Q1 2024 Thermo Fisher Scientific Inc Earnings Call

Angela: Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2024 first quarter conference call. My name is Angela, and I'll be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by t. I would like to introduce our moderator for the call, Mr. Rafael Tejada, vice president of investor relations. Mr. Tejada, you may begin the call.

Good morning, ladies and gentlemen, and welcome to the Synovus Fisher Scientific 2024 first quarter Conference call. My name is Angela and I'll be coordinating your call today. During the presentation. You can register to ask a question by pressing star followed by one on your telephone.

Pat If you change your mind. Please press star followed by T. I would like to introduce our moderator for the call Mr. Rafael to hover Vice President Investor Relations. Mr. <unk>, you may begin the 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. 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 May 8, 2024. A copy of the press release about our first quarter 2024 earnings is available in the investor section of our website under the heading, Financial. So, before we begin, let me briefly cover Safe Harbor State.

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 investors section of.

Our website Thermo Fisher dot com under the heading events and presentations until May eight 2024.

A copy of the press release of our first quarter 2024 earnings is available in the investors section of our website under the heading financials. So before we begin let me briefly cover our safe Harbor statement.

Rafael Tejada: 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. However, 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, which is on file with the SEC and available in the investor section of our website under the heading Financials, SEC Filing. 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.

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 $19 95 actual results may differ materially from those indicated.

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, which is on file with the SEC and available in the investors section of our website under the heading financials SEC filings.

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.

Rafael Tejada: 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 press release for our first quarter 2024 earnings and also in the investor section of our website under the heading Financial. So with that, I'll now turn the call over to Marc.

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

REIT conciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release of our first quarter 2020 for earnings and also in the investors section of our website under the heading financials. So with that I'll now turn the call over to Mark.

Marc N. Casper: Thank you, Raf. Good morning, everyone, and thanks for joining us today for our first quarterly call. As you saw in our press release, we had a great start to the year and delivered another quarter of strong financial performance. I'm proud of our team's ongoing focus on enabling the success of our customers while demonstrating incredibly strong commercial execution and operational discipline and our continued success as a result of our proven growth strategy and our PPI business. So, let me first recap the financials. Our revenue in the quarter was $10.34 billion. Our adjusted operating income was $2.28 billion.

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

As you saw on our press release, we had a great start to the year, we delivered another quarter of strong financial performance I'm proud of our team's ongoing focus on enabling the success of our customers, while demonstrating incredibly strong commercial execution and operational discipline.

Mark: And our continued success is a result of our proven growth strategy and our PPI business system.

Speaker Change: So let me first recap the financials our revenue in the quarter was 10, three 4 billion.

Speaker Change: Our adjusted operating income was $2 two 8 billion.

Marc N. Casper: We expanded our adjusted operating margin in Q1 to 22%, and we delivered another quarter of strong adjusted EPS performance, achieving a 2% increase year over year to $5.11 per share. Our performance in the first quarter is allowing us to raise our guidance and sets us up to deliver differentiated performance in 2020. Turning to our performance by end market, in the first quarter, underlying market conditions played out as we'd expected. Our team's excellent execution enabled us to deliver differentiated revenue performance that was ahead of our expectations. Now, let me provide you with some additional context.

Speaker Change: We expanded our adjusted operating margin in Q1 to 42% and we delivered another quarter of strong adjusted EPS performance, achieving a 2% increase year over year to $5 11 per share our performance in the first quarter is allowing us to raise our guidance and sets us up to deliver differentiated performance.

In 2020.

Turning to our performance by end market in the first quarter underlying market conditions played out as we'd expected.

Speaker Change: Our team's excellent execution enabled us to deliver differentiated revenue performance that was ahead of our expectations.

Speaker Change: Now let me provide you some additional context.

Marc N. Casper: Starting with pharma and biotech, we declined in the low single digits for the quarter, which was a sequential improvement in performance over Q4 2020. In the first quarter, the vaccine and therapy revenue runoff resulted in a three-point headwind for this customer segment, and we also delivered strong growth in our clinical research. A quick reminder about academic and government and industrial and applied. A year ago, we had very strong shipments of analytical instruments as we worked down the backlog that was caused by the pandemic-related supply chain disruption. As a result, in academic and government, we declined in the low single-digit story in the quarter.

Starting with pharma and biotech we declined in the low single digits for the quarter, which was a sequential improvement in performance over Q4 2023.

Speaker Change: In the first quarter, the vaccine and therapy revenue runoff resulted in a three point headwind for this customer segment.

Speaker Change: And we also delivered strong growth in our clinical research business.

Speaker Change: A quick reminder, on academic and government and industrial and applied a year ago, we had very strong shipments of analytical instruments as we work down the backlog that was caused by pandemic related supply chain disruptions.

Speaker Change: As a result in academic and government we declined in the low single digits. During the quarter, we delivered strong growth in our electron microscopy business as well as in our research and safety market channel.

Marc N. Casper: We do have strong growth in our electron microscopy business, as well as in our research and safety marketing. In industrial and applied, we declined in the low single digits for the quarter. We deliver strong growth in our electron microscopy business in this. Finally, in diagnostics and healthcare in Q1, we declined in the high single digits. The reported growth in this end market was impacted by the runoff of COVID-19 testing related revenue.

Speaker Change: In industrial and applied we declined in the low single digits for the quarter, we delivered strong growth in our electron microscopy business in this segment.

Speaker Change: Finally in diagnostics and healthcare in Q1 with declines in the high single digits. The reported growth in this end market was impacted by the runoff of COVID-19 testing related revenue during the quarter core revenue growth was highlighted by our transplant diagnostics and immuno diagnostics businesses as well as our healthcare market channel.

Marc N. Casper: During the quarter, core revenue growth was highlighted by our transplant diagnostics and immuno-diagnostics businesses, as well as our healthcare market channels. So, in terms of our end markets, underlying market conditions played out as we expected to start the year. As you recall, our assumption for 2024 is that we'll see a modest pickup in economic activity as the year progresses.

Speaker Change: So wrapping up on our end markets underlying market conditions played out as we expected to start the year.

Speaker Change: As you recall our assumption for 2024 is that we will see a modest pickup in economic activity as the year progresses.

Marc N. Casper: During the quarter, it was good to see a couple of positive developments in our end markets that support this view, including continued improvements in the biotech funding environment and the stimulus program announced by China. I'll now turn to an update on our growth strategy. As a reminder, our strategy consists of three pillars, high impact innovation, our trusted partner status with customers, and our unparalleled commercial and, starting with the first pillar, High Impact Innovation.

Speaker Change: During the quarter. It was good to see a couple of positive developments in our end markets that support this view, including continued improvements in the biotech funding environment and the stimulus program announced by China.

Speaker Change: I'll now turn to an update on our growth strategy. As a reminder, our strategy consists of three pillars high impact innovation, our trusted partner status with customers and our unparalleled commercial engine.

Speaker Change: Starting with the first pillar higher.

Speaker Change: High impact innovation, we had an excellent start to the year launching a number of new products across our businesses during the first quarter.

Marc N. Casper: We had an excellent start to the year, launching a number of new products across our businesses during the first quarter. Let me first highlight a number of products in analytical instruments that demonstrate our continued market leadership. In our chromatography and mass spectrometry business, we launched the Thermo Scientific Dionics Inuvion Ion Chromatography System, which enables higher resolution, faster time-to-results, and streamlined workflows to more efficiently identify contaminants for environmental testing. In our chemical analysis business, we launched the Thermo Scientific Linspector Edge inline metrology solution to enhance battery safety, performance, and production.

Speaker Change: Let me first highlight a number of products in analytical instruments that demonstrate our continued market leadership.

Speaker Change: In our chromatography and mass spectrometry business, we launched the thermo scientific IONICS newly on ion chromatography system, which enables higher resolution faster time to results and streamline workflows to more efficiently identify contaminants for environmental testing.

Speaker Change: In our chemical analysis analysis business, we launched the thermo scientific linked specter edge in line metrology solution to enhance battery safety performance and production and.

Marc N. Casper: And we also launched the thermoscientific TruScan G3 handheld Raman analyzer, a next-generation handheld instrument for the rapid identification of chemical compounds used in drug production. And then, in Life Science Solutions, we launched the Axiom Pangenomics Array, a high-throughput microarray for use in human genomic studies across global populations, including disease risk and detection research, as well as population-scale disease research programs.

Speaker Change: And we also launched the thermo scientific true scan G. III handheld Raman analyzer, a next generation Hilton handheld instrument for the rapid identification of chemical compounds used in drug production.

Speaker Change: And then in life Science solutions, we launched the axiom Pan genomics array.

Speaker Change: A high throughput microarray for use in <unk>.

Speaker Change: Human genomic studies across global populations, including disease risk in detection research as well as population scale disease research programs. So.

Marc N. Casper: So another strong quarter of product launches. One of the highlights of our high-impact innovation during the quarter was being named as one of Fast Company Magazine's Most Innovative Companies. It's a great external recognition for the impact that our team is driving for our customers. Moving to the second pillar of our strategy.

Speaker Change: Another strong quarter of product launches.

Speaker Change: One of the highlight of our high impact innovation during the quarter was being named as one of fast company magazine's most innovative companies. It's great external recognition for the impact that our team is driving for our customers.

Speaker Change: Moving to the second pillar of our strategy.

Marc N. Casper: We have been in trusted partner status for many years, and it gives me the unique opportunity to connect with our customers' senior executives. Since the beginning of the year, I've had many meetings with our customers, as they are turning to us more than ever. This is to both reinforce our partnership as well as to help them navigate the opportunities and challenges that they face. These conversations are happening across our company at all levels of the organization. Our customers see our team as part of theirs. And our culture of always finding a better way every day serves to reinforce our trusted partner status with our customers.

