businesses, including electron microscopy chromatography and mass spectrometry as well as the research and safety market channel.

Mark: In industrial and applied we grew in the low single digits for both the quarter and for the full year.

Mark: During the year, we delivered very strong growth in our electron microscopy business.

Mark: And finally in diagnostics and healthcare in Q4 revenue declined in the high teens and was 30% lower for the full year.

In 2023, we delivered good core business growth in this end market highlighted by our immuno diagnostics microbiology and transplant diagnostics businesses.

Speaker Change: I'll now turn to an update on our growth strategy. As a reminder, our strategy consists of three pillars.

Marc N. Casper: We expanded our adjusted operating margin by 100 basis points to 23.4%, and we delivered another quarter of strong adjusted EPS performance, growing adjusted EPS 5% to $5.67 per share. Then, in terms of our full-year results, our revenue is $42.9 billion in 2023. Adjusted operating income was $9.81 billion, and adjusted EPS was $21.55 per share.

Speaker Change: High impact innovation, our trusted partner status with customers and our unparalleled commercial engine.

Speaker Change: Starting with the first pillar.

Speaker Change: It was another terrific year of high impact innovation throughout the year, we launched outstanding new products across our businesses that strengthen our industry leadership by enabling our customers to advance their important work.

Speaker Change: In chromatography and mass spectrometry. The year was highlighted by the launch of the groundbreaking thermo scientific will be trapped Astro mass spectrometer, which is helping our customers uncover proteins that were previously undetectable.

Marc N. Casper: Last year, we once again delivered meaningful share gains with our industry-leading products, services, and expertise. We leverage our PPI business system to enable outstanding execution, including aggressively addressing our cost base to effectively navigate a challenging macroeconomic environment. At the same time, we strengthened our long-term competitive position with high-impact innovation, exciting and complementary acquisitions, additional investments in our capabilities, and further strengthening our trusted partner status with our customers. Turning to our performance by end market, in the fourth quarter, underlying market conditions largely played out in line with our expectations. Our continued strong execution resulted in revenue performance that was slightly ahead of our expectations. Now, let me provide you with some color on our performance in the context of each of our end marks. Starting with pharma and biotech.

Speaker Change: The scientific breakthrough is enabling customers to advance precision medicine, including the identification of new clinical Biomarkers.

Speaker Change: And the six months since launch the scientific communities adoption of the product has exceeded our high expectations and the momentum is continuing to build as we enter 2024.

Speaker Change: And electron microscopy, we launched the thermo scientific metro six stem a fully automated system that enables our customers to rapidly obtain large volume of high quality data from increasingly complex semiconductors to advance development.

Speaker Change: In specialty diagnostics, we launched the first FDA cleared assays for the risk assessment and clinical management of preeclampsia.

Speaker Change: This first of a kind diagnostic has received significant attention and adoption as it is significantly raise the standard of care for pregnant women, helping physicians to better manage care pipe predicting who is most at risk for this condition.

Marc N. Casper: As expected, growth declined in the high single digits for the quarter and approximately 1% for the full year. In 2023, vaccine and therapy runoff resulted in a seven point headwind in this customer segment, which was effectively offset through share gains as a result of our trusted partner status. We've made strong progress in transitioning COVID-related capacity to other therapies, and that's very exciting for the future. In academic and government, we grew in the mid-single digits for the quarter and in the high-single digits for the full year. In 2023, we delivered strong growth across a range of our business, including electron microscopy, chromatography, and mass spectrometry, as well as the research and safety market channels. In industrial and applied, we grew in the low single digits for both the quarter and for the full year.

Speaker Change: In life Sciences solution, we introduced a gift cost Cts detachable diabetes, our next generation database platform to accelerate manufacturing of life changing cell therapies.

We continue this great innovation momentum in the fourth quarter and electron microscopy, we launched the thermo scientific <unk> <unk> system for precise defect localization and advanced logic semiconductors.

Speaker Change: And then local laboratory products, we launched the thermo scientific Equinix ultra pure water purification system for reliable water purity and operational enhancement laboratories. So another spectacular year of innovation and an exciting pipeline for the future.

Speaker Change: In 2023, we also continue to strengthen our industry, leading commercial engine and the trusted partner status, we have earned with our customers.

Speaker Change: This included the opening of a state of the our customer center of excellence in Milan to showcase our industry, leading products services and expertise and during the fourth quarter. We further strengthened our position in advanced materials by opening a customer experience center for battery manufacturing and soul to accelerate the development of next generation of environment.

Marc N. Casper: During the year, we delivered very strong growth in our electronic processing business. And finally, in Diagnostics and Healthcare, revenue declined in the high teens and was 30% lower for the full year. In 2023, we delivered good core business growth in this end market, highlighted by our Immunodiagnostics, Microbiology, and Transplant Diagnostics business. As a reminder, our growth strategy consists of three pillars.

Speaker Change: And Ali friendly energy solutions.

We also made significant advancements in the partnerships and collaborations with our customers throughout the year.

Speaker Change: Building on our long standing relationship with Boehringer Ingelheim, a great example, in the fourth quarter was an exciting opportunity to develop a genomic testing based companion diagnostic for non small cell lung cancer patients in Japan, and the United States, where lung cancer is a leading cause of cancer death.

Marc N. Casper: High Impact Innovation, our trusted partner status with customers, and our unparalleled commercial capabilities, starting with the first pillar. It was another terrific year of high-impact innovation. Throughout the year, we launched outstanding new products across our businesses that strengthen our industry leadership by enabling our customers to advance their important work. For chromatography and mass spectrometry, the year was highlighted by the launch of the groundbreaking thermoscientific Orbitrap astral mass spectrometer, which is helping our customers uncover proteins that were previously undetected. The scientific breakthrough is enabling customers to advance precision medicine, including the identification of new clinical biomarkers. In the six months since launch, the scientific community's adoption of the product has exceeded our high expectations, and the momentum is continuing to build as we enter 2024.

Speaker Change: Now, let me turn to our PPI business system, and our mission driven culture, which continue to enable successful execution during the year.

Speaker Change: PPI engages and empowers all of our colleagues to find a better way every day, it's helping us to drive share gain improved quality productivity and customer legions.

Speaker Change: I'm proud of the way our team leveraged PPI the step up in an agile way to navigate the dynamic environment last year, driving higher commercial intensity actively managing our cost base and optimizing sourcing.

Speaker Change: We're also leveraging generative AI as part of our PPI business system toolkit to increase productivity further optimize our commercial effectiveness and improve the customer experience.

Marc N. Casper: In electromicroscopy, we launched the thermoscientific METRIO-6 STEM, a fully automated system that enables our customers to rapidly obtain large volumes of high-quality data from increasingly complex semiconductors for advanced development. In Specialty Diagnostics, we launched the first FDA-cleared assays for the risk assessment and clinical management of preeclampsia. This first-of-a-kind diagnostic has received significant attention and adoption as it has significantly raised the standard of care for pregnant women, helping physicians to better manage care by predicting who is most at risk for this condition. In Life Sciences Solutions, we introduce the GIPCO CTS Detachable DynaBeads, our next generation DynaBeads platform to accelerate the manufacturing of life-changing cell therapy. We continue this great innovation momentum in the fourth quarter. For example, in electromicroscopy, we launched the thermoscientific Meridian EX system for precise defect localization in advanced logic semiconductors.

Speaker Change: A quick recap on capital deployment last year, we continued to successfully execute our disciplined capital deployment strategy, which is a combination of strategic M&A and returning capital to our shareholders and.

Speaker Change: In terms of M&A, we completed our acquisition of the binding site, our protein diagnostics business, which enhances our specialty diagnostics offering by advancing the diagnosis and management of patients with multiple myeloma and other immune disorders.

Speaker Change: The integration has gone smoothly and the business is performing extremely well and tracking ahead of the deal model.

As we look to the future of the protein diagnostics business, our launch of exempt instruments solution represents a significant breakthrough given this enhanced sensitivity specificity and ease of use when compared to conventional methods methods. This is a great complement to our free light assays and there is strong interest from the medical community.

Speaker Change: Due to the positive impact on diagnosing multiple myeloma patients.

Speaker Change: In the third quarter, we added core epitaph.

Marc N. Casper: And in Laboratory Products, we launched the Thermoscientific AQUINEX Ultra Pure Water Purification System for reliable water purity and operational enhancement in laboratories. So, another spectacular year of innovation and an exciting pipeline for the future. In 2023, we will also continue to strengthen our industry-leading commercial engine and the trusted partner status we have earned with our customers. This includes the opening of a state-of-the-art customer center of excellence in Milan to showcase our industry-leading product services and expertise. And during the fourth quarter, we further strengthened our position in advanced materials by opening a customer experience center for battery manufacturing in Seoul to accelerate the development of the next generation of environmentally friendly energy solutions. We also made significant advancements in partnerships and collaborations with our customers throughout the year. Building on our longstanding relationship with Borenger Ingelheim, a great example in the fourth quarter was an exciting opportunity to develop a genomic testing-based companion diagnostic for non-small cell lung cancer patients in Japan and the United States, where lung cancer is a leading cause of cancer death.

Speaker Change: Leading provider of regulatory grade real world evidence for approved medicines and therapies.

<unk> is now integrated into our clinical research business and customers are seeing the benefit of these additional capabilities. The business is off to a great start and performing very well.

Speaker Change: During the fourth quarter, we announced our intent to acquire <unk> a provider of advanced proteomics solutions that help researchers to gain an understanding of disease at the protein level rapidly and efficiently as a reminder, OLED technology complements our leading mass spectrometry and life science platforms.

Speaker Change: <unk> positioned to rapidly bring this technology to customers. The transaction is on track to be completed by mid 2024 subject to customary closing conditions, including regulatory approvals.

Speaker Change: In 2023, we also returned $3 $5 billion of capital to shareholders through stock buybacks and dividends.

Speaker Change: Let me now give you a brief update on our corporate social responsibility initiatives as a mission driven company, we hope to make the world a better place by enabling the important work of our customers.

Speaker Change: We also have a positive impact by supporting our communities and being a good steward of our planet.

Marc N. Casper: Now, let me turn to our PPI business system and our mission-driven culture, which continue to enable successful execution during the year. PPI engages and empowers all of our colleagues to find a better way every day. It's helping us to drive share gain, improve quality, productivity, and customer lead. I'm proud of the way our team leveraged PPI to step up in an agile way to navigate the dynamic environment last year, driving higher commercial intensity, actively managing our call space, and optimizing sources. We're also leveraging generative AI as part of our PPI business system toolkit to increase productivity, further optimize our commercial effectiveness, and improve the customer experience.