We are in the trusted partner status over many years and it gives me the unique opportunity to connect with our customers senior executive teams since the beginning of the year I've had many meetings with our customers as they are turning to us more than ever. This is to both reinforce our partnership as well as to help them navigate the opportunities and challenges.

Speaker Change: That they face.

Speaker Change: These conversations are happening across our company at all levels of the organization our customers see our team as part of theirs and our culture of always finding a better way every day serves to reinforce our trusted partner status with our customers. We do not take lightly the trust our customers have in our company and we will continue to partner closely with.

Marc N. Casper: We do not take lightly the trust our customers have in our company and will continue to partner closely with them to enable their innovation and productivity. The first example of this is in our clinical next-generation sequencing business. In the quarter, we announced a collaboration with Bayer to develop a next-generation sequencing-based companion diagnostic that will help identify patients who may benefit from Bayer's growing portfolio of precision cancer therapy. The second example is our analytical instruments business.

Speaker Change: Them to enable their innovation and productivity so far.

Speaker Change: First example of this is in our clinical next generation sequencing business.

Speaker Change: In the quarter, we announced the collaboration with buyer to develop a next generation sequencing based companion diagnostic that will help identify patients who may benefit from buyers growing portfolio of precision cancer therapies.

Speaker Change: The second example is our analytical instruments business, we are partnering with the North Carolina collaboratively to support P. Fast research capacity in the state as they help to identify and implement solutions to address PFS contamination. This.

Marc N. Casper: We are partnering with the North Carolina Collaboratory to support PFAS research capacity in the state as they help to identify and implement solutions to address PFAS contamination. This is the first network of its kind, and they'll use several of our state-of-the-art instruments, including the Orbitrap Astral, in their research.

Speaker Change: This is the first network of its kind and they'll use several of our state of the art instruments, including the <unk> cash flow and their research.

Marc N. Casper: And finally, in our clinical research business, I'll share two examples of how our trusted partner status comes to life as our customers look for solutions to their unmet needs. We expanded our portfolio of GMP lab services to include qPCR-based biosafety testing capabilities for the detection of bacteria and other contaminants in medicine. This offering enables significantly faster results versus traditional testing methods, allowing for quicker delivery of medicines to patients. Additionally, we launched the CORE-Evitas Syndicated Clinical Registry and Generalized Pustular Psoriasis to address an unmet need for real-world evidence related to outcomes for patients with this rare disease.

Speaker Change: And finally in our clinical research business I'll share two examples of how our trusted partner status comes to life as our customers look for solutions to their unmet needs.

Speaker Change: We expanded our portfolio of GMP lab services to include two PCR based biosafety testing capabilities for the detection of bacteria and other contaminants in medicines.

Speaker Change: This offering enables significantly faster results versus traditional testing methods, allowing for quicker delivery of medicines to patients.

Speaker Change: And we launched the core every task syndicated clinical registry and generalized pustular psoriasis to address an unmet need for real world evidence related to outcomes for patients with this rare disease.

Marc N. Casper: As you recall, Corevitas became part of our company last year. The business is performing very well and making a difference for our customers and patients. All of these are great examples of our trusted partner status.

Speaker Change: As you recall <unk> became part of our company last year, the business is performing very well and making a difference for our customers and patients.

Speaker Change: All of these are great examples of our trusted partner status.

Marc N. Casper: Now, let me turn to our PPI business system, which enables outstanding execution during the year. PPI engages and empowers all of our colleagues to find a better way every day. You can see it in our strong profitability and cash flow that we delivered in the first quarter. Looking forward, our team is actively utilizing generative AI as part of the PPI business to increase efficiency and productivity, as well as to continually improve the customer experience across the company. To share a couple of examples of how we're applying AI, it's enabling us to accelerate software development timelines in our analytical instruments and life science solutions business. We're also leveraging the combination of large language models with a vast and differentiated amount of data at our disposal.

Speaker Change: Now, let me turn to our PPI business system, which enables outstanding execution during the quarter.

Speaker Change: PPI engages and empowers all of our colleagues to find a better way every day you can see it in our strong profitability and cash flow that we delivered in the first quarter.

Speaker Change: Looking forward our team is actively utilizing generative AI as part of the PPI business system to increase efficiency and productivity as well as to continue to improve the customer experience across the company to.

Speaker Change: To share a couple of examples of how we're applying AI.

Speaker Change: It's enabling us to accelerate software development timelines in our analytical instruments in life Science solutions businesses.

We're also leveraging the combination of large language models with a vast and differentiated amount of data at our disposal. One benefit we're seeing is our ability to enhance the capability of our technical and customer service teams to more effectively serve our customers.

Marc N. Casper: One benefit we're seeing is our ability to enhance the capability of our technical and customer service teams to more effectively serve our customers. Generative AI is another great example of how we continually strengthen the impact of the PPI business. Now, I'd like to give you an 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.

Speaker Change: <unk> is another Great example of how we continually strengthen the impact of the PPI business system.

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

Marc N. Casper: We also have a positive impact by supporting our communities, being a good steward of our planet, and focusing on STEM education and advancing global health equity. To that end, during the first quarter, we announced a collaboration with the South African Medical Research Group. Together, we will establish a center of excellence and training program focused on molecular biology and life sciences. The facility will provide specialized education and support for professional development to scientists and laboratory professionals in Africa.

Speaker Change: We also have a positive impact by supporting our communities being a good steward of our planet and our focusing on some education and advancing global health equity.

Speaker Change: To that end during the first quarter, we announced the collaboration with the South African Medical Research Council.

Speaker Change: Together, we will establish a center of excellence in training program focused on molecular biology in life Sciences. The facility will provide specialized education and support for professional development to scientists and laboratory professionals in Africa.

Marc N. Casper: I'm also pleased to share that Thermo Fisher achieved a perfect score on the Human Rights Campaign Foundation's Corporate Equality Index for the eighth year in a row. Now, let me give you an update on capital deployment. We continue to successfully execute our disciplined capital deployment strategy, which is a combination of strategic M&A and returning capital to our shareholders. During the quarter, we reached the one year anniversary of the binding site acquisition, now our protein diagnostics business.

Speaker Change: I'm also pleased to share that somewhat Fisher achieved a perfect score on the human rights campaign Foundation's corporate quality index for the eighth year in a row.

Speaker Change: Let me now give you an update on capital deployment, we continue to successfully execute our disciplined capital deployment strategy, which is a combination of strategic M&A and returning capital to our shareholders.

Speaker Change: During the quarter, we reached the one year anniversary of the binding site acquisition now our protein diagnostics business.

Marc N. Casper: Its financial performance is tracking ahead of the deal model with really strong growth. I recently had the chance to visit the headquarters of our protein diagnostics business and see the great progress that they are making given the exciting new products that can positively impact patient care for multiple myeloma.

Speaker Change: Its financial performance is tracking ahead of the deal model with really strong growth I recently had the chance to visit the headquarters of our protein diagnostics business and so the great progress we're making.

Speaker Change: Given the exciting new products that can positively impact patient care for multiple myeloma.

Marc N. Casper: Turning to our planned acquisition of O-Link, we're working through the regulatory process, and the transaction is on track to close by mid-2024. We look forward to welcoming our new colleagues to the company later this year. And in terms of return on capital during the quarter, we repurchased $3 billion of shares and increased our dividend by 11%. As I reflect on the quarter, I'm very proud of what our team accomplished and grateful for their contributions to our success. In a nice recognition of both our team and our track record, Thermo Fisher has once again been included on Fortune Magazine's list of most admired companies. Let me now turn to our guidance.

Speaker Change: Turning to our planned acquisition of <unk>, we are working through the regulatory process and the transaction is on track to close by mid 2024, we look forward to welcoming our new colleagues to the company later this year.

Speaker Change: And in terms of return of capital during the quarter, we repurchased $3 billion of shares and increased our dividend by 11%.

Speaker Change: As I reflect on the quarter.

Speaker Change: I'm very proud of what our team accomplished and grateful for their contributions to our success.

Speaker Change: And a nice recognition of both our team and track record Thermo Fisher has once again been included unfortunate magazine's list of most admired companies.

Speaker Change: Let me now turn to our guidance given the stronger operational performance to start the year. We are raising our 2024 guidance. We now expect revenue to be in the range of $42 3 billion to $43 3 billion.

Marc N. Casper: Given the stronger operational performance to start the year, we are raising our 2024 guidance. We now expect revenue to be in the range of $42.3 billion to $43.3 billion, and we expect Adjusted EPS to be in the range of $21.14 to $22.02 per share. Stephen will take you through the details in his remarks.

Speaker Change: And we expect adjusted EPS to be in the range of $21 14 to $22 <unk> per share Stephen will take you through the details in his remarks.

Marc N. Casper: So to summarize our key takeaways from the first quarter, we delivered another quarter of strong financial results driven by our proven growth strategy and PPI business model. We continue to enable customer success, and this continually reinforces our trusted partner status. Our strong results in Q1 position us to deliver differentiated performance in 2024, as we continue to create value for all of our stakeholders and build an even brighter future for our customers. With that, I'll now hand the call over to our CFO, Stephen Williamson. Stephen.

Stephen Williamson: So to summarize our key takeaways from the first quarter.

Stephen Williamson: We delivered another quarter of strong financial results driven by our proven growth strategy and PPI business system.

Stephen Williamson: We continue to enable our customer success and this continually reinforces our trusted partner status.

Stephen Williamson: Our strong results in Q1 position us to deliver differentiated performance in 2024, as we continue to create value for all of our stakeholders and build an even brighter future for our company.

Stephen Williamson: With that I'll now hand, the call over to our CFO Stephen Williamson Stephen.

Stephen Williamson: Thanks, Marc. And good morning, everyone. I'll take you through an overview of our first quarter results for the total company, then provide color on our four business segments, and I'll conclude by providing our updated 2024 guidance. Before I get into the details of our financial performance, let me provide you with a high-level view of how the first quarter played out versus our expectations at the time of our last earnings. In Q1, market conditions were as we'd expected.

Thanks, Mark and good morning, everyone I'll take you through an overview of our first quarter results for the total company then provide color on our four business segments and I'll conclude by providing our updated 2024 guidance.

Before I get into the details of our financial performance. Let me provide you with a high level view on how the first quarter played out versus our expectations at the time of our last earnings call.

Stephen Williamson: In Q1 market conditions, whereas we had expected we had another quarter of excellent execution and this enabled us to deliver Q1 financials meaningfully ahead of what we had assumed in our prior guidance.

Stephen Williamson: We had another quarter of excellent execution, and this enabled us to deliver Q1 financials meaningfully ahead of what we'd assumed in our prior guidance. Core organic revenue was $150 million, or 1.5% ahead. An adjusted EPS was 40 cents ahead. To give you some color on that $0.40, $0.19 was from very strong profitability pull through on the revenue beat, and twelve cents was from phasing of spending within the year.

Stephen Williamson: Core organic revenue was $150 million or one 5% ahead.

Stephen Williamson: And adjusted EPS was <unk> 40 <unk> ahead.

Stephen Williamson: Give you some color on that 40.

Stephen Williamson: 19, with some very strong profitability pull through on the revenue beat.

Stephen Williamson: 12 switch from phasing of spending within the year.

Stephen Williamson: So we're continuing to manage the business really well, and after a great start to the year. Let me now provide you with some additional details on our performance, beginning with earnings per share. In the quarter, we grew adjusted EPS by 2% to $5.11. Gap EPS in the quarter was $3.46, up 4% from Q1 last year. On the top line, in Q1, reported revenue was 3% lower year over year.

Stephen Williamson: <unk> <unk> was from lower FX headwinds and <unk> was from lower net interest expense.

Speaker Change: So we're continuing to manage the business really well and off to a great start to the year.

Speaker Change: Let me now provide you with some additional details on our performance beginning with earnings per share in the quarter. We grew adjusted EPS by 2% to $5 11.

Speaker Change: GAAP EPS in the quarter was $3 46.

Up 4% from Q1 last year.

On the top line in Q1 reported revenue was 3% lower year over year the.

Stephen Williamson: The components of our Q1 reported revenue change included 4% lower organic revenue and a slight contribution from acquisitions. Q1 Core Organic Revenue Decreased 3% And in the quarter, pandemic-related revenue was approximately $200 million, including $175 million of vaccines and therapies-related revenue. Turning to our organic revenue performance by geography, in Q1, North America declined mid-single digits, Europe declined low-single digits, and Asia-Pacific and China declined in the low-single digits.

Speaker Change: The components of our Q1 reported revenue change included 4% lower organic revenue and a slight contribution from acquisitions.

Speaker Change: Q1 core organic revenue decreased 3%.

Speaker Change: And in the quarter, a pandemic related revenue was approximately $200 million in.

Speaker Change: Including $175 million of vaccines or therapies related revenue.

Speaker Change: Turning to our organic revenue performance by geography in Q1, North America declined mid single digits, Europe declined low single digits, and Asia Pacific and China declined in the low single digits.

Speaker Change: With respect to our operational performance the team use the PPI business system to execute really well in the quarter delivering $2 $3 billion of adjusted operating income, which was 22% of revenue 20 basis points higher than Q1 last year.

Stephen Williamson: With respect to our operational performance, the team used the PPI business system to execute really well in the quarter, delivering $2.3 billion of adjusted operating income, which was 22% of revenue, 20 basis points higher than Q1 last year. Total company adjusted gross margin in the quarter came in at 41.8%, 150 basis points higher than Q1 last year. In the quarter, we continue to deliver very strong productivity, reflecting our continued focus on cost management, as well as the carryover benefits from the cost actions put in place last year.

Speaker Change: Total company adjusted gross margin in the quarter came in at 41, 8% 150 basis points higher than Q1 last year.

Speaker Change: In the quarter, we continued to deliver very strong productivity, reflecting our continued focus on cost management as well as the carryover benefits from the cost actions put in place last year.

Stephen Williamson: This enabled us to more than offset the impact of lower volumes while appropriately funding investments to further advance our industry leadership. Moving to the details of the P&L, adjusted SG&A in the quarter was 16.5% of revenue. Total R&D expense was $330 million in Q1, reflecting our ongoing investment in high-impact innovation.

Speaker Change: This enabled us to more than offset the impact of lower volumes, while appropriately funding investments to further advance our industry leadership.

Moving to the details of the P&L adjusted SG&A in the quarter was 16, 5% of revenue total R&D expense was $330 million in Q1, reflecting our ongoing investment in high impact innovation.

Stephen Williamson: R&D as a percent of manufacturing revenue was 7.2% in the quarter. Looking at results below the line, our Q1 net interest expense was $84 million, which is $70 million lower than Q1 2023 due to an increased cash balance. Just the tax rate in the quarter was 10.5%.

Speaker Change: R&D as a percent of manufacturing revenue was seven 2% in the quarter.

Speaker Change: Looking at our results below the line Q1, net interest expense was $84 million, which is $17 million lower than Q1 2023 due to increased cash balances.

Speaker Change: Our adjusted tax rate in the quarter was 10, 5% in.

Stephen Williamson: And average diluted shares were $384 million in Q1, approximately $4 million lower year over year, driven by share repurchases net of option dilution. Now, we turn to free cash flow and the balance sheet. We had a strong start to the year with cash flow generation. Q1 cash flow from operations was $1.3 billion, and free cash flow for Q1 was $910 million after investing $340 million of net capital expenditure. We continue to return capital to shareholders in Q1, with an 11% increase in our dividend and the $3 billion of share buybacks which were completed in January.

And average diluted shares were $384 million in Q1, approximately $4 million lower year over year, driven by share repurchases net of option dilution.

Speaker Change: Turning to free cash flow free cash.

Speaker Change: Cash flow and the balance sheet, we had a strong start to the year with cash flow generation Q1 cash flow from operations was $1 3 billion.

Speaker Change: And free cash flow for Q1 was $910 million.

Speaker Change: After investing $340 million of net capital expenditures.

We continued to return capital to shareholders in Q1, with an 11% increase in our dividend and a $3 billion of share buybacks, which were completed in January.

Stephen Williamson: We ended the quarter with $7.25 billion in cash and short-term investments and $35.6 billion of total debt. The leverage ratio at the end of the quarter was 3.3 times gross debt to adjusted EBITDA and 2.6 times on a net debt basis.

Speaker Change: We ended the quarter with $7 $25 billion in cash and short term investments and $35 6 billion of total debt our leverage ratio at the end of the quarter was three three times gross debt to adjusted EBITDA and $2 six times on a net debt basis.

Stephen Williamson: Concluding my comments on our total company performance, the adjusted ROIC was 11.8%, reflecting the strong returns on investment that we've been generating across. Now I'll provide some color on the performance of our four business segments, starting with Life Sciences Solutions. Q1 reported revenue in this segment declined 13%, and organic revenue was 12% lower than the prior year quarter. This is driven by moderation in pandemic-related revenue in the segment, as well as lower levels of activity in our bioproduction business versus the year ago quarter.

Speaker Change: Concluding my comments on our total company performance adjusted ROIC was 11, 8%, reflecting the strong returns on investment that we've been generating across the company.

Speaker Change: Now I'll provide some color on the performance of our four business segments, starting with life Sciences solutions.

Speaker Change: Q1 reported revenue in this segment declined 13% and organic revenue was 12% lower than the prior year quarter. This was driven by moderation in pandemic related revenue in the segment as well as lower levels of activity in our bio production business versus the year ago quarter.

Stephen Williamson: Q1 Adjusted Operating Income for Lifescience Solutions increased 1%, and Adjusted Operating Margin was 36.8%, up 480 base points versus the prior year quarter. During Q1, we delivered exceptionally strong productivity, which was partially upset by unfavorable volume pull. The team continues to do an excellent job to appropriately manage the cost base and deal with the unwind of the pandemic. In the analytical instrument segment, reported revenue declined 2%, and organic growth was 1% lower than the prior year quarter. We continue to deliver very strong growth in the electron microscopy business.

Speaker Change: Q1, adjusted operating income for life Science solutions increased 1% and adjusted operating margin was 36, 8% up 480 basis points versus the prior year quarter.

Speaker Change: During Q1, we delivered exceptionally strong productivity, which was partially offset by unfavorable volume pull through the <unk>.

Speaker Change: Team continues to do an excellent job of to appropriately manage the cost base and deal with the unwind of the pandemic.

Speaker Change: In the analytical instruments segment reported revenue declined 2% and organic growth was 1% lower than the prior year quarter. We continued to deliver very strong growth in the electron microscopy business and as a reminder, we had very strong comparisons in this segment in the quarter is the high level of instrument shipments in Q1 last year as we walk down the <unk>.

Stephen Williamson: And as a reminder, we had very strong comparisons in this segment in the quarter due to the high level of instrument shipments in Q1 last year as we worked down the backlog. In this segment, Q1 Adjusted Operating Income decreased 5%, and Adjusted Operating Margin was 23.7%, 70 basis points lower year over year. In the quarter, we deliver strong productivity, which is more than offset by unfavorable volume mix and strategic investment. Turning to our specialty diagnostics, in Q1, reported revenue and organic revenue were flat versus the prior year quarter.

Speaker Change: Log.

Speaker Change: In this segment Q1, adjusted operating income decreased 5% and adjusted operating margin was 23 seven.