Speaker Change: And I'm proud of the actions we took in 2023 in this regard.

Speaker Change: Building on the environmental sustainability initiatives, we continue to accelerate our transition to renewable energy with onsite solar projects and power purchase agreements around the world.

Speaker Change: This progress will help us achieve our recently established targets of utilizing 80% renewable electricity globally by 2030.

Speaker Change: To advance global health equity in the fourth quarter, we announced the partnership with project hope to improve the well being and treatment outcomes for young people living with HIV in Nigeria, the country with the second largest HIV epidemic worldwide.

Speaker Change: Throughout the year Thermo Fisher scientific was once again recognized for our industry leadership and inclusive culture, where colleagues can have a mission driven career.

Marc N. Casper: A quick recap on capital deployment last year. We continued to successfully execute our disciplined capital deployment strategy, which is a combination of strategic M&A and returning capital to our shareholders. In terms of M&A, we completed our acquisition of the binding site. Our protein diagnostics, which enhances our specialty diagnostics offering by advancing the diagnosis and management of patients with multiple myeloma and other immune disorders. The integration has gone smoothly, and the business is performing extremely well and tracking ahead of the deal model. As we look to the future of the protein diagnostics business, our launch of the Xent instrument solution represents a significant breakthrough given its enhanced sensitivity, specificity, and ease of use when compared to conventional methods.

Speaker Change: So, let's just a few of the recognitions. We were once again included on Fortune's list of the world's most admired companies as well as fortunes inaugural list of most innovative companies Newsweek named US as one of America's most responsible companies Forbes included us on its list of the world's top companies for women and named Us as one of them.

Speaker Change: Best employers for veterans.

Speaker Change: As I reflect on the year I'm very proud of what our team accomplished thanks to our incredible colleagues, we successfully navigated the environment continues to build a bright future for our company.

Speaker Change: I am very excited about 2024 and beyond.

Speaker Change: So let me now turn to guidance Stephen will outline the assumptions that factor into our 2020 for revenue and earnings guidance, but let me quickly cover the highlights.

Marc N. Casper: This is a great complement to our Freelite assays, and there's strong interest from the medical community due to the positive impact on diagnosing multiple myeloma patients. In the third quarter, we added Cor Evitas, a leading provider of regulatory-grade, real-world evidence for approved medicines and therapies. Core Evitas is now integrated into our clinical research business, and customers are seeing the benefits of these additional capabilities. The business is off to a great start and is performing very well. During the fourth quarter, we announced our intent to acquire O-Link, a provider of advanced proteomic solutions that help researchers to gain an understanding of disease at the protein level rapidly and efficiently. As a reminder, O-Link's technology complements our leading mass spectrometry and life science platform.

Stephen Williamson: We're initiating a 2020 for revenue guidance range of $42 1 billion to $43 3 billion.

Stephen Williamson: And an adjusted EPS range guidance range of $20 95 to $22 per share.

Stephen Williamson: This outlook reflects a continuation of us demonstrating incredibly strong commercial execution and operational discipline and enabling the success of our customers I've.

Stephen Williamson: I've had the opportunity to connect with many of our customers in January to understand what's on their minds.

Based on our long standing relationships, we have terrific access to the senior executive teams of our customers from these conversations it is clear to me that our customers value, our partnership and see us and is essential to enabling their success.

Marc N. Casper: We are uniquely positioned to rapidly bring this technology to customers. The transaction is on track to be completed by mid-2025, subject to customary closing additions, including regulatory.

Stephen Williamson: They are enthusiastic for the future because of the progress and pipelines to treat disease and there is also a great enthusiasm with material science customers for the important advances made in those fields.

Marc N. Casper: In 2023, we will also return $3.5 billion of capital to shareholders through stock buybacks and dividends. Let me now give you a brief update on our Corporate Social Responsibility Initiative. As a mission-driven company, we help to make the world a better place by enabling the important work of our customers. We also have a positive impact by supporting our communities and being a good steward of our planet, and I'm proud of the actions we took in 2023 in this regard. Building on environmental sustainability initiatives, we continue to accelerate our transition to renewable energy with on-site solar projects and power purchase agreements around the world. This progress will help us achieve our recently established target of utilizing 80% renewable electricity globally by 2030. In the fourth quarter, we announced a partnership with Project HOPE to improve the well-being and treatment outcomes for young people living with HIV in Nigeria, the country with the second largest HIV epidemic worldwide.

All of this will create strong long term demand for our capabilities as we enabled customers scientific breakthroughs and we continue to be incredibly well positioned to enable our customers to make the world healthier cleaner and safer.

Speaker Change: So to summarize our key takeaways for 2023 or.

Speaker Change: Our proven growth strategy continues to drive significant share gain.

Speaker Change: We continue to elevate our trusted partner status and deepen the relationship with many customers last year.

Speaker Change: And this in combination with the power of our PPI business system to deliver differentiated performance for the quarter and the full year, helping us to effectively navigate a challenging macroeconomic environment.

Speaker Change: We are well positioned in 2024% to once again deliver differentiated short term performance and further strengthen our long term competitive position with that I'll now turn the call over to our CFO Stephen Williamson Stephen.

Stephen Williamson: Thanks, Mark and good morning, everyone. As you saw in our press release, we executed really well in Q4.

Marc N. Casper: Throughout the year, Federal Fisher Scientific was once again recognized for its industry leadership and inclusive culture where colleagues can have a mission-driven career. To list just a few of the recognitions, we will once again include it on Fortune's list of the world's most admired companies, as well as Fortune's inaugural list of the most innovative companies. Newsweek named us one of America's most responsible companies. Forbes included us on its list of the world's top companies for women and named us as one of the best employers for veterans.

Stephen Williamson: Market conditions played out largely as we had expected in the quarter and through great execution, we delivered 1% more core organic revenue growth.

Stephen Williamson: And then our prior guide.

Stephen Williamson: In terms of adjusted EPS, We beat our prior guide by <unk> and that included offsetting <unk> <unk> of additional FX headwind, so really strong operational execution in the quarter. We also capped off the year with very strong free cash flow delivering 7 billion in 2023.

Stephen Williamson: Throughout the year, we navigated the changing macro environment very effectively.

Marc N. Casper: As I reflect on the year, I'm very proud of what our team accomplished. Thanks to our incredible colleagues, we successfully navigated the environment and continue to build a bright future for our company. I'm very excited about 2024 and beyond.

Stephen Williamson: Our proven growth strategy and PPI business system enabled us to deliver a differentiated experience for our customers and differentiated financial results for our shareholders all while continuing to invest in the business and advance our strategic position as the world's leader in serving science.

Speaker Change: We now provide you some additional details on our performance beginning with our earnings results.

Marc N. Casper: Stephen will outline the assumptions that factor into our 2024 revenue and earnings guidance, but let me quickly cover the highlights. We're initiating a 2024 revenue guidance range of $42.1 billion to $43.3 billion and an adjusted EPS guidance range of $20.95 to $22. This outlook reflects a continuation of us demonstrating incredibly strong commercial execution and operational discipline and enabling the success of our customers. I had the opportunity to connect with many of our customers in January to understand what's on their minds. Based on our longstanding relationships, we have terrific access to the senior executive teams of our customers.

Speaker Change: At $5 67 of adjusted EPS in Q4, and $21 55 for the full year.

Speaker Change: GAAP EPS in the quarter was $4 20.

Speaker Change: And $15 45 for the full year.

Speaker Change: On the top line reported revenue was 5% lower year over year in Q4.

Speaker Change: The components of our Q4 reported revenue change included 7% lower organic revenue, a 1% contribution from acquisitions and a tailwind of 1% from foreign exchange Q.

Speaker Change: Q4 core organic revenue decreased 4%.

For the full year 2023 reported an organic revenue decreased 5% and core organic revenue growth for the year with 1% in.

Marc N. Casper: From these conversations, it's clear to me that our customers value our partnership and see us as essential to enabling their success. They're enthusiastic about the future because of progress and pipelines to treat disease. And there's also great enthusiasm with material science customers for the important advances made in those. All of this will create strong long-term demand for our capabilities as we enable customer scientific breakthroughs, and we continue to be incredibly well positioned to enable our customers to make the world healthier, cleaner, and so to summarize our key takeaways for 2023. Our proven growth strategy continues to drive significant share gains. We continue to elevate our trusted partner status and deepen our relationship with many customers last, and this, in combination with the power of our PPI business system, delivers differentiated performance for the quarter and the full year, helping us to effectively navigate a challenging macroeconomic environment. We're well positioned in 2024 to once again deliver differentiated short-term performance and further strengthen our long-term competitive position. With that, I'll now turn the call over to our CFO, Stephen Williamson. Stephen.

Speaker Change: In 2023, we delivered $1 $73 billion.

Pandemic related revenue $330 million of testing and $1 $4 billion of vaccines and therapies revenue.

Speaker Change: Turning to our organic revenue performance by geography, the organic growth rates by region are skewed by the pandemic related revenue in the quarter and the current year and prior year in Q4, North America declined low double digits Europe declined low single digits.

Speaker Change: Pacific grew low single digits with China declining in the mid single digits for.

Speaker Change: For the full year in North America declined high single digits, Europe declined low single digits and Asia Pacific declined low single digits with China declining high single digits.

Speaker Change: With respect to our operational performance, we delivered $2 $5 $5 billion of adjusted operating income in the quarter and adjusted operating margin was 23, 4% 100 basis points higher than Q4 last year.

Speaker Change: In the quarter, we continued to deliver exceptionally strong productivity and achieved price realization. This was partially offset by lower pandemic related revenue strategic investments and FX.

Speaker Change: The strength of our productivity reflects the impact of our PPI business system is enabling us to manage our cost base appropriately given the macro conditions.

Stephen Williamson: Thanks, Marc, and good morning, everyone. As you saw in our press release, we executed really well in Q4, market conditions played out largely as we'd expected in the quarter, and through great execution, we delivered one percent more core organic revenue growth than our prior guidance. In terms of adjusted EPS, we beat our prior guide by $0.05, and that included offsetting $0.08 of additional FX headwind, so really strong operational execution in the quarter. We also capped off the year with very strong free cash flow, delivering $7 billion in 2023. Throughout the year, we have navigated the changing macro environment very effectively.

Speaker Change: For the full year adjusted operating income decreased 11% and adjusted operating margin was 22, 9% in line with our prior guide.