Speaker Change: 70 basis points lower year over year.

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

Speaker Change: Turning to our specialty diagnostics in Q1 reported revenue and organic revenue was flat versus the prior year quarter.

Stephen Williamson: In Q1, we continue to see strong underlying growth in the core, led by our transplant diagnostics and immunodiagnostics businesses, as well as in our healthcare market share. Q1 Adjusted Operating Income for Specialty Diagnostics increased 5%, and Adjusted Operating Margin was 26.5%, which is 120 basis points higher than Q1 2023. During the quarter, we delivered favorable business mix and good productivity, which is partially offset by strategic. And finally, in the biotechnology products and biopharmaceutical services segment, both reported revenue and organic growth decreased 1% in Q1 versus the prior year quarter. This was driven by the runoff of vaccines and therapies revenue.

Speaker Change: In Q1, we continued to see strong underlying growth in the core led by transplant diagnostics and immuno diagnostics businesses as well as in our healthcare market channel.

Speaker Change: Q1, adjusted operating income for specialty diagnostics increased 5% and adjusted operating margin was 26, 5%, which is 120 basis points higher than Q1 2023.

Speaker Change: During the quarter, we delivered favorable business mix and good productivity, which was partially offset by strategic investments.

Speaker Change: And finally in laboratory products and Biopharma services segment, both reported revenue and organic growth decreased 1% in Q1 versus the prior year quarter. This was driven by the runoff of vaccines and therapies revenue.

Stephen Williamson: During the quarter, we delivered strong growth in our clinical research business. Q1 adjusted operating income declined 6% and adjusted operating margin was 13%, which is 80 basis points lower than Q1 2023. In the quarter, we delivered strong productivity, which was more than offset by unfavorable volume mix and strategic investment.

Speaker Change: During the quarter, we delivered strong growth in our clinical research business.

Speaker Change: Q1, adjusted operating income declined 6% and adjusted operating margin was 13%, which is 80 basis points lower than Q1 2023 in the quarter, we delivered strong productivity, which was more than offset by unfavorable volume mix and strategic investments.

Stephen Williamson: Turning now to guidance, as Marc outlined, given the strong start to the year, we're raising our 2024 full-year guidance. We now expect revenue to be in the range of $42.3 billion to $43.3 billion, and adjusted EPS to be in the range of $21.14 to $22.02. At the midpoint, that reflects a core revenue increase of just under $100 million. We continue to assume core organic revenue growth will be in the range of minus 1% to positive 1% for 2024. We continue to assume that the market declines below single digits this year.

Speaker Change: Turning now to guidance as Mark outlined given the strong start to the year, we're raising our 2020 for full year guidance.

Speaker Change: We now expect revenue to be in the range of $42 3 billion to $43.

Speaker Change: $43 3 billion.

Speaker Change: And adjusted EPS to be in the range of $21 14.

$22 <unk>.

Speaker Change: At the midpoint that reflects a core revenue increase of just under $100 million.

Speaker Change: We continue to assume core organic revenue growth will be in the range of minus 1% to positive 1% for 2024, and we continue to assume that the market declined low single digits. This year, our growth strategy and PPI business system execution will enable us to continue to take share once again.

Stephen Williamson: Our growth strategy and PPI business system execution will enable us to take share once again. In terms of adjusted EPS, the increase in the guidance at the midpoint is just over 10 cents. The majority of this is from the core revenue raise. There's also $0.02 from assumed lower net interest expense versus the prior guy. Our 2024 updated guidance range assumes an adjusted operating income margin between 22.4% and 22.8%, slightly improved from the prior guidance.

Speaker Change: In terms of adjusted EPS the increase in the guidance at the midpoint is just over 10.

Speaker Change: The majority of this is from the core revenue raise is also too from assumed lower net interest expense versus our prior guidance.

Speaker Change: Our 2020 for updated guidance range assumes an adjusted operating income margin between 22, 4% and 22, 8% slightly improved from the prior guide.

Speaker Change: We continue to use the PPI business system to enable excellent execution managed cost appropriately and fund the right long term investments to enable us to further advance our industry leadership.

Stephen Williamson: We continue to use the PPI business system to enable excellent execution, manage costs appropriately, and fund the right long-term investments to enable us to further advance our industry leadership. To a great start of the year and increase in the guidance outlook. Remain well positioned to continue to deliver differentiated performance. I thought it would be helpful to remind you of some of the key underlying assumptions behind the guide that remain unchanged from the previous guidance.

To a great start to the year and increase in the guidance outlook, we remain well positioned to continue to deliver differentiated performance.

Speaker Change: I thought it'd be helpful to remind you of some of the key underlying assumptions behind the guide that remain unchanged from the previous guidance.

Speaker Change: In 2024, we're assuming just under $100 million of testing revenue and $300 million to $400 million of vaccines and therapies related revenue in total this represents a year over year headwind of one three to $1 4 billion.

Speaker Change: Or 3% of revenue.

Stephen Williamson: In 2024, we're assuming just under $100 million of testing revenue and $300 to $400 million of vaccines and therapies-related revenue. In total, this represents a year-over-year headwind of $1.3 to $1.4 billion, or 3% of revenue. We've seen that FX will be roughly neutral year-over-year to both revenue and just the DPS. Given recent FX rate changes, we're assuming that the $0.07 beat that we saw in Q1 is offset in the remainder of the year, leading to no change for the year as a whole for FX versus the prior guy.

Speaker Change: We assume that FX will be roughly neutral.

Speaker Change: Year over year to both revenue and adjusted EPS given recent FX rate changes, we're assuming that the <unk> beat that we saw in Q1 is offset in the remainder of the year, leading to no change for the year as a whole for FX versus our prior guide.

Speaker Change: We expect the adjusted income tax rate will be 10, 5% in 2024 and were assuming between $1 3 billion and $1 5 billion.

Speaker Change: Net capital expenditures.

Speaker Change: And free cash flow in the range of $6 5 billion to $7 billion.

Speaker Change: In terms of capital deployment, we're assuming $3 billion of share buybacks, which were completed in January we expect to return approximately $600 million of capital to shareholders. This year through dividends.

Stephen Williamson: We expect the adjusted income tax rate to be 10.5% in 2024, and we're assuming between $1.3 billion and $1.5 billion of net capital expenditures and free cash flow in the range of $6.5 billion to $7 billion. In terms of capital deployment, we're assuming $3 billion of share buybacks, which were completed in January. We expect to return approximately $600 million of capital to shareholders this year through dividends. We continue to assume that we'll close the O-Link acquisition by mid-year. The full year average diluted share count is assumed to be approximately 383 million shares.

Speaker Change: Continues to assume that we'll close the <unk> acquisition by mid year.

Speaker Change: Full year average diluted share count is assumed to be approximately 383 million shares.

And finally I wanted to touch on quarterly phasing in Q2, we expect revenue to step up from the first quarter and organic growth will likely be two points better than Q1.

Speaker Change: And we expect Q2 adjusted EPS to be similar to Q1. This reflects the revised view of the phasing of spending within the year that I mentioned earlier.

Speaker Change: I think this view of Q2 is pretty close to what's currently baked into consensus right now.

Speaker Change: So to conclude we delivered on our commitments in Q1 and were at great position to deliver differentiated performance.

Stephen Williamson: And finally, I wanted to touch on quarterly phasing. In Q2, we expect revenue dollars to step up from the first quarter, and organic growth will likely be two points better than Q1. And we expect Q2 adjusted EPS to be similar to Q1. This reflects our revised view of the phasing of spending within the year that I mentioned earlier. I think this view of Q2 is pretty close to what's currently baked into consensus right now. So to conclude, we delivered on our commitments in Q1, and we're in a great position to deliver differentiated performance for all our stakeholders in 2024. With that, I'll turn the call back over to Raph. Operator.

Speaker Change: All of our stakeholders in 2024 with that I'll turn the call back over to Ralph.

Ralph: Operator, we're ready for the Q&A portion of the call.

Ralph: Thank you Mr <unk>.

Speaker Change: As a reminder to everyone. If you would like to ask a question. Please press star followed by one on your telephone keypad.

Operator: Have you changed your mind, Please press star followed by T.

Ralph: And in order to allow everyone in the queue and opportunity to address this normalization management team. Please limit your time on the call to one question and only one follow up.

Ralph: If you have additional questions. Please respond to that Keith.

Rafael Tejada: Operator, we're ready for the Q&A portion of the call.

Operator: Thank you, Mr. Tejada. As a reminder, everyone, if you would like to ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by T. 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 only one follow-up. If you have additional questions, please return to the queue. We will pause here briefly as to question the register. We have the first question from Doug Schenkel with Wolf Research. Your line is open.

We will pause briefly ask the question Richard.

Speaker Change: We have quest.

Speaker Change: Question from Doug Schenkel with Wolfe Research. Your line is now open.

Douglas Anthony Schenkel: Good morning, guys. Thank you for taking my questions.

Simply put it was a better start than expected to the year Mark can you share color on one how did the quarter progress too.

Douglas Anthony Schenkel: How does that progression and really momentum heading into the second quarter, how do those things inform your thinking on the outlook for the balance of the year.

Douglas Anthony Schenkel: Good morning, guys. Thank you for taking the time to answer my questions.

Douglas Anthony Schenkel: Thanks.

Marc N. Casper: Simply put, it was a better start than expected for the year. Marc, can you share color on one, you know, how the quarter progressed? And two, you know, how that progression and really momentum heading into the second quarter, how do those things inform your thinking on the outlook for the balance of the year?

Mark: So I thought.

Mark: Just in the spirit of continuous improvement and PPI that I would frame a few of the key points for the Q&A session and then get to your question. So.

Speaker Change: Indulge me for a second.

Speaker Change: So.

Speaker Change: When I think about the key points, one I always start with the long term, we serve an awesome industry that has a bright future alright, and when you think about what drives the bright future very durable growth given by the great science strong pipelines and the unmet medical needs.

Marc N. Casper: Doug, thanks. So, I thought, just in the spirit of continuous improvement in PPI, that I would outline a few of the key points for the Q&A session and then get to your question. So, indulge me for a second.

Speaker Change: I think about the first quarter zooming into the short term.

Marc N. Casper: So, when I think about the key points, one, I always start with the long term. We serve an awesome industry that has a bright future, right?

Speaker Change: Market conditions were in line with our expectations and really with strong execution in the quarter that resulted in the financial performance that was ahead of our expectations. It allowed us to retire risk as well as raise our full year outlook.

Marc N. Casper: And when you think about what drives the bright future, very durable growth given by great science, strong pipelines, and unmet medical needs. When I think about the first quarter, zooming in on the short term, you know, market conditions were in line with our expectations. And really, it was strong execution in the quarter that resulted in the financial performance that was ahead of our expectations. It allowed us to retire risk as well as raise our full-year output, reminding our investors what's assumed in the 24 guidances that we're going to see a modest step up or pick up in economic activity as the year progresses.

Speaker Change: Reminding our investors what's assumed in the 'twenty four guidance is that we're going to see a modest step up or pickup in economic activity as the year progresses and during the quarter.

Speaker Change: It was really good to see a couple of positive developments in our end markets that supports the view of a pick up as the year progresses, which is continued improvements in the biotech funding environment and the stimulus program that was announced by China as.

Speaker Change: As you know how we define success is that we deliver differentiated short term performance with a strong emphasis on share gain while strengthening our competitive position for the long term and Q1 was another quarter in which we achieve that so talk as I think about the phasing of the quarter.

Marc N. Casper: And during the quarter, it was really good to see a couple positive developments in our end markets that support the view of a pickup as the year progresses, which are continued improvements in the biotech funding environment and the stimulus program that was announced by China. As you know, how we define success is that we deliver differentiated short-term performance with a strong emphasis on share gain while strengthening our competitive position for the long term.

Speaker Change: Market really played out exactly as we thought it was when we looked at the different parts of it really in aggregate in the pieces that really played out that way as the quarter.

Speaker Change: Unfolded.

Speaker Change: What I would say is didn't see a huge change in pattern, Although march was a little bit better.

Speaker Change: Then the first couple of months you had the way Easter.

Marc N. Casper: And Q1 was another quarter in which we achieved that. So, Doug, as I think about the phasing of the quarter, the market really played out, you know, exactly as we thought it was. And we looked at the different parts of it, and really, in aggregate and in the pieces, it really played out that way. As the quarter unfolded, you know, I didn't see a huge change in pattern, although March was a little bit better than, you know, the first couple months.

Speaker Change: Laid out which kind of makes it a little bit hartzell exactly but it felt like March was a good exit rate consistent with the modest step up in that.

Speaker Change: Baked into it and I would say that.

Speaker Change: April is in the first couple of weeks kind of playing out with that as well.

Speaker Change: Okay. That's super helpful and thank you for the high level thoughts as well if I could.

Speaker Change: Maybe just.

Speaker Change: Kind of double click into a.

Speaker Change: An area of focus for all of US lab products and services was stronger than expected relative to certainly what I had in my model and from what I can tell what's in consensus.

Marc N. Casper: You have Easter laid out, which kind of makes it a little bit hard to know exactly, but it felt like March was a good exit rate consistent with the modest step, and that's baked into it. And I would say that, you know, April is, you know, in the first couple of weeks, kind of playing out with that as well.

Speaker Change: In particular, obviously, the CRO and the CMO businesses are a focus for all of us.

Speaker Change: What are you seeing there is it fair to say that.

Douglas Anthony Schenkel: Okay, that's super helpful. And thank you for the high-level thoughts as well. If I could, you know, maybe just, you know, kind of double-click into an area of focus for all of us, lab products and services were stronger than expected relative to certainly what I had at my model. And from what I can tell, that was in consensus. You know, in particular, obviously, the CRO and the CDMO businesses are our focus for all of us. What are you seeing there?

Speaker Change: And things are picking up there a little bit better and maybe better than expected.

Speaker Change: Keeping in mind.

Speaker Change: Mind that some of the early updates from CMO peers have been relatively encouraging and then I think maybe more on the CRO side is where we would see this impact but as you know as we kind of keeping in mind that Q1 was the best Biopharma funding quarter in about five years, how does that how does that make you feel about the outlook for.

Marc N. Casper: Is it fair to say that, you know, things are picking up there a little bit better and maybe better than expected? You know, keeping in mind that, you know, some of the early updates from CDMO peers have been relatively encouraging. And then I think maybe more on the CRO side is where we'd see this impact. But as, you know, as we kind of keep it in mind that Q1 was the best biopharma funding quarter in about five years, you know, how does that make you feel about the outlook for the next several quarters and, you know, the years ahead?

Speaker Change: The next several quarters.

Speaker Change: Years ahead.

Douglas Anthony Schenkel: This is Doug.

Douglas Anthony Schenkel: The kind of the view versus consensus but in a market can talk about the kind of business dynamics. So we don't guide by by segment in terms of our organic growth and for US. It was it came in as Mark said the market came in as we'd expected in aggregate.

That's the same thing for the segments and we executed well so it wasn't a huge outperformance part of the beat that was kind of pretty much across the board for the company.

Douglas Anthony Schenkel: And then when you get into the dynamics.

Stephen Williamson: This is Doug. I'll tee up the kind of view versus consensus, but I'm not going to talk about the kind of business dynamics. So, we don't guide by segment in terms of our organic growth. And for us, it came in, as Marc said, the markets came in as we'd expected in Agrius. And that's the same thing for this segment, and we executed well. So it wasn't a huge outperformance part of the beat that was kind of pretty much across the board.

Douglas Anthony Schenkel: The one thing I would call out is in our.

Douglas Anthony Schenkel: CRM capabilities clinical research the form of PPD business.

Douglas Anthony Schenkel: Excellent execution in the first quarter.

Douglas Anthony Schenkel: So really very strong performance, we are proud of what the team accomplished.

Douglas Anthony Schenkel: And when I think about.

Douglas Anthony Schenkel: The market dynamics.

Douglas Anthony Schenkel: Definitely seeing the pipeline of activity picking up in us.

Speaker Change: As you certainly know it takes a while for that to actually materialize into revenues given the cycle of the business, but very encouraging given the biotech funding environment to see that level of pipeline of work picking up so thank you Doug.

Stephen Williamson: Yeah, and then when you get into the dynamics, the one thing I would call out is our, you know, CRO capabilities, clinical research, the former PPD business, really excellent execution in the first quarter, driving really very strong performance. Very proud of what the team accomplished. And when I think about the market dynamics, I'm definitely seeing the pipeline of activity picking up, and as you certainly know, it takes a while for that to actually materialize into revenue just given the cycle of the business, but very encouraging given the biotech funding environment to see that level of pipeline work picking up. So, thank you, Douglas.

Thank you. The next question is from Mike King with Bank of America.

Your line is open.

Mike Brewer: Great. Thanks for taking my question and congrats on the quarter.

Mike Brewer: Mark I wanted to pick up on something you just mentioned.

Mike Brewer: Called out continued improvement in biotech funding environment and earlier, you talked about a stimulus in China too.

Mike Brewer: Positive developments you saw on the end market in <unk>.

Michael Wilkin: Thank you. The next question is from Michael Wilkin with Bank of America. Your line is open.

But I think you also acknowledged it's still relatively early going for those and there's been a few false starts and end markets over the course of 2023. So I guess the question is what gives you confidence that these have really turned the corner what data points are you looking for as the year progresses, especially given your position on the China business Council.

Marc N. Casper: Great. Thanks for taking my question and congrats on the quarter. Marc, I want to pick up on something you just mentioned. You called out the continued improvement in the biotech funding environment, and earlier you talked about the stimulus in China. You know, two positive developments you saw in the end market in one go. But I think you also acknowledge it's still relatively early going for those, and there have been a few false starts in end markets over the course of 2023.

Mike Brewer: Just when do you think the better funding and stimulus will show up as revenues for you for thermo.

Mike Brewer: Yes.

Speaker Change: I think it's a great question I think the way you framed it as well so.

Speaker Change: Nothing about false starts the way that I think about it is.

Speaker Change: Super clear on the word choice what was assumed in our original guidance was a modest pickup the two data points that I called out would be consistent with our view so we're not change.

Marc N. Casper: So I guess the question is, what gives you confidence that things have really turned the corner? You know, what data points are you looking for as the year progresses? And especially given your position on the China Business Council, just, you know, when do you think the better funding and stimulus will show up as revenues for you from Thermo?

Speaker Change: Changing our view upwards on the market, but rather.

Speaker Change: What's going to drive the slight pick up the fact that biotech funding is improving and that China announced a stimulus program I think everybody.

Michael Wilkin: Yeah, Mike, I think it's a great question. I like the way you phrased it as well.

Speaker Change: Probably positively surprised that they announced that is early in the year is that they did and they are trying to get the economy growing.

Marc N. Casper: So nothing about false starts. The way that I think about it is, and this is super clear on the word choice, what was assumed in our original guidance was a modest pickup. The two data points that I called out would be consistent with that view. So we're not, you know, changing our view upwards on the market, but rather, what's going to drive the slight pickup, the fact that biotech funding is improving, and that China announced a stimulus program.

Speaker Change: There was some good facts to support the modest step up and set ourselves up for.

Speaker Change: And even stronger set of market conditions as we enter 2025 solid slots, how I think about.