Speaker Change: Total company adjusted gross margin in the quarter came in at 41, 5% 10 basis points higher than Q4 last year. The change in gross margin was due to the same drivers as those of our adjusted operating margin for the full year adjusted gross margin was 41, 2%.

Speaker Change: Moving onto the details of the P&L adjusted SG&A in the quarter was 15, 1% of revenue an improvement of 50 basis points over Q4 of last year.

Stephen Williamson: Our proven growth strategy and PPI business system enabled us to deliver a differentiated experience for our customers and differentiated financial results for our shareholders, all while continuing to invest in the business and advance our strategic position as the world leader in serving science. Let me now provide you with some additional details on our performance. Beginning with our earnings results, we delivered $5.67 of adjusted EPS in Q4 and $21.55 for the full year. Gap EPS in the quarter was $4.20 and $15.45 for the full year. On the top line, reported revenue was 5% lower year-over-year in Q4. The components of our Q4 reported revenue change included 7% lower organic revenue, a 1% contribution from acquisitions, and a tail end of 1% from foreign exchange. Q4 core organic revenue decreased by 4%.

Speaker Change: Full year adjusted SG&A was 15, 2% of revenue an improvement of 60 basis points compared to 2022.

Speaker Change: Total R&D expense was $328 million in Q4 for the full year R&D expense was $1 35 billion.

Speaker Change: Reflecting our ongoing investments in high impact innovation.

Speaker Change: R&D as a percent of our manufacturing revenue was six 8% in 2023.

Speaker Change: Looking at our results below the line. Our Q4 net interest expense was $81 million, which is $38 million lower than Q4 2022.

Speaker Change: Net interest expense for the full year was $495 million, an increase of $41 million year over year.

Speaker Change: Adjusted other income expense was a net expense in the quarter of $19 million nine.

Speaker Change: $9 million higher than Q4 2022. This is primarily due to changes in non operating FX.

Speaker Change: For the full year adjusted other income and expenses, a net expense of $60 million compared to net income of $14 million in 2022.

Stephen Williamson: So the full year 2023 reported an organic revenue decrease of 5%, and core organic revenue growth for the year was 1%. In 2023, we delivered $1.73 billion of pandemic-related revenue, $330 million of testing, and $1.4 billion of vaccines and therapies revenue. Turning to our organic revenue performance by geography, the organic growth rates by region are skewed by the pandemic-related revenue in the current year and prior year. In Q4, North America declined by low double digits. Europe declined by low single digits.

Speaker Change: Our adjusted tax rate in the quarter and for the full year was 10%. This was 280 basis points lower than Q4 last year and 300 basis points lower for the full year, reflecting the results of our tax planning activities.

Speaker Change: Adjust average diluted shares were $388 million in Q4, approximately $5 million lower year over year, driven by share repurchases net of options.

And shortly after the year end in January 2024, we repurchased $3 billion of sheds.

Stephen Williamson: Asia Pacific grew low single digits, with China declining in the mid single digits. For the full year, North America declined high single digits, Europe declined low single digits, and Asia-Pacific declined low single digits, with China declining high single digits. With respect to our operational performance, we delivered $2.55 billion of adjusted operating income in the quarter, and adjusted operating margin was 23.4%, 100 basis points higher than Q4 last year. In the quarter, we continue to deliver exceptionally strong productivity and achieve good price realization. This is partially offset by lower pandemic-related revenue, strategic investments, and FX. The strength of our productivity reflects the impact of our PPI business system. It's enabling us to manage our cost base appropriately given the macro conditions. For the full year, Adjusted Operating Income decreased 11%, and Adjusted Operating Margin was 22.9%, in line with our prior guidance.

Speaker Change: Turning to cash flow and the balance sheet full year cash flow from operations was $8 4 billion.

Speaker Change: And as I mentioned earlier free cash flow was <unk> 7 billion.

Speaker Change: After investing $1 4 billion.

Speaker Change: Net capital expenditures.

Speaker Change: We returned $136 million of capital to shareholders through dividends in Q4 and $523 million for the full year.

Speaker Change: During the year, we invested $3 $7 billion uncompleted acquisitions and committed $3 1 billion to the acquisition of <unk>, which we expect to close by mid 2024.

Speaker Change: We ended the quarter with $8 $1 billion in cash and $34 9 billion of total debt our leverage ratio at the end of the quarter was three two times gross debt to adjusted EBITDA and two five times on a net debt basis.

Concluding my comments on our total company performance adjusted ROIC was 12%, reflecting the strong returns on investment that we are generating across the company.

Stephen Williamson: Total company adjusted gross margin in the quarter came in at 41.5%, 10 basis points higher than Q4 last year. The change in gross margin was due to the same drivers as those of our adjusted operating margin. For the full year, adjusted gross margin was 41.2%. Moving on to the details of the P&L, adjusted SG&A in the quarter was 15.1% of revenue, an improvement of 50 base points over Q4 last year. For the full year, adjusted SG&A was 15.2% of revenue, an improvement of 60 basis points compared to 2022. Total R&D expense was $328 million in Q4.

I'll provide some color on the performance of our four business segments. Let me start with a couple of framing comments the scale and margin profile of a pandemic related revenue varies by segment and that revenue was higher than the prior year. So that does skew some of the reported segment growth rates and margins in 2023, we continue to execute strong pricing realization across all <unk>.

Speaker Change: <unk> to address inflation.

Speaker Change: Moving on to the segment details starting with life Sciences solutions Q4 reported revenue in this segment declined 19% and <unk>.

Speaker Change: Organic revenue was 20% lower than the prior year quarter. This was driven by the run off of a pandemic related revenue in the segments as well as lower levels of activity in our bio production business versus the year ago quarter.

Stephen Williamson: For the full year, R&D expense was $1.35 billion, reflecting our ongoing investments in high-impact innovation. R&D as a percent of our manufacturing revenue was 6.8% in 2023. Looking at results below the line, our Q4 net interest expense was $81 million, which is $38 million lower than Q4 2022. That interest expense for the full year was $495 million, an increase to $41 million year-over-year.

Speaker Change: For the full year reported and organic revenue was 26% lower than 2022.

Speaker Change: Q4, adjusted operating income for life Science solutions decreased 14% and adjusted operating margin was 36, 2% up 210 basis points versus the prior year quarter.

Speaker Change: During the quarter, we delivered exceptionally strong productivity, which was partially offset by unfavorable volume pull through the team's done an excellent job of appropriately managing the cost base and dealing with the unwind of the pandemic.

Stephen Williamson: And just to think about other income and expenses, the net expense in the quarter was $19 million, $9 million higher than Q4 2022. This is primarily due to changes in non-operating FX. For the full year, adjusted other income and expenses, a net expense of $16 million compared to a net income of $14 million in 2022. Our adjusted tax rate in the quarter and for the full year was 10%. This was 280 basis points lower than Q4 last year and 300 basis points lower for the full year, reflecting the results of our tax planning activity. Average diluted shares were $388 million in Q4, approximately $5 million lower year-over-year, driven by share repurchases net of options.

Speaker Change: For the full year adjusted operating income declined 39% and adjusted operating margin was 34, 3%.

Speaker Change: In the analytical instruments segment reported revenue increased 8% in Q4 and organic growth was also 8%.

Speaker Change: The strong growth in the segment. This quarter was led by the electron microscopy business.

Speaker Change: For the full year, both reported and organic revenue were 10% higher than 2022.

Speaker Change: In this segment Q4, adjusted operating income increased 23% and adjusted operating margin was 28, 8% up 340 basis points year over year.

Speaker Change: In the quarter, we delivered strong productivity and volume pull through which is partially offset by FX and strategic investments.

Speaker Change: For the full year adjusted operating income increased 27% and adjusted operating margin was 26, 3% an increase of 350 basis points versus the prior year.

Stephen Williamson: And shortly after the year-end in January 2024, we repurchased $3 billion of shares. Turning to cash flow and the balance sheet, full-year cash flow from operations was $8.4 billion. And, as I mentioned earlier, free cash flow was $7 billion after investing $1.4 billion of net capital expenditures. We returned $136 million of capital to shareholders through dividends in Q4 and $523 million for the full year. During the year, we invested $3.7 billion in completed acquisitions and committed $3.1 billion to the acquisition of Olink, which we expect to close by mid-2024. We ended the quarter with $8.1 billion in cash and $34.9 billion of total debt.

Speaker Change: Turning to specialty diagnostics in Q4 reported revenue declined 1% and organic revenue was 7% lower than the prior year quarter and Q4, we continued to see strong underlying growth in the core led by transplant diagnostics microbiology and immuno diagnostics businesses. This was offset by lower pandemic.

Speaker Change: Weighted revenue versus the year ago quarter.

Speaker Change: For the full year reported revenue declined 8% and organic revenue was down 13% Q4, adjusted operating income for specialty diagnostics increased 27% in the quarter and adjusted operating margin was 23, 9%, which is 530 basis points higher than Q4 of 2022 in.

Speaker Change: In Q4, we'd love, a strong productivity and favorable business mix, which was partially offset by the lower impact of lower COVID-19 testing volume and strategic investments.

Speaker Change: For the full year adjusted operating income was 10% higher than 2022, and adjusted operating margin was 25, 5% an increase of 400 basis points versus 2022.

Speaker Change: Finally in the laboratory products and Biopharma services segment, Q4 reported revenue decreased 4% and organic revenue was 5% lower than the prior year quarter.

Stephen Williamson: Our leverage ratio at the end of the quarter was 3.2 times gross debt to adjusted EBITDA and 2.5 times on a net debt basis. Concluding my comments on our total company performance, adjusted ROIC was 12%, reflecting the strong returns on investment that we're generating across the company. Now I'll provide some color on the performance of our four business segments. Let me start with a couple of framing comments.

Speaker Change: This is driven by the runoff of vaccines and therapies revenue and the phasing of revenue in our pharma services business within 2023 as had been expected.

Speaker Change: For the full year, both reported and organic revenue with 2% higher than 2022.

Speaker Change: In this segment Q4, adjusted operating income declined 4% and adjusted operating margin was 14% just 10 basis points lower than Q4 2022.

Speaker Change: In the quarter, we delivered strong productivity, which was more than offset by unfavorable volume mix.

Stephen Williamson: The scale and margin profile of our pandemic-related revenue varies by segment, and that revenue is higher in the prior year, so that does skew some of the reported segment growth rates and margins. In 2023, we continue to execute strong pricing realizations across all segments to address inflation. Moving on to the segment details, starting with life science and solutions.

Speaker Change: For the full year adjusted operating income was 17% higher than the prior year and adjusted operating margin was 14, 6% an increase of 180 basis points versus 2022.

Speaker Change: So let me now turn to guidance and as Mark outlined we're initiating a 2020 for revenue guidance range of $42 1 billion to $43 3 billion.

Stephen Williamson: Q4 reported revenue in this segment declined 19%, and organic revenue was 20% lower than the prior year quarter. This is driven by the runoff of our pandemic-related revenue in the segment, as well as lower levels of activity in our bioproduction business versus a year ago. For the full year, organic revenue was 26% lower than 2022.

And adjusted EPS guidance range of $20 95 to.

Speaker Change: The $22.

Speaker Change: Guidance assumes core organic revenue growth in the range of minus one to positive 1% for 2024.

Speaker Change: Our view on the expected market conditions in 2024 has not changed significantly from our initial framing for the year shared on the last earnings call.

Stephen Williamson: Q4 adjusted operating income for Lifeline Solutions decreased 14%, and adjusted operating margin was 36.2%, up 210 basis points versus the prior year quarter. During the quarter, we delivered exceptionally strong productivity, which was partially offset by unfavorable volume pulls. The team did an excellent job appropriately managing the cost base and dealing with the unwind of the pandemic. For the full year, Adjusted Operating Income declined 39%, and Adjusted Operating Margin was 34.3%.

Speaker Change: We're assuming that the market declines in the low single digits. This year, our growth strategy and PPI business system execution will enable us to continue to take share once again this year.

Speaker Change: Our current estimate of pandemic related revenue in 2024 is just under $100 million of testing revenue and $300 million to $400 million of vaccines and therapies related revenue in.

Speaker Change: In total this represents a year over year headwind of one three to $1 4 billion or 3% of revenue.

Speaker Change: M&A is expected to increase revenue by $175 million year over year. The combination of six months of <unk> revenue and the inorganic portion of core <unk> revenue in 2024.

Stephen Williamson: In the analytical instrument segments, reported revenue increased 8% in Q4, and organic growth was also 8%. The strong growth in the segment this quarter was led by the electron microscopy business. So the full year both reported and organic revenue were 10% higher than 2022. In this segment, Q4 Adjusted Operating Income increased 23%, and Adjusted Operating Margin was 28.8%, up 340 basis points year-over-year. In the quarter, we delivered strong productivity and volume pull-through, which was partially offset by FX and strategic investments. Hence, the full year adjusted operating income increased 27% and adjusted operating margin was 26.3%, an increase of 350 basis points versus the prior year. Turning to specialty diagnostics, in Q4, reported revenue declined 1%, and organic revenue was 7% lower than the prior year quarter.

Speaker Change: At current rates, we expect FX to be neutral year over year to both revenue and adjusted EPS.

Speaker Change: From a phasing standpoint, FX is expected to be a slight headwind in Q1, and an offsetting tailwind in the second half.

Speaker Change: Turning to margins at 2024 guidance range assumes adjusted operating income margins between 22, 3% and 22, 8%.

Speaker Change: We continue to aggressively manage our cost base and that's reflected in this margin outlook in terms of the range for margins is driven by the revenue range that I provided.

Speaker Change: We will continue to use the PPI business system to not only manage costs very carefully but also continued to make the right long term investments to enable us to further advance our industry leadership.

Speaker Change: <unk> underlying productivity and cost controls, including the carryover benefit from the cost actions put in place last year are expected to largely offset the runoff and the remaining pandemic related revenue inflation and the normalization of incentive compensation across the company to appropriately invest in our colleagues.

Stephen Williamson: In Q4, we continue to see strong underlying growth in the core, led by transplant diagnostics, microbiology, and immunodiagnostics businesses. This is offset by lower pandemic-related revenue versus the year-ago quarter. For the full year, reported revenue declined 8%, and organic revenue was down 13%.

Speaker Change: Below the line, we expect approximately $430 million of net interest expense in 2024 and.

Speaker Change: And expect adjusted other income and expense to net close to zero.

We assume that adjusted income tax rate will be 10, 5% in 2024.

Speaker Change: And below the tax line, you should factor in $20 million of profit elimination related to minority interests.

Stephen Williamson: Q4 Adjusted Operating Income for Specialty Diagnostics increased 27% in the quarter, and adjusted operating margin was 23.9%, which is 530 basis points higher than Q4 2022. In Q4, we delivered strong productivity and a favorable business mix, which was partially offset by the impact of lower COVID-19 testing volume and strategic. The full-year adjusted operating income was 10% higher than 2022, and adjusted operating margin was 25.5%, an increase of 400 basis points versus 2022. Finally, in the laboratory products and biopharmaceutical services segment, Q4 reported revenue decreased 4%, and organic revenue was 5% lower than the prior year quarter.

We're expecting between $1 3 billion and $1 5 billion of net capital expenditures in 2024 and were assuming free cash flow is in the range of $6 5 billion.

Speaker Change: $7 billion.

Speaker Change: For the year.

Speaker Change: In terms of capital deployment, our guidance assumes $3 billion of share buybacks share buybacks, which as I mentioned earlier, we're already completed in January and we estimate that full year average diluted share count will be approximately 383 million shares.

Speaker Change: We're assuming that we'll return approximately $600 million of capital to shareholders. This year through dividends.

Speaker Change: And we're assuming that we close the acquisition of our link by midyear.

Speaker Change: And finally I wanted to touch on quarterly phasing for the year. So there are a few things to consider.

Speaker Change: First in terms of organic revenue growth, we expect Q1 to be better sequentially than Q4, 'twenty three by one to two points and then improve each quarter during the year.

Speaker Change: Implied in that is core organic revenue growth in Q1, similar to Q4 2003.

Stephen Williamson: This is driven by the runoff of vaccines and therapies revenue and the phasing of revenue in our pharma services business in 2023, as had been expected. For the full year, both reported and organic revenue were 2% higher than 2022. In this segment, Q4 Adjusted Operating Income declined 4% and Adjusted Operating Margin was 14%, which is 10 basis points lower than Q4 2022. In the quarter, we delivered strong productivity, which was more than offset by unfavorable volume mix. For the full year, Adjusted Operating Income was 17% higher than the prior year, and Adjusted Operating Margin was 14.6%, an increase of 180 basis points versus 2022. Let me now turn to guidance.

Speaker Change: Core organic revenue growth is also expected to improve each quarter during the year, leaving some moderate growth in the second half of the year.

Speaker Change: From a margin standpoint, we expect Q1 to be just under 21% and increased each quarter throughout the year from that level.

Speaker Change: And we expect Q1 adjusted earnings per share to be approximately 22% of the full year.

Speaker Change: So in conclusion, we navigated the challenging environment in 2023, very successfully we stepped up for our customers and deliver differentiated financial performance for our shareholders. We.

We continue to manage the company with agility, and we're really well positioned for the year ahead I look forward to updating you on our progress as we go through the year with that I'll turn the call back over to Ross.

Ross: Thank you Stephen operator, we're ready for the Q&A portion of the call.

Ross: Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad.

Stephen Williamson: And as Marc outlined, we're initiating a 2024 revenue guidance range of $42.1 billion to $43.3 billion, and just an EPS guidance range of $20.95 to $22. Our guidance assumes core organic revenue growth in the range of minus one to positive one percent for 2024.

Ross: If for any reason you would like to mention that question. Please press star followed by <unk>.

Ross: To ask a question. Please press star followed by one.

Ross: In order to allow everyone an opportunity to address this time efficient management team. Please limit your time on the call to one question and one follow up.

Ross: If you have additional questions. Please return to the queue. Thank you.

Our first question today comes from the line of Jack Meehan from Nephron Research. Please go ahead. Your line is now open.

Stephen Williamson: Our view on the expected market conditions in 2024 has not changed significantly from our initial framing for the year shared on the last earnings call. We're assuming that the market declines in the low single digits this year, and a growth strategy and PPI business system execution will enable us to continue to take share once again this year. Our current estimate of pandemic-related revenue in 2024 is just under $100 million in testing revenue and $300 to $400 million in vaccines and therapies-related revenue.

Jack Meehan: Thank you good morning.

Mark.

Jack Meehan: On that business.

Jack Meehan: Good morning, So if you look at the business I think the question is if you start to see some recovery could you talk about what parts, you think could grow more or less above market and just what that can mean in terms of revenue and earnings.

Jack Meehan: Yes.

Speaker Change: Jack when I think about.

Speaker Change:

Speaker Change: Last year, and you've heard us say.

Speaker Change: Delivering differentiated short term performance strengthen the company for the long term kind of simultaneously.

Stephen Williamson: In total, this represents a year-over-year headwind of $1.3 to $1.4 billion, or 3% of revenue. However, M&A is expected to increase revenue by $175 million year-over-year, the combination of six months of O-Link revenue and the inorganic portion of core EBITAS revenue in 2024. At current rates, we expect FX to be neutral year over year to both revenue and adjusted EPS. From a phasing standpoint, FX is expected to be a slight headwind in Q1 and an offsetting tailwind in the second half.

Speaker Change: We had the opportunity to look at.

Speaker Change: Obviously for the first nine months of how others have done and we looked at those companies are pre announced or reported so far and we had a really strong year in terms of delivering above market growth, which means share gain alright, and thats share gain actually was broad based in terms of the performance you look at.

Things like analytical instruments.

Speaker Change: Strong clinical research pharma services these businesses did well and by by the absence of some amount implying anything in the others. That's a very strong year relative to a challenge set of market conditions I think to the future. We are well positioned in those businesses to continue our share gain momentum.

Stephen Williamson: Turning to margins, the 2024 guidance range assumes adjusted operating income margins between 22.3% and 22.8%. We continue to aggressively manage our cost base, and that's reflected in this margin outlook. In terms of the range for the margins, that's driven by the revenue range that I provided. We'll continue to use the PPI business system to not only manage costs very carefully but also continue to make the right long-term investments to enable us to further advance our industry leadership. Strong underlying productivity and cost controls, including the carryover benefit from the cost actions put in place last year, are expected to largely offset the runoff in the remaining pandemic-related revenue, inflation, and the normalization of incentive compensation across the company to appropriately invest in our colleagues. Below the line, we expect approximately $430 million of net interest expense in 2024, and expect adjusted other income and expense to be close to zero. We assume that the adjusted income tax rate will be 10.5% in 2024.

Speaker Change: We made an assumption for this year.

Speaker Change: Which is pretty much the same as what we said back in.