Speaker Change: Kind of a phasing of what's going on in the market and then the other thing that I wouldn't just note about the quarter, which was very positive is that it actually played out as we expected right, including the four end markets and that's good because that means.

Marc N. Casper: I think everybody was probably positively surprised that they announced it as early in the year as they did and they're trying to get their economy growing. Those are good facts to support the modest step up and set ourselves up for an even stronger set of market conditions as we enter 2025. So that's how I think about the kind of phasing of what's going on in the market, and then you know the other thing that I wouldn't just note about the quarter, which was very positive, is that it actually played out as we expected, right, including the foreign markets. And that's good because that means the normal incredible visibility and predictability that you typically have in this business, which is helpful as well, is returning.

Speaker Change: The normal incredible visibility and predictability that you typically have in this business is returning which which is helpful as well.

Speaker Change: Okay, that's really helpful.

Speaker Change: Doug asked about <unk>.

Speaker Change: Product and services, let me focus on analytical instruments, you called out electron microscopy continued to do very well there but.

Speaker Change: And you do have really tough comps with maybe you could focus a little bit on chromatography mass spec. What are you seeing there from an end market perspective, theres been a lot of concern about pharma capex budgets and sort of how they're trending in 2024. So any early comments you can say about that part of the portfolio.

Michael Wilkin: Okay, that's really helpful. And, you know, Doug asked about lab products and services. When we focus on analytical instruments, you call it out electron microscopy, which continues to do very well there. But, and you do have really tough competition, but maybe you could focus a little bit on chromatography mass spec.

Speaker Change: Yes, so Mike when I think about analytical insurance you had a really good quarter.

Speaker Change: And it's against a very very strong comparison, which is why I called it out because.

Speaker Change: <unk>.

Speaker Change: Compared to the high Def high teens growth last year, it's important to flag it.

Michael Wilkin: What are you seeing there from a market perspective? There's been a lot of concern about pharma capex budgets and sort of how they're trending in 2024. So any early comments you can say about that part of the portfolio? Yeah.

Speaker Change: Let me start with electron microscopy, then I'll get to chroma mass spec. So electron microscopy that business is performing at a great level continues to have a strong order book.

Marc N. Casper: Yes, so when I think about analytical instruments, we had a really good quarter, and it's against a very, very strong comparison, which is why I called it out, because compared to the high team's growth last year, it's an important flag.

Speaker Change: Just doing a really good job and I feel great about that when I think about chromatography mass spectrometry.

Speaker Change: Well I'll have incredibly strong comparisons.

Speaker Change: Getting really good uptake on the Astro and.

Marc N. Casper: Let me start with electron microscopy, then I'll get to chroma mass spec. So electron microscopy, that business has been growing at a great level, continues to have, you know, a strong order book, and, you know, just doing a really good job. And I feel great about that. When I think about chromatography and mass spectrometry, they, as well, have incredibly strong comparisons.

Speaker Change: Really have had some milestone level of shipments on that product over the first nine months of.

Speaker Change: Oney launching it so that's gone well.

Speaker Change: Most of our businesses and the high end research portion.

Speaker Change: Which has done well for us we are a little bit less exposure to kind of the more routine applications.

Speaker Change: I did flag one product that we launch which is really quite relevant as you know with the.

Marc N. Casper: We're getting really good uptake on the Astro and really have had some milestone levels of shipments on that product over the first nine months of owning, you know, launching it. So that's gone well. You know, most of our business is in the high-end research portion, which has done well for us. We have a little bit less exposure to kind of the more routine applications.

Very strong market leader and ion chromatography, you hear a lot about PFS testing things of this sort and we launched the next generation of instrumentation, there, which is great just given how large our fleet is around the world.

Speaker Change: <unk> is off to a great start so I feel good about the outlook for.

Speaker Change: For the different pieces and I highlighted a couple of interesting launches and chemical analysis, the smallest of the three businesses.

Marc N. Casper: You know, I did flag one product that we launched, which is really quite relevant, as you know, with a very strong market leader in ion chromatography. You hear a lot about PFAS testing, things of this sort. And we launched the next generation of instrumentation there, which is great, just given how large our fleet is around the world. And that product is off to a great start, so I feel good about the outlook for the different pieces.

Speaker Change: Where we're enabling battery production and really trying to change the way the QA QC is done in pharmaceutical manufacturing by having raw materials inspected.

Speaker Change: At the factory versus doing lab testing in the handheld Raman analyze it does that so.

Speaker Change: Really great innovation drives growth in the business in a really good performance to start the year.

Speaker Change: Thank you. The next question is from Jack Meehan with Nephron Research. Your line is open.

Marc N. Casper: And I highlighted a couple interesting launches in chemical analysis, the smallest of the three businesses, where we're enabling battery production and really trying to change the way that QAQC is done in pharmaceutical manufacturing by having raw materials inspected at the factory versus doing lab testing, and the handheld Raman analyzer does that. So, you know, really great innovation drives growth in the business and a really good performance to start the year.

Jack Meehan: Good morning, guys.

Jack Meehan: I wanted to keep digging in on the pharma businesses here. So the first question's on clinical research you called out strong growth.

Jack Meehan: Verification is this.

Is that the COVID-19 headwinds you've talked about before.

Jack Meehan: The tone sounds more positive any comments around what youre seeing would be great.

Jack Meehan: Yes, and there is no adjustments to any of that it's just business does go through that and.

Marc N. Casper: Thank you. The next question is from Jack Meehan with Neffern Research. Your line is open.

Jack Meehan: When I think about the year when I think about the guidance that some of the assumptions embedded in the guidance, we reminded our investors that we had the largest role in clinical research on supporting the pandemic response, we also have in parallel incredible growth in the business.

Jack Meehan: I wanted to keep digging in on the pharma businesses here. So the first question is on clinical research. You called out strong growth. Just a clarification, www.youtube.com.uk Yes, there's no adjustments to any of that.

Marc N. Casper: It's just business just grew through that. And, you know, when I think about the year, when I think about the guidance, that's the assumptions of better than the guidance, we reminded our investors that we had the largest role in clinical research supporting the pandemic response. We also had, in parallel, incredible growth in the business and really just an excellent start and excellent execution to deliver strong growth in the quarter. And while we expect this business will moderate, you know, this year relative to the last few years, just the momentum it has built up has both extremely well for the midterm of, you know, high single-digit growth businesses plus synergies.

Jack Meehan: And really just an excellent start and excellent execution to deliver strong growth in the quarter and while we expect this business will moderate this year relative to last few years.

Jack Meehan: Just the momentum it has bodes extremely well for the mid term of high single digit growth business plus synergies.

Jack Meehan: The team has done a great job of becoming part of our company leveraging our relationships.

Jack Meehan: Getting really strong commercial momentum so really nice nice nice start to the year.

Jack Meehan: Awesome.

Jack Meehan: And then on the pharma services side, there's been a little bit of a competitive shakeup with novo's proposed acquisition of Catlin can you just talk about your win rates of Patheon and how you feel about the runway for future Tech transfers.

Marc N. Casper: So the team has done a great job of becoming part of the company, leveraging our relationships, and, you know, getting really strong commercial momentum. So really, really, nice start to the year. And then, on the pharma services side, there's been a little bit of a competitive shakeup with Novo's proposed acquisition of Catalan. Can you just talk about your win rates at Paytheon?

Speaker Change: Yeah, So Jeff when I think about pharma services.

Speaker Change: The business has performed very well.

Speaker Change: And when I think about the industry dynamics that have gone on in an area that we're the market leader sterile cell finish.

URL: https://www.patreon.com

Marc N. Casper: Yeah, so, Jack, when I think about pharma services, the business has performed very well. And when I think about the industry dynamics that have gone on, you know, in an area that we're the market leader, you know, sterile fill finish, where we put the medicine or vaccine in its final dosage form, you know, effectively. You have one of the pure play competitors being taken, you know, out of the CDMO business effectively or less so.

Speaker Change: Where we put the medicine or vaccine in his final dosage form.

Speaker Change: Effectively.

Speaker Change: One of the pure play competitors.

Speaker Change: Being taken out of the CMO business effectively were less so.

Speaker Change: And that's an area where capacity is constrained already.

Speaker Change: Kipp bodes really well for our businesses as the market leader in great reputation.

Marc N. Casper: And that in an area where capacity is constrained already. It bodes really well for our business as the market leader and has a great reputation. Our activity level is high.

Speaker Change: Our activity level is high.

Speaker Change: Number of dialogue, we're having with our customers is high we're securing new business.

Marc N. Casper: The amount of dialogue we're having with our customers is high. We're securing new business, so I feel great about it.

Speaker Change: So I feel great about it.

Speaker Change: And our job as the trusted partner is to enable our customer success right and.

Marc N. Casper: And, you know, our job, as the trusted partner, is to enable our customer success, right? And, you know, our customers have been thinking in decades in this industry. And when there's events that make them uncertain, whether it's biosecure or whether it's an acquisition of one of the suppliers, they look at the industry leader and say, This is a company that doesn't create uncertainty. It does a great job. And those things will ultimately allow us to better support our customers going forward.

Speaker Change: Our customers think in decades in this industry and when there's events that make them uncertain, whether its bio secure whether it's an acquisition of one of the suppliers.

Speaker Change: They look at the industry leader and say this is a company that doesn't create uncertainty does a great job and those things ultimately allow us to better support our customers going forward.

Rachel Pottenstall: Thank you. The next question is from Rachel Pottenstall with J.P. Morgan. Your line is open.

Speaker Change: Okay.

Speaker Change: Thank you. The next question is from Rachel Goldman with Jpmorgan. Your line is open.

Rachel Marie Vatnsdal Olson: Okay, good morning, and congratulations on the quarter. So I wanted to dig into the comments around the Chinese stimulus a little bit more. Just on the one hand, the language around the stimulus is fairly broad, but this tranche also appears to be two and a half times the dollar amount of the stimulus package that benefited last year. So can you walk us through what you are hearing from customers regarding this stimulus? Are you working on proposals with customers yet?

Rachel Marie Vatnsdal Olson: Okay, good morning, and congratulations on the corner.

Rachel Marie Vatnsdal Olson: I wanted to dig into the clients are on China, and your life, a little bit more just on one hand, the language around the stimulus it's fairly broad but this conscious also curious you mean, two five times the dollar amount of a stimulus package that benefited last year. So can you walk us through what are you hearing some customers are earning the stimulus are you working on proposals with customers yet or the agency.

Rachel Marie Vatnsdal Olson: Or have you even seen any orders related to that stimulus come through? Albeit, it's probably a bit early for that. And then just to follow up on those comments around the timeline for stimulus, if we look at what happened last year, the stimulus was actually announced on September 22, but we really didn't see an impact until early 2023. So given that delay between the initial announcement and actually seeing the benefit, in your view, could we potentially see the benefit this year? Or could this ultimately be a 2025 dynamic?

Rachel Marie Vatnsdal Olson: Any orders related to that stimulus come through albeit it's probably a bit early for that.

Rachel Marie Vatnsdal Olson: And then just to follow up on the comments around the timeline for stimulus. If we look at what happened last year. The stimulus was actually now include September 'twenty, two but we really didn't see an impact until early 2023. So just given that delay between initial announcement and actually seeing the benefit in your view could we potentially see the benefit this year of conditional ultimately be it 2020.

Rachel Marie Vatnsdal Olson: Yes.

Speaker Change: So Rachel thanks for the question.

Speaker Change: I share the enthusiasm about the government's efforts to stimulate the economy get things going so so it's an interesting.

Marc N. Casper: So Rachel, thanks for the question. I share the enthusiasm about the government's efforts to stimulate the economy, get things going. So it's an interesting time in that respect. Anybody, do you want me to switch back to Mike's comment about what?

Speaker Change: Time in that respect.

So.

Speaker Change: I didn't really expect the Jay system, one is back to mikes comment about that.

Speaker Change: What.

Marc N. Casper: The view on this is this. I think it's a good thing that China is trying to find ways to stimulate the economy, and I think this is one element of it, and I look forward to other things happening as well in terms of the way that China is managing the economy. Yeah, so when I think about the way things play out, and a lot of this is about signaling, as far as I can tell from my own experience, I've worked in China for many years.

Speaker Change: The view on this.

Speaker Change: These start post start I think is a good thing that China is trying to find ways to stimulate the economy and I think this is one element of it and look forward to other things happening as well because just the way the China amazingly economy, Mark Sorry go ahead.

Mark: So when I think about actually.

Mark: The way things play out.

Mark: And a lot of this is about signaling as far as I can tell from my own experience of work in China for many years.

Marc N. Casper: It's a multi-year program, as opposed to the last one, which was a shorter term. So basically, the government is signaling, at least to the economy, that they're looking for investments in instrumentation equipment, you know, technological advances, and advanced research. So that's very encouraging in terms of that it's not a short-term program but rather a longer-term one. And yes, we already have proposals in front of customers. And, yes, there's quite a bit of dialogue.

Mark: It's a multiyear program.

Mark: As opposed to the last one which was shorter term. So basically the government is signaling at least to the economy that they're looking for investments in instrumentation equipment.

Mark: Technological advances advanced research so that's very encouraging.

Mark: In terms of that it's not a short term program, but rather a longer term.

Mark: And.

Mark: Yes, we've already have proposals in front of customers and yes, there is quite a bit of dialogue customers are actually waiting for some of the very practical details of how this will work because it varies by province, ultimately so to my knowledge no orders, yet and I wouldn't expect any of that quickly anyway.

Marc N. Casper: Customers are actually waiting for some of the very practical details of how this will work because it varies by province, ultimately. So to my knowledge, no orders yet; I wouldn't expect any that quickly anyway. But lots of activity. And the way that I would think about this is that there's the direct effect and then the indirect. I would expect that we would see orders really later in the year and some revenue late in the year directly associated with the stimulus, but that may be off by a few months one way or the other.

Mark: But lots of activity and the way that I would think about this is there is the direct effect and then the indirect effect I would expect that we would see.

Mark: Orders.

Mark: And then later in the year and some revenue late in the year directly associated with the <unk>.

With the stimulus that may.

Mark: Miss by a few months, one way or the other so I wouldn't expect material shipments in Q2 around that so it would be the way I would think about my experience the indirect effect us a confidence booster right, which is basically saying the government is going to try to get the economy up and going and that should help more broadly and that doesn't help tomorrow, but it helps from a contextual.

Marc N. Casper: So I wouldn't expect material shipments in Q2 around this; it would be the way I would think about my experience. The indirect effect is confidence. Travel and our viewers, as long-term trends, should be a good growth market.

Business confidence so I think those things.

Rachel Marie Vatnsdal Olson: Perfect, really appreciate all that detail. And I just wanted to stick with China for my follow-up then. Obviously, we've seen some of these headlines around the Biosecure Act, and we've heard some of your customers talking about, you know, trying to de-risk some of their supply chains and go with more Western manufacturers, just given where we're at from that headline perspective. So I wanted to see how that has been impacting your customer conversations.

Would say that.

Mark: Youre seeing China trying to get the economy growing and we're not assuming a lot in China in our numbers this year.

Mark: Major changes so what I'm most excited about there is that it sets up for 25% that we won't see a benefit this year, but it's kind of a direction of travel and our view is longer term, China should be a good growth market for us.

Speaker Change: Perfect really appreciate all that detail.

Speaker Change: I just wanted to stick on China for my follow up then obviously 18 somebody's headline front <unk> heard some of your customers talking not trying to derisk some of their supply chain thing Delek more western manufacturers, just given where we're at on that headline perspective. So I wanted to see how has that been impacting your customer conversation.

Rachel Marie Vatnsdal Olson: Have you seen any increase in inbounds in terms of Paytheon? And then just from a timing point of view, if you were to benefit from this? Obviously, a pretty capacity constrained sector right now, I know you mentioned some of the Catalan Novo dynamics earlier as well. Could you even benefit in the near term from, you know, any competitive wins relating to biosecure? Or is it just a function of capacity constraints?

Speaker Change: And have you seen any increase in inbound in terms of <unk> and then just from a timing issue where it can benefit from that.

Speaker Change: Obviously, a pretty capacity constrained sector right now I know you mentioned some of the Cadillac Novo dynamics earlier as well.

Speaker Change: Could you even benefit in the near term Bryan.

Speaker Change: Palliative win relating to <unk> or is it just a function as capacity constrained.

Marc N. Casper: This, you know, really alludes to the value chain and vertical integration that Thermo has but will be more of a benefit in the longer term. Thank you.

Speaker Change: Really alludes to the value chain into vertical integration that from Ohio, but will be more of a benefit longer term.

Speaker Change: Yes.

So the way that I think about bio secure is kind.

Marc N. Casper: So the way that I think about biosecure is I kind of put it into the context of there being a level of geopolitical tension that exists around the world, including between the U.S. and China. You know, it's never exactly clear whether these things will become enacted or not.

Speaker Change: Kind of put it into the context, so there's a level of geopolitical tensions that exist around the world, including between the U S and China.

Speaker Change: Exactly clear.

Speaker Change: Whether these things become enacted or not.

Marc N. Casper: It's our job to help our customers navigate those shifting landscapes. I think at the highest level, actually, relations are falling between the countries of Vietnam. There will always be challenges. When I think about, you know, how this could play out, should it play out, you know.

Speaker Change: It's our job to help our customers navigate those.

Speaker Change: Shifting landscapes I think.

Speaker Change: At the highest level actually relations are falling between the between the countries of that will always be challenges when I think about.

Speaker Change: How this could play out should it play out.

Speaker Change: <unk>.

Marc N. Casper: I think that what is making the customer base, that's largely Western in terms of where biotech and pharmaceutical activity is concentrated. Just think more about their supply chains, who's doing development work, etc. Given our network is effectively 100% in the US and Western Europe and that set of capabilities, you know, we're likely to be a long-term beneficiary, not per se of the act, but rather the fact that customers are thinking about who their partners are and where those partners should be based. So I think that, in the long term, should be okay. And I don't think it has any material impact on the results in the short term.

Speaker Change: I think that what is making the.

Speaker Change: Our customer base.

Speaker Change: That's largely western in terms of where biotech and pharmaceutical activity is largely.

Speaker Change: Think more about their supply chains, who is doing development work et cetera.

Speaker Change: Given our network is effectively 100% in U S and western Europe in that set of capabilities.

Speaker Change: We're likely to be a long term beneficiary not per se of the act, but rather the fact that customers are thinking about who their partners and where we are should those partners would be base. So I think that's a long term.

Speaker Change: Should be okay, and I don't think it has any material impact to the results in the short term.

Daniel Brennan: Thank you. The next question is from Dan Brennan with TD Cowen. Your line is open.

Speaker Change: Thank you Rachel.

Thank you. The next question is from Dan Brennan with TD Cowen Your line is open.

Daniel Brennan: Great, thanks for the questions, Marc and Stephen. Maybe just on China, I know some of the points we've discussed here, Marc, but could you just give us a sense of how the low single-digit decline in the quarter kind of compared to expectations and, you know, just remind us what to assume for the full year and any kind of color you can share about just demand trends across your business segments in China.

Daniel Brennan: Great. Thanks for the questions Mark and Stephen.

Daniel Brennan: Maybe just on China I know some there's already been some discussion points here Mark but could you just give us a sense.