Speaker Change: Late October is that we're assuming that for the full year, it's going to be pretty similar to 2023, and a mirror image meeting that we start to lap comps as the.

Speaker Change: As the year unfolds, and we wind up with the market being down.

Speaker Change: Slightly in the low single digits and is performing better than that level. So I'm excited about what the years, what unfolds and are positioned to deliver differentiated performance and we're certainly going to capitalize on any improvements in the market and hold ourselves to a very high standard of local it looks like.

Speaker Change: Okay and are there specific businesses you can talk about so as an example in the script I think you talked about transitioning capacity.

New therapies, so like in a potential.

Speaker Change: Potential recovery like what can you talk about how you expect feazing for Patheon and bio processing business.

Speaker Change: Yeah, so when I think about the year.

Stephen Williamson: And below the tax line, you should factor in $20 million of profit elimination related to minority interest. We're expecting between $1.3 billion and $1.5 billion of net capital expenditures in 2024. And we're assuming free cash flow in the range of $6.5 billion and $7 billion for the year. In terms of capital deployment, our guidance assumes $3 billion of share buybacks, which, as I mentioned earlier, were already completed in January, and we estimate the full-year average diluted share count will be approximately 383 million shares.

Speaker Change: We basically use a range of outcomes for each of our businesses in terms of how they perform.

Speaker Change: I'll leave that the second half.

Speaker Change: Of the year based on lapping the comps as well as we're expecting that the market conditions improved slightly as the year unfolds and that helps with demand for the industry and for us.

Speaker Change: Is how I would think about the business in aggregate.

Speaker Change: <unk> is the way that we manage the company. So thank you Jack.

Stephen Williamson: We're assuming that they will return approximately $600 million of capital to shareholders this year through dividends, and we're assuming that we will close the acquisition of Olink by mid-year. And finally, I wanted to touch on quarterly phasing for the year as there are a few things to consider. First, in terms of organic revenue growth, we expect Q1 to be better sequentially than Q4-23 by one to two points and then improve each quarter during the year. Implied in that is core organic revenue growth in Q1, similar to Q4-23, and core organic revenue growth is also expected to improve each quarter during the year, leading to moderate growth in the second half of the year. From a margin standpoint, we expect Q1 to be just under 21% and increase each quarter throughout the year from that level. And we expect Q1 adjusted earnings per share to be approximately 22% of the full year.

Jack Meehan: Thank you.

Speaker Change: The next question today comes from the line of.

Donald: Donald Yes from Stifel. Please go ahead. Your line is now open.

Donald Yes: Good morning, guys. Thanks for the questions Mark obviously, a lot of discussion on destocking across the industry can you just maybe add some color to where you think you are with that process and maybe draw a distinction for us between the inventory work down that's taking place on the bioprocess.

Mark: Specifically versus more routine consumables.

Put it that way are the drawdowns kind of happening at a similar pace.

Mark: And being at a similar time or do you think we should sort of.

Mark: Keep those two buckets separately or think of them differently.

Mark: Yeah, So Dan I guess.

Let me start with sort of bio production, which I think is the essence.

Mark: Of the question.

Speaker Change: Step one level above that.

Speaker Change: In terms of bio production.

Speaker Change: It is an incredibly good long term market historically, it's been an incredibly good market.

Stephen Williamson: So in conclusion, we navigated the challenging environment in 2023 very successfully. We stepped up for our customers and delivered differentiated financial performance for our shareholders. We continue to manage the company with agility, and we're really well positioned for the year ahead. With that, I'll send a call back to RASP. Thank you, Stephen.

Speaker Change: Sort of a taboo name these days right in terms of bio production caused a lot of volatility.

Speaker Change: Certainly 2023 in the industry.

Speaker Change: For us.

Speaker Change: A couple of facts right, it's a little bit under 10% of our revenue.

Speaker Change: And we have best in class bio processing products with an incredible global footprint, we have leading positions in cell culture media single use technologies and increasingly important purification business as we grow our share position there.

Operator: Operator, we're ready for the Q&A portion of the call. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by one. Again, to ask another question, please press star followed by one.

Speaker Change: When I think about the fourth quarter.

We did see a sequential pickup in orders.

In Q4 versus Q3.

Speaker Change: But the underlying activity is still muted right in the market. So we didn't see an inflection we werent expecting one and we didn't see one in the fourth quarter.

Operator: In order to allow everyone in the queue an opportunity to address the Thermo Fisher management team, please limit your time on the call to one question and one follower. If you have additional questions, please return to the queue. Thank you. Our first question today comes from the line of Jack Meehan from Nephron Research. Please go ahead; your line is now open.

Speaker Change: Our view is that it will normalize as the year unfolds.

Speaker Change: As I've said in an Investor conference earlier in the year.

Speaker Change: No one's going to get rewarded for call. It in the moment of when that inflection happen. So it will play out during the course of the year and the long term fundamentals here are.

Jack Meehan: Thank you. Good morning. Mark Pornwreck Good morning.

Speaker Change: Our very strong.

Speaker Change: When I think about.

Marc N. Casper: So if you look at the business, I think the question is, if you start to see some recovery, could you talk about what parts you think could grow more or less above market? And just what can that mean in terms of revenue and earnings? Yeah, so Jack, when I think about last year, and you've heard us say, delivering differentiated short term performance strengthens the company for the long term kind of simultaneously. You know, we've had the opportunity to look at, you know, obviously, for the first nine months how others have done, and we looked at, you know, those companies that have pre-announced or reported so far, and we had a really strong year in terms of delivering, you know, above market growth, which means share gain, right?

Speaker Change: Our businesses in general coming.

Speaker Change: Coming into the year.

Speaker Change: Think the things that are very exciting as.

Speaker Change: The trusted partner status that we have earned with our customers over many many years.

Speaker Change: In the room with the decision makers, we understand what's on their mind, we're incredibly well positioned and if I think about.

Speaker Change: The mid term outlook.

Speaker Change: For clinical research for pharma services for bio production for our channel business.

Speaker Change: Credibly, well positioned right in terms of where part of helping our customers bring the breakthroughs to their pipeline, where part of helping them navigate.

Speaker Change: Whatever the environment is so hopefully that's helpful. And then maybe the last comment I would make is one of my takeaways from the many many customer interactions that I had in the first month of the year.

Speaker Change: Does that in the biotech community and what I mean by biotech is I'll call. It the smaller companies.

Marc N. Casper: And that share gain actually was broad-based in terms of the performance; you look at things like analytical instruments, very strong clinical research, pharma services, these businesses did well, and by the absence of some, I'm not implying anything about the others, it's a very strong year, relative to a challenging set of market conditions, as I think, for the future, we're well positioned in those businesses to continue our share gain momentum. We made an assumption for this year, which is pretty much the same as what we said back in late October is that we're assuming that, you know, for the full year, it's going to be pretty similar to 2023. And a mirror image, meaning that we start to lap comps as the year unfolds, and we wind up with the market being down, you know, slightly in the low single digits, and we perform better than that level.

Speaker Change: Capital market dependent companies in the pharma biotech circle segment.

Speaker Change: They were much more positive right, they're seeing green shoots they love the M&A activity that was happening at the end of the year that gets investors excited about.

New New company formation, new rounds of capital in wireless early and it will take some time, it's certainly the most optimistic that I've seen in the last five quarters in terms of what the tone was on the on their view and I think that bodes very well for the coming few years. Thank you.

Speaker Change: Okay, that's encouraging.

Speaker Change: Maybe just a follow up on the AIP consistently solid growth. There I'm curious if you are just still carrying a backlog and microscopy and can you maybe just talk a little bit about lead times and order conversion. This year is the assumption that those.

Speaker Change: Might get extended as we move through the year or do you think maybe you can be.

Marc N. Casper: So I'm excited about how the year unfolds and our position to deliver differentiated performance. And we're certainly going to capitalize on any improvements in the market and hold ourselves to a very high standard of what it could look like. Okay, and are there specific businesses you can talk about? So as an example in the script, I think you talked about transitioning capacity, um, new therapies, so in a potential recovery, what can you talk about how you expect phasing for Patheon and some of you in the bioprocessing business Yeah, so when I think about the year, we basically use a range of outcomes for each of our businesses in terms of how they perform. I believe that the second half of the year will be based on la And for us, that is how I would think about the business in aggregate. The way that we manage it. So thank you, Jack. Thank you. The next question today comes from the line of Dan Arias from Stiefel.

Speaker Change: Relative to where we are today.

Speaker Change: Yes, so when I think about the performance of our analytical instruments business with double digit growth for the full year.

Speaker Change: Awesome really a tremendous year.

Speaker Change: It was across all three businesses.

Speaker Change: The backlog that we carried into the beginning of 2023 those things largely cleared in the first half of 'twenty three so, whereas we've been at normal lead times normal shipping times really for about six months now in terms of that already so we're kind of a normal spot.

Speaker Change: <unk>.

Speaker Change: And while there won't be the repeat of the.

Speaker Change: The unwind of the pandemic impacts on.

Speaker Change: The supply chain.

Speaker Change: The business is positioned for a good year.

There is high demand for the.

Speaker Change: The breakthrough technologies, whether it's in electron microscopy for semiconductor materials Science life Sciences, where the Astro and chroma mass back. It's just incredible demand for those technology. So we're excited for.

Dan Arias: Please go ahead, your line is now open. Good morning, guys. Thanks for the questions. Marc, obviously, there's a lot of discussion on de-stocking across the industry. Can you just maybe add some color to where...

Speaker Change: The upcoming year and the future of that business.

Speaker Change: Thank you.

Speaker Change: The next question today comes from the line of Jack <unk> from Bank of America. Please go ahead. Your line is now open.

Marc N. Casper: I think you are with that process and maybe draw a distinction for us between the inventory workdown that's taking place on the bio process and more routine consumables. If you split it that way, are the drawdowns kind of happening at a similar pace? ending at a similar time, or do you think we should sort of Yeah, so Dan, I guess, Let me start with sort of bioproduction, which I think is the essence of the question, and maybe I'll step one level above that. In terms of bioproduction, You know, it is an incredibly good long-term market. Historically, it's been, you know, an incredibly good market. Sort of a taboo name these days, right, in terms of bioproduction, which caused a lot of volatility during certainly 2023 in the industry. For us, you know, a couple of facts, right?

Jack Meehan: Hi, good morning, everyone.

Jack Meehan: Good morning Derik.

Jack Meehan: So mark.

Jack Meehan: Just sort of curious last quarter you were talking about.

1% core growth.

We're sort of looking at your initial framework for 2024, if I heard you correctly now.

Jack Meehan: Plus or minus 1%.

Jack Meehan: Didn't seem like Q4 got a lot worse than anything so I'm, what sort of what's changed or are you more conservative on.

Jack Meehan: L L.

Jack Meehan: PPD and these businesses are you more conservative on just tough comps I'm just sort of curious what's embedded now in this like more more conservative.

Marc N. Casper: It's a little bit under 10% of our revenue, and we have best-in-class bioprocessing products with an incredible global footprint. We have leading positions in cell culture, media, single use technologies, and an increasingly important purification business as we grow our share position there. When I think about the fourth quarter, we did see a sequential pickup in orders in Q4 versus Q3, but the underlying activity is still muted, in the market. So we didn't see an inflection. We weren't expecting one, and we didn't see one in the fourth quarter.

Jack Meehan: Outlook.

Steve Dyer: Steve Dyer.

Let me provide some context on the guidance a kind of a.

Stephen Willoughby: Kind of step back on that and and hopefully help frame your questions. So we.

Stephen Willoughby: We provided an early framing for 24 on our last call and it will have the insight on how Q4 played out in a completed a detailed planning work with our businesses through that process are viewing the market outlook has not changed significantly the guidance is not significantly different from the initial framing that we provided includes the latest view on FX, both rates and expected mix.

Stephen Willoughby: <unk> revenue and costs by currency.

Marc N. Casper: Our view is that it will normalize as the year unfolds. And as I've said in an investor conference earlier in the year, no one's going to get rewarded for calling the moment when that inflection happens. So it'll play out during the course of the year.

Stephen Willoughby: That increased revenue from our initial framing, but no impact on our.

Stephen Willoughby: Operating income, which reduces our margins by 20 basis points from that initial framing and then from an operational standpoint, I think the only an item of note that's changed in the past three months as a discrete item in our pharma services business. We are transitioning some of our sterile fill finish capacity from Covid vaccine support the GOP one support.

Marc N. Casper: And the long-term fundamentals here are very strong. You know, when I think about our businesses, you know, in general, coming into the year, I think the things that are very exciting are the trusted partner status that we have earned with our customers. Over many, many years, you know, we're in the room with the decision makers, we understand what's on their minds, we're incredibly well positioned. And if I think about, you know, the midterm outlook for clinical research, for pharma services, for bioproduction, for our channel business. It's incredibly well positioned, right, in terms of us being part of helping our customers bring breakthroughs through their pipeline. We're part of helping them navigate, you know, whatever the environment is. So, hopefully, that's helpful.

Stephen Willoughby: We have been expecting to recognize an upfront fee in Q1 24.

Stephen Willoughby: Now the accounting is finalized we expect to recognize that benefit in line with production, which actually starts in 'twenty five so it's shifted approximately 2020 out of Q1 'twenty four.

Stephen Willoughby: And that's had some impact on in terms of the reported core growth and then one other comment on the guidance is that we thought it best to provide a range not a point estimate so I think it's more helpful for our investors in the range of outcomes for the year.

Stephen Willoughby: Now that the rain doesn't capsulate every possible scenario for the year, but it does capture the reasonably likely scenarios of how the year can play out as we see it today in the range of about $1 billion to our revenue and $1 five of adjusted EPS, which.

Marc N. Casper: And then maybe the last comment that I would make, one of my takeaways from the many, many customer interactions that I had in the first month of the year, was that in the biotech community, and what I mean by biotech is, I'll call it the smaller companies, the capital market-dependent companies in the pharma and bioceutical segment. They were much more positive, right. They were seeing green shoes.

Stephen Willoughby: I think it's appropriate given the scale of the company. So hopefully you can kind of tease out kind of the framing.

Stephen Willoughby: The guide.

Speaker Change: Okay, and a little bit more.

Speaker Change: Should we sort of think about the segment margins as we go through I mean, I'm just sort of looking.

Speaker Change: I mean, you've seen really good progress in Oss and <unk> made some good progress on your margin expansion in margins across all of them, but I'm just sort of thinking about how should we think about you know LP.

Marc N. Casper: They love the M&A activity that was happening at the end of the year. That gets investors excited about, you know, new company formation, new rounds of capital. And while it's early, and it'll take some time, it's certainly the most optimistic that I've seen in the last five quarters, in terms of what the tone was in their view. And I think that bodes very well for the coming few years. Thank you.

Speaker Change: Lps and given where you were in the.

Speaker Change: Is that 14% margin range that we're seeing for the full year is that sort of sustainable does that fall back next year I'm, just trying to figure out where the margin hit is on given relative to what our expectations were.

Marc N. Casper: Okay, that's encouraging. Maybe just to follow up on the AI piece: consistently solid growth there. I'm curious if you're just still carrying a backlog in microscopy, and can you maybe just talk a little bit about lead times and order conversion this year, the assumption. Those might get extended as we move through the year, do you think? Yeah, so when I think about the performance of our analytical instruments business, with double-digit growth for the full year, that was awesome. It was really a tremendous year.

Speaker Change: In terms of the margin profile, we finished the year at exactly where we guided to for the full year for our margin profile for the company.

Speaker Change: I think some of the changes in terms of Q4 versus between the segments.

Speaker Change: I don't think everyone quite understood the phasing of our revenue within the lab products and Biopharma services when I see some of the pre call notes.

Speaker Change: There is I think a little bit different in terms of what the some expectations, but from our expectations and certainly Q4 played out as we had expected and then for margins going forward.

Marc N. Casper: It was across all three businesses. The backlog that we carried into the beginning of 2023; those things largely cleared in the first half of 2024. So we've been at normal lead times, normal shipping times, really for about six months now in terms of that already. So we're kind of in a normal spot. And while there won't be a repeat of the, you know, the unwind of the pandemic or, you know, impacts on the supply chain, the year the business is positioned for a good year. And, you know, there's high demand for breakthrough technologies, whether it's in electron microscopy, semiconductor material science, life sciences, or astrophysics, right, and chroma mass spec. It's just incredible demand.

Speaker Change: I think the margin profile that we have today.

Speaker Change: Calling a significant difference in margin profile going forward into next year.

I think where we are in landing point on margins for the segments is probably a good starting point to think about the year ahead.

Speaker Change: Okay. Thank you.

Great. Thanks, Eric.

Yeah.

Speaker Change: The next question today comes from the line of Doug Schenkel from Wolfe Research. Please go ahead.

Doug Schenkel: Your line is now open.

Doug Schenkel: Alright, good morning, everybody. Thanks for taking the questions.

Marc N. Casper: And for those technologies, we're excited for the upcoming year and the future of that business. Thank you. The next question today comes from the line of Derik Debrawn from Bank of America. Please go ahead. Your line is now open.

Doug Schenkel: Good morning, Doug I'll come back.

Doug Schenkel: Thanks, great to be back and working with great folks like you and the team. So I want to start just with a high level <unk> question and then my follow up.

Derik de Bruin: So, Marc, I'm just sort of curious, you know, last quarter you were talking about 1% core growth. When you were sort of looking at your initial framework for 2024, if I heard you correctly, now it's plus or minus 1%. It didn't seem like Q4 got a lot worse in anything.

Speaker Change: Is really just a clarification on Lps so.

Speaker Change: So on the <unk> Mark <unk> been consistent in saying that thermo is built to grow two to three points better than the peer group over the long term.

Speaker Change: That said you did talk about 7% to 9% growth as recently as last year's analyst day.

Marc N. Casper: So what's changed? Are you more conservative on... um, you know, l, uh, you know, the ppd and these businesses are more conservative on just tough comps. I'm just sort of curious what's embedded now this like more conservative out. Yes, let me provide some context on the guidance, kind of a step back on that, and then we'll. I hope we helped frame your questions. We provided an early framing for 24 on our last call, and we had insight into how Q4 played out and completed our detailed planning work with our businesses. Through that process, our view on the market outlook has not changed significantly, and the guidance is not significantly different from the initial framing that we provided.

Im sure the two to three points Hasnt changed but as we flip the calendar.

Speaker Change: Is it fair to say that the 7% to 9% growth rate.

Speaker Change: Maybe as a little bit higher even in a more normalized environment I just want to give you an opportunity to maybe just adjust that as we kind of flip the calendar and look ahead.

And below the top line.

Speaker Change: You've done a fantastic job as always leaning operations in a more challenging period never never let a good crisis go to waste.

Speaker Change: <unk> suggests to me at least on the surface that you may be investing more in the near term, but as we think about a return to normal I'm. Just wondering is do you think we could get some outsized incremental margin flow through for the business as the business normalizes. So let me leave it there and then I'll ask a quick follow up on Lps in a second.

Marc N. Casper: It includes the latest view on FX, both rates and the expected mix of revenue and cost by currency. That increased revenue from our initial framing, but it had no impact on operating income, which reduced our margins by 20 basis points from that initial framing. And then from an operational standpoint, I think the only item of note that's changed in the past three months is a discrete item in our pharma services business. We're transitioning some of our sterile fill finish capacity from COVID vaccine support to GLP-1 support.

Speaker Change: Sure Doug Thanks for the question.

Speaker Change: In terms of the long range outlook.

Speaker Change: We raised.

Our outlook in late in 2021.

Speaker Change: And.

Speaker Change: What that at that moment, and we can remember exactly what that moment was but.

Speaker Change: But we were growing.

Marc N. Casper: We'd have been expecting to recognize an upfront fee in Q1-24. Now the accounting's finalized, we expect to recognize that benefit in line with production, which actually starts in Q25. So it shifted approximately 20 cents out of Q1-24, and that's had some impact in terms of the reported core growth. And then one other comment on the guidance is that we thought it was best to provide a range, not a point estimate. So I think it's more helpful for our investors and the range of outcomes for the year. Now, the range doesn't encapsulate every possible scenario for the year, but it does capture the reasonably likely scenarios of how the year could play out as we see it today. And the range is about a billion to revenue and $1.05 of adjusted EPS, which I think it's appropriate given the scale of the, I hope we kind of teased out the kind of framing for the guide. Okay, and a little bit more. How should we sort of think about the segment margins? go through. I mean, I'm just sort of looking.

Speaker Change: 5% right.

Speaker Change: We were growing at extraordinary organic way.

Speaker Change: And what we wanted to do was give our investors.

Speaker Change: A very long term view of what is the market.

Speaker Change: And what is our position in the market right.

And in terms of our ability to gain share.

Speaker Change: Three points I think is there's two or three but I used three for simplicity three points faster than the market is kind of the standard we hold ourselves to and.

Speaker Change: And we've been delivering that for a while.

Speaker Change: And we've been growing share for a really long while for many many many years and so nothing has changed there in terms of the market growth.

Speaker Change: Where the market was extraordinary when we said it.

Speaker Change: We said four to six was going to be our underlying market growth and that was higher than three to five and the change was actually just that we had a larger exposure to pharma and biotech as we built our business capability there.

Speaker Change: When I look to the future and I think about what's going on in the drivers of the long term in our industry.

Speaker Change: Feel incredibly confident that this is a 4% to 6% growth industry.

Speaker Change: And that we are well positioned to grow for simplicity three points faster than that so 7% to nine so so while I get the question a lot and obviously in a period, where we delivered 1% core growth in 2023, that's a long way from seven to nine.

Stephen Williamson: You know, I mean, you've seen really good progress in LSS. You made some good progress in your margins, expansion of margins across all of them. But I'm just sort of thinking about how we should think about LPS and, given where you were in the.

Speaker Change: But our view on the market declining low single digits last year reflects at least the share gain component.

Stephen Williamson: Is that 14% margin range that we're seeing for the full year sustainable? Does that fall back next year? I'm just trying to figure out where the margin hit is on, you know, given relative to what our expectations are. In terms of the margin profile, we finished the year exactly where we guided to for the full year in terms of our margin profile for the company. And I think some of the changes in terms of Q4 versus between the segments. I don't think everyone quite understood the phasing of our revenue within lab products and biopharma services. When I see some of the prequel notes, this is, I think, a little bit different in terms of what some expectations were, but from our expectations internally, Q4 played out as we'd expected.

Speaker Change: And when I look to the future.

Speaker Change: Continue to remain very confident in the long term health of the industry.

Speaker Change: I've had some really interesting discussions with investors and basically went through the logic, saying, if you're bullish on life science tools diagnostics pharma services.

Speaker Change: Youll, probably up 6% long term growth.

Speaker Change: And if you're bearish on the life science tools diagnostics and pharma services Youll, probably a 4%.

Speaker Change: Industry growth.

Speaker Change: But you have to be incredibly bearish on the world to actually get to less than 4% industry growth for the long term in our segment because this.

Stephen Williamson: And then from margins going forward, I think the margin profile that we have today is not a significant difference from the profile going forward into next year. And I think where we are in the landing point and margins for the segments is probably a good starting point to think about the year ahead. Okay, thank you.

Speaker Change: We really are a GDP plus type business.

Speaker Change: In terms of the markets that we serve so hopefully that gives you at least a sense of how we think about and while I. Appreciate the offer to to change our outlook I couldnt be more confident in the future of our industry and our competitive position in terms of the below the line a very high level concept.

Doug Schenkel: Great. Thanks, Derik. The next question today comes from the line of Doug Schenkel from Wolf Research. Please go ahead.

Speaker Change: I do believe that as you see volumes grow at a more normalized rate youll see a very strong flow through on the margins and part of what's going on with the margins for this year.

Doug Schenkel: Your line is now open. Good morning, everybody. Thanks for taking the questions. Good morning, Doug. Welcome back. Thanks. Great to be back and working with great folks like you and the team. So I want to start just with a high-level LRP question, and then my follow-up is really just a clarification on LPS.

Speaker Change: As we reset our incentive compensation for our colleagues back to normalized levels. After a year of below that so just the math. So you have some level of headwind embedded in easier numbers nothing different than we expected in October but that's part of why you don't see as much of the.

Speaker Change: Margin step up that one would expect to have.

Marc N. Casper: So on the LRP, Marc, you've been consistent in saying that Thermo's built to grow two to three points better than the pure group over the long term. That said, you did talk about 7 to 9% growth as recently as last year's Analyst Day. I'm sure the 2 to 3 points haven't changed, but as we flip the calendar, is it fair to say that the 7 to 9% growth rate, you know, maybe is a little bit high, even in a more normalized environment? I just want to give you an opportunity to maybe just adjust that, you know, as we kind of flip the calendar and look ahead. And below the top line... You know, you've done a fantastic job, as always, leaning operations in a more challenging period. You know, never let a good crisis go to waste.

Speaker Change: Okay, I'm going to I'll leave the Lpl's question for another day, but I guess the other part of my question on the margins Mark was.

Speaker Change: Obviously, you got to pay people you got to reset things in a period, where youre not growing as much. This is where thermo has historically played offense, while others have played defense to a certain extent. So I'm just wondering if you're actually pulling forward. Some investment early in the year and that could go over the next several quarters.

Speaker Change: <unk>.

Speaker Change: It's even better than expected margin flow through as the company returns to a more normalized period.

Speaker Change: Yes, Doug I think I think the example that I gave on the GOP. One contract is we're basically standing up a facility for our customer we're getting paid a fee to do that.

Marc N. Casper: Your guidance suggests to me, at least on the surface, that you may be investing more in the near term. But as we think about a return to normal, I'm just wondering if you think we could get some outsized incremental margin flow through for the business as the business normalizes. So let me leave it there, and then I'll ask a quick follow-up on LPL. Sure.

Speaker Change: We get to recognize that fee over the production volumes and we're incurring substantial cost in the interim in 'twenty, four which will create good accretive growth going forward absent. This that's one. Good example, and we're continuing to invest in innovation across the company and it would not lessened our drive here to really drive great long term growth.

Marc N. Casper: So Doug, thanks for the question. You know, in terms of the long-range outlook, All right, we raised our outlook late in 2021, and what that moment we can remember exactly what that moment was, but we were growing, you know, 25%. Right, you know, you know, we were growing in an extraordinary organic way.

Speaker Change: We are appropriately managing our cost of topline environment, we're making sure that we're actually putting the right investments in place.

Speaker Change: Make sure that that topline environment stays in the outlet space is good as we as much as articulated.

Speaker Change: Okay I'll leave it there thanks so much.

Thanks.

Speaker Change: The next question today comes from the line of Vijay Kumar.

Marc N. Casper: And what we wanted to do was give our investors a very long-term view of what the market is and what our position in it is. And in terms of our ability to gain share, you know, three points, I think, is two, three, but I use three for simplicity. Three points faster than the market is kind of the standard we hold ourselves to.

Vijay Muniyappa Kumar: Recall ISI please.

Vijay Muniyappa Kumar: Please go ahead. Your line is now open.

Vijay Muniyappa Kumar: Hi, Mark good morning, and thanks for taking my question My first one mark when I look at the annual guidance here.

Vijay Muniyappa Kumar: The core is flattish at the midpoint, excluding the vaccine headwinds its about three points, that's a pretty pretty solid guide.

Marc N. Casper: And we've been delivering that for a while, and we've been growing share for a really long time, for many, many, many years. And so nothing has changed there in terms of market growth, right where the benchmark was extraordinary when we set it. We said four to six was going to be our underlying market growth, and that was higher than three to five.

Speaker Change: The three things that have come up is China, the CRM business and analytical Tech can you just remind us what China, what PPD did in fiscal 'twenty.

Speaker Change: Is the guide assuming.

Speaker Change:

Speaker Change: Those.

Speaker Change: C pieces, China's hero and analytical tech is that at 3% about 3% below 3%. Thank you.

Marc N. Casper: And the change was actually just that we had a larger exposure to pharma and biotech as we built our business capabilities. When I look to the future, and I think about what's going on in the drivers of the long term in our industry, I feel incredibly confident that this is a four to 6% growth industry. And that we're well positioned to scroll for simplicity three points faster than that. So seven to nine.

Speaker Change: So vijay thanks for the question so when I think about.

Speaker Change: The.

Vijay Muniyappa Kumar: Performance of our businesses certainly last year and certainly as we look to the future.

Speaker Change: Last year, just spectacular performance in our clinical research business.

Marc N. Casper: So, while I get the question a lot, and obviously, in a period where we delivered 1% core growth in 2023, that's a long way from seven to nine. But our view on the market declining, you know, low single digits last year reflects at least a share gain component, and when I look to the future, I continue to remain very confident in the long-term health of the industry. I've had some really interesting discussions with investors and basically went through the logic saying, if you're bullish on life science tools, diagnostics, and pharma services, you're probably at 6% long-term growth. And if you're bearish on life science tools, diagnostics, and pharma services, you're probably at 4% industry growth. But you have to be incredibly bearish on the world to actually get to less than 4% industry growth for the long term in our segment because this. We really are a GDP plus type business in terms of the markets that we serve. So hopefully, that gives you at least a sense of how we think about it.

Speaker Change: Really the team unbelievably good job in terms of the results and I think that in a way we probably under sold the detailed numbers as Mark just sort of what actually was going on because there's so many different things we were communicating but if I think about clinical research is a little over two years after the acquisition.

Speaker Change: Phenomenal acquisition customers loved the business performing well colleagues doing a great job alright.

Speaker Change: Alright, and it's been a big success.

Speaker Change: The business in the pandemic played the largest role in supporting the clinical trials on vaccines and at the same time delivered by far the fastest I'll call. It underlying growth excluding all of the Covid activity just crushed it.

And that means for this year, we have both a roll off which we have given transparency to on.

Speaker Change: A big chunk of the vaccine revenue, which is fine and we.

Marc N. Casper: And while I appreciate the offer to change our outlook, I couldn't be more confident in the future of our industry and our competitive position. In terms of the below the line, the very high-level concept, you know, I do believe that as you see volumes grow at a more normalized rate, you'll see a very strong flow through on the margins. And part of what's going on with the margins for this year is we reset our incentive compensation for our colleagues back to normalized levels after a year of below that. So just the math says you have some level of headwind embedded in these numbers, nothing different than we expected in October. But that's part of why you don't see as much of the margin step-up that one would expect to have.

Speaker Change: We have generated a really substantial comparison, which is call it like that.

Good challenge to have in terms of the great performance. So we would expect that the businesses growth would be much more moderate.

Speaker Change: This year, just based on the comparisons, but the future, meaning looking out into 'twenty five and beyond this is a really strong business long term high single digit growth business plus the synergies driving so I feel really great about that and then a quick comment just on China, and which is unrelated to clinical research with sort of the other element of your question.

Speaker Change: China.

Speaker Change: Market conditions were challenged in 2023.

Marc N. Casper: Okay, I'll leave the LPS question for another day. But I guess the other part of my question on the margins, Mark was, You know, obviously you got to pay people, you got to reset things. In a period where you're not growing as much, this is where Thermo has historically played offense while others have played defense to a certain extent.

Speaker Change: First quarter was really strong.

Speaker Change: Lots of stimulus all of those good things, but then.

Speaker Change: So that was China effectively we're not calling for.

Speaker Change: A meaningful improvement in China. This year, rather we lap the comparisons as the year unfolds. So it becomes a little bit less of a headwind. We all know that at some point the Chinese government will create some mechanism of stimulus, whether that's direct to our confidence or wherever it doesn't we don't know when that'll happen, but at some point.

Doug Schenkel: So I'm just wondering if you're actually pulling forward some investment early in the year and that could, over the next several quarters, lead to even better than expected margin flow through as the company returns to a more normalized period. Yeah, Doug, I think the example that I gave on the GLP-1 contract is that we're basically standing up a facility for a customer, and we're getting paid a fee to do that. We get to recognize that fee over the production volumes, and we're incurring substantial costs in the interim in 24, which will create good accretive growth going forward. That's one good example, and we're continuing to invest in innovation across the company, and we haven't diminished our drive here to really drive great long-term growth. So we're appropriately managing our costs in a top-line environment, but we're making sure that we're actually putting the right investments in place and to make sure that that top-line environment stays the outlook space as good as we, as much as I have articulated. Thanks, Doug. Okay, I'll leave it there. Thanks so much.

Speaker Change: It will.

Speaker Change: Improved market conditions, because the need for what we do is very high so I'm bullish on the long term being better in China than what we've been experiencing currently.

Speaker Change: And it will take some time to.

Speaker Change: Time to get there.

Speaker Change: Great. Thanks P J Mark.

Speaker Change: Go ahead.

Steven just just one quick one for you on on.

Q1, I think operating margin slightly under 21% I think the EPS, it's around 470 ish.

Is that just the outsized impact from incentive comp reset just want to understand the Q1 margin cadence.

Steven: Yes, so when I think about the margin in Q1 that that is definitely an element when you look at it year over year and kind of sequentially as well so when I think about it year over year.

Doug Schenkel: Thanks. The next question today comes from the line of Vijay Kumar from Evercore ISI. Please go ahead; your line is now open.

Steven: So there's that.

Steven: Obviously, we have a significant drag from the lower pandemic revenue and the reset of incentive comp that's just under 200 basis points in total.

Vijay Muniyappa Kumar: Hi Marc, good morning, and thanks for taking my question. My first one, Marc: when I look at the annual guidance here, the core is flattish at the midpoint, but excluding the vaccine headwinds, it's about three points. That's a pretty solid guide.

Steven: And then about 100 basis points contribution from.

Steven: From the core business, despite the lower $1 of revenue and the key driver of that being the impact of the cost actions that we've taken over the past year. So to give you a way to frame the margin in Q1, and then yes at the margin profile grows each quarter as their revenue dollars grow during the year in terms of the profile for the year ahead.

Marc N. Casper: The three things that have come up are China, the CRO business, and analytical tech. Can you just remind us what China, what PPD did in fiscal 23? Is the guide assuming those three pieces, China, CRO, and analytical tech, are that at 3%, about 3%, below 3%?

Speaker Change: Thanks, Vijay that's helpful. Thank you guys.

Speaker Change: Operator, we have time for one more question.

Marc N. Casper: Thank you. So Vijay, thanks for the question. So when I think about the performance of our businesses, certainly last year and certainly as we look to the future, last year, just a spectacular performance in our clinical research business. Really, the team did an unbelievably good job in terms of the results.

Speaker Change: Thank you.

Speaker Change: Final question today comes from the line of Tejas Savant from Morgan Stanley. Please go ahead. Your line is now open.

Hey, guys good morning, and thanks for the time here.

Tejas Savant: Just a follow up on your on your China commentary there more in terms of the long term opportunity you've talked in the past about that being an important market for you growing at the higher end of your outlook for the company.

Marc N. Casper: And I think that, in a way, we probably undersold the details, not the numbers as much as sort of what actually was going on because there were so many different things we were communicating. But if I think about clinical research, you know, it's a little over two years after the acquisition, a phenomenal acquisition, customers love it, business performing well, colleagues doing a great job. Right, and it's been a big success. The business in the pandemic played the largest role in supporting the clinical trials for vaccines and at the same time delivered by far the fastest, I'll call it underlying growth, excluding all of the COVID activity that just crushed it. And that means for this year, we have both a roll-off which we've given transparency to on a big chunk of the vaccine revenue, which is fine, and we have generated a really substantial comparison, which is cool, like we that's a good, good challenge to have in terms of the great performance. So we would expect that the business's growth would be much more moderate this year, just based on the comparisons, but the future meaning China, you know, market conditions were challenged in 2023. However, the first quarter was really strong.

Tejas Savant: Recently, there has been a thawing in relations over the last month or so I think you've kind of alluded to that as well and some high level government engagement, but then a little while ago. We got the award of this bio secure act legislation can you just help us think through sort of what that entails for you, perhaps an opportunity to be more front footed and gained share in.

Tejas Savant: In the near term on the services side.

Tejas Savant: It is kind of the long term risk of a potential blowback from the Chinese side in terms of U S. Mmc's operating in that market that would be super helpful. Thank you.

Sure. So thanks for the question in terms of China.

Tejas Savant: A market that we've been in for 40 years.

Tejas Savant: Set of capabilities that we built over a long period of time.

Tejas Savant: That's helped Chinese Chinese society, right and created American jobs as part of it.

Tejas Savant: Better food supply addressing air pollution.

Tejas Savant: <unk> produced medicines for the local population.

Tejas Savant: We have a great reputation.

Tejas Savant: I've had the honor of being the chair of the U S. China business Council over the last couple of years and interacting both with the U S administration and the Chinese government.

While it is clear to me that the short term GDP environment is challenged in China that the needs.

What our industry does and what thermo Fisher to us for the long term is good it will be a there'll be a solid growth market certainly one of the faster growing geographies and the long term in terms of the relations.

Tejas Savant: Between the countries Yeah, I agree with your sentiment is a filing and in terms of potential.

Tejas Savant: Legislation there are thousands of bills that are written that don't happen, so until something sort of matures through the process.

Marc N. Casper: Lots of stimulus, all those good things, but then so that was China. We're not calling for a meaningful improvement in China this year, rather we've lagged the comparisons as the year unfolds, so it becomes a little bit less of a headwind. We all know that at some point, the Chinese government will create some mechanism of stimulus, whether that's direct or confidence or whatever it does. We don't know when that'll happen, but at some point, it will improve market conditions because the needs for what we do are very high. So I'm bullish on the long term being better in China than what we've been experiencing currently. And it'll take some time to get used to, time to get used to it. Great. Thanks, Vijay, Marc, and Stephen. Fan Stephen, just one quick one for you. On Q1, I think the operating margin is less likely under 21%. I think the EPS is around 470-ish.

Tejas Savant: It's hard to really know whether it comes to pass and what the exact implications.

Tejas Savant: A quick read of what they're working on this particular, one it really is basically an opportunity for.

Tejas Savant: Non Chinese companies to have a stronger position in serving.

Tejas Savant: Federal government related entities so.

Speaker Change: That's sort of the essence of that and obviously as a non Chinese company, we'd be well positioned to support the U S. Government. So thank you for the question. Let me just do a quick wrap on the call. So thanks.

Thanks, everyone for participating in our call today.

Speaker Change: We entered this year with strong momentum we're in a great position to deliver an excellent year in 2024.

Speaker Change: As always thank you for your support of Thermo Fisher scientific and we look forward to updating you as the year progresses. Thanks, everyone.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: [music].

Stephen Williamson: Is that just the outsized impact from intentual comp reset? Just want to understand the Q1 margin cadence. Yeah, so when I think about the margin in Q1, that's definitely an element when you look at it year over year and, consequently, as well. So when I think about it year over year, there's the obvious drag from the lower pandemic revenue and the reset of the incentive comp, that's just under 200 basis points in total. And then about 100 basis points of contribution from the core business, despite the lower dollars of revenue and the key driver there being the impact of the cost actions that we've taken over the past year. So it's a good way to frame the margin in Q1.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.

Stephen Williamson: And then, yes, the margin profile grows each quarter as their revenue dollars grow during the year in terms of the profile for the year ahead. Thanks, Vijay. That's helpful.

Vijay Muniyappa Kumar: Thank you, guys. Operator, we have time for one more question. Thank you. Our final question today comes from the line of Tejas Savant from Morgan Stanley. Please go ahead; your line is now open.

Tejas Savant: Hey guys, good morning, and thanks for your time here. Marc, just to follow up on your China commentary there, more in terms of the long-term opportunity, you've talked in the past about, you know, that being an important market for you growing at the higher end of your outlook for the company. You know, recently, there's been a thawing in relations over the last month or so, and I think you've kind of alluded to that as well. And you know, some high-level government engagement. But then, you know, a little while ago, we got word of this Biosecure Act legislation. Can you just help us think through sort of what that entails for you, perhaps an opportunity to be more front footed and gain share in the near term on the services side versus kind of the long-term risk of a potential blowback from the Chinese side in terms of US MNCs operating in that market? That would be super helpful. Thank you. Sure.

Marc N. Casper: So thanks for the question. In terms of China, you know, a market that we've been in for 40 years, a set of capabilities that we've built over a long period of time that's helped Chinese Chinese society, right and created American jobs as part of it, you know, better food supply, addressing air pollution, helping produce medicines for the local population. We have a great reputation. I've had the honor of being the chair of the US-China Business Council for the last couple of years and interacting both with the US administration and the Chinese government. And while it's clear to me that the short-term GDP environment is challenged in China, that the needs for what our industry does and what Donald Fisher does for the long term are good, it'll be a solid growth market, certainly one of the faster growing geographies in the long term. In terms of the relations between the countries, yeah, I agree with your sentiment; there's a thawing. And in terms of potential legislation, there are thousands of bills that are written that don't happen. So until something sort of matures through the process, you know, it's hard to really know whether it comes to pass and what its exact implications are.

Marc N. Casper: In my quick read of what they're working on, on this particular one, it really is basically an opportunity for non-Chinese companies to have a stronger position in serving federal government-related entities. So that's sort of the essence of that. And obviously, as a non-Chinese company, we'd be well positioned to support the US government.

Marc N. Casper: So thank you for the question. Let me just do a quick wrap up on the call. Thanks, everyone, for participating in our call today. You know, we enter this year with strong momentum. We're in a great position to deliver an excellent year in 2024. As always, thank you for your support of Thermo Fisher Scientific, and we look forward to updating you as the year progresses. Thanks, everyone. This concludes today's conference call. Thank you all for your participation.