Daniel Brennan: How that will have a low single digit decline in the quarter compared to expectations and just remind us what's assumed for the full year and kind of any color you can share about just demand trends across your business segments in China.

Marc N. Casper: Yeah, so you know, when I think about China, that actually played out, as we expected; the team delivered on the expectations for the quarter. You know, and as you know, our guidance, we don't guide by geography or by business, you know; it's really the aggregate of it all, you know. But actually, the first quarter played out, you know, as the team expected, and they executed well. When you kind of go down into the subsegments of China, now you get into the tiny portions of our revenue, not anything really significant of note, in terms of things better or worse than what we've been seeing or what we would expect. So that's a high level. I'm looking forward to returning to China early in the summer. So, get some first-hand perspectives on that as well.

Mark: Yeah, So when I think about China that actually played out as we expect as the team delivered on the expectations for the quarter.

Mark: And as you know our.

Mark: Guidance, we don't guide by geography or by business, it's really the aggregate of all.

Yes.

Mark: But actually the first quarter played out.

Mark: As the team expected they executed well.

Mark: When you kind of go down into the sub segments of China, now you're going to be tiny portions of our our revenue nothing really significant of note.

Mark: In terms of things better or worse than what we've been seeing or what we would expect so.

Speaker Change: Hello, I'm looking forward to returning to China early in early in the summer so.

Speaker Change: Get some firsthand perspective on that as well.

Daniel Brennan: Got it, and then maybe just on file processing. I know the consumable portion of your business, Marc, is called 10% or so of revenues, but there's obviously tremendous focus there right now. Could you give any color on how that business performed in the quarter, and any color you can provide on this ongoing D-stock issue, whether or not you've seen orders start to grow again sequentially? Thanks.

Speaker Change: Got it and then and then maybe just on bio processing I know the consumable portion of your business Mark is call it 10% or so of revenues, but not there's obviously tremendous focus there right now could you give any color on how that business performed in the quarter and any color you can provide on like this ongoing destock issue, whether or not you've seen orders start.

Speaker Change: To grow again sequentially. Thanks.

Marc N. Casper: Yeah, Dan, thanks for the question on bioproduction. It's definitely, you know, to factor where it got in the queue of the questions; it says that the emphasis is reducing on that. So it's becoming a little bit more predictable. Really, Q1 was in line with expectations. Organic growth did decline, as we expected in the quarter due to strong comparisons from the year before. But when I look at orders, that's now two quarters in a row with really good sequential bookings growth.

Speaker Change: Yes, Dan Thanks for the thanks for the question on bio production.

It's definitely the fact of where it goes.

Mark: A few of the questions as close as at the emphasis is reducing on that so it's becoming a little bit more predictable.

Mark: <unk>.

Speaker Change: Really Q1 was in line with expectations.

Speaker Change: Organic growth did decline as we expected in the quarter due to the strong comparisons from a year ago.

Speaker Change: But when I look at orders that's now two quarters in a row with really good sequential bookings growth.

Marc N. Casper: Nice improvement in book to bill. And when I look at the things that have been said externally about the quarter, I feel really good about our performance in terms of how we executed. So, it worked out in line with what we thought would happen.

Speaker Change: Nice improvement in book to Bill.

Speaker Change: And.

Speaker Change: When I look at the.

Speaker Change: Things that have been set externally about the quarter I feel really good about our performance in terms of how we execute it so.

Speaker Change: Working out.

Speaker Change: Working out in line with what we thought would happen.

Speaker Change: Thanks, Tim.

Operator: Thank you. The next question is from Max Zeiss with Goldman Sachs. Your line is open.

Yeah.

Speaker Change: Thank you. The next question is from Mac Sykes with Goldman Sachs. Your line is open.

Max Zeiss: Hi, good morning. Thanks for taking my questions. Maybe just revisiting the AI segment and maybe just comparing and contrasting the end markets and where you're seeing some of the greatest strengths. Sounds like industrial applied remains strong, but just would love to hear you kind of go through biopharma, applied industrial, and academic government, and sort of the phasing of growth over the course of this year in those end markets for AI.

Matthew Carlisle Sykes: Hi, good morning, Thanks for taking my questions maybe just.

Matthew Carlisle Sykes: Revisiting the AI segment.

Matthew Carlisle Sykes: Maybe just compare contrast, the end markets and where youre seeing some of the greatest strengths sounds like industrial applied remained strong, but just would love to hear your kind of go through Biopharma.

Matthew Carlisle Sykes: <unk> industrial and academic government and sort of the phasing of growth over the course of this year in those end markets for AI. Thank you.

Marc N. Casper: So when I think about the business, one of the things, Matt, is we really don't manage it by end segment because, effectively, you produce a certain amount of products, and then you ship them to specific customers. So you can have quarters where you ship more to an industrial customer the exact same product as a biopharma customer, and therefore, it kind of skews things. So that's my caveat about that.

Matthew Carlisle Sykes: Sure.

Speaker Change: So when I think about.

Speaker Change: <unk>.

Speaker Change: The business one of the things Matt.

Speaker Change: We really don't manage it by.

Speaker Change: And segment, because effectively you produce a certain amount of products and then you ship them to specific customers. So you can have quarters, where you ship more to an industrial customer the exact same product as a biopharma customer and therefore is kind of skews things. So the first point caveat around medical.

Max Zeiss: But when I look at the parts of the business, you know, industrial and applied continue to have strong momentum in semiconductor material science applications, where electron microscopy is strong. So in terms of how that played out, very difficult comparisons for all of the businesses, based on the shipments a year ago, but, but that was strong. And then the other segments in terms of, you know, academic government, farm, and biotech pretty much played out as we expected. So nothing that really jumped out at me as being significant in terms of trends or patterns.

Speaker Change: When I look at the parts of the business.

Speaker Change: In the industrial and applied continues to have strong momentum in semiconductor materials science applications for electron microscopy response. So so in terms of how that played out very difficult comparison for all of the businesses based on the shipments a year ago, but.

Speaker Change: That was strong and then the other segments in terms of academic government pharma and biotech pretty much played out as we expected so nothing really jumped out at me as being.

Speaker Change: <unk> in terms of trends or patterns.

Marc N. Casper: Got it. And then just for my follow-up, just on LPS and margins, I know when you acquired PPD, you talked about potential for long-term margin expansion in that business. Could you maybe talk about some of the levers you've got with an LPS, understanding that revenue, you know, improvement would help a lot, but just any levers to get that margin with an LPS to expand it over time?

Speaker Change: Got it and then just for my follow up just on the Lps and the margins I know when you had acquired PPD you talked about potential for long term margin expansion that business could you just maybe talk about some of the levers you've got within Lps understanding that revenue improvement would help a lot, but just any leverage.

To get that margin within Lps to expand that over time.

Marc N. Casper: I'll start and then maybe Stephen will add his thoughts if he has additional thoughts. So when I think about margins, and obviously, you have different businesses there. The clinical research business, formerly PPD, incredibly strong operational execution, right? So when you actually look at, you know, utilization rates, modification, all of the things that ultimately drive margins, they're doing a great job and executing really well. We're obviously benefiting from the synergies that we outlined, and you know, we will have achieved all of our synergies targets on the cost side. So that's gone well.

Speaker Change: I'll start and then maybe just.

Speaker Change: Stephen I'll add a few additional thoughts.

Speaker Change: So.

Speaker Change: So when I think about margins and obviously you have different businesses there.

Speaker Change: The clinical research business, formerly PPD.

Stephen Williamson: Incredibly strong operational execution when you actually look at.

Utilization rates.

Stephen Williamson: Modifications all of the things that ultimately drive margins.

Stephen Williamson: They're doing a great job and executing really well, we're obviously benefiting from the synergies that we outlined in.

Stephen Williamson: We will have achieved all of our synergy targets on the cost side. So that's gone well and so they're really doing a great job.

Marc N. Casper: And so they're really doing a great job, executing the trials really well. And that bodes well for margin expansion along with volume. When I think about pharma services, you know, there, the underlying is very strong, but we obviously have capacity coming online and also the runoff of COVID revenue. So when you lose volume, you see short-term pressure on margins. But if I say how is the team operating? Actually, the team's operating well.

Stephen Williamson: Executing the trial is really well and that bodes well for margin expansion along with volume.

Stephen Williamson: Hmm.

Stephen Williamson: When I think about pharma services.

Stephen Williamson: There.

The underlying is very strong, but we obviously havent.

Stephen Williamson: <unk> capacity coming online and also the run off of the Covid revenue. So when you lose the volume you see short term pressure on margins. Both let's say how is the team operating actually teams operating where also the margins and will expand expand.

Stephen Williamson: The margins there will expand as the year progresses and into the future as well. So that will be my thoughts about margins. But I don't know, Stephen. I think on the pharma services side, it's, you know, the capacity coming online and switching over the cost to do that. And as you're ramping up a facility, bringing on the colleagues to be able to operate that facility. Those are all factors that come into that. So those are the right drivers.

Stephen Williamson: As the year progresses and into the future as well so that will be my thoughts about margins by more seasonal I think.

Stephen Williamson: On the pharma services side as you know the capacity coming online in switching over the cost to do that and as you're ramping up the facility.

Stephen Williamson: Bringing on the colleagues to be able to operate that facility.

Stephen Williamson: Those are all factors that come into that but those are those the right drivers.

Thanks, Matt.

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

Speaker Change: Thank you.

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

Speaker Change: Next question, we have time for today is from Lisa <unk> with Barclays.

Luke England Sergott: Thank you. The last question we have time for today is from Luke Sergott with Barclays. Your line is open.

Lisa: Your line is open.

Lisa: Great. Thanks for the question Tony.

Lisa: So I wanted to dig back into the bio secure act.

Luke England Sergott: follow up on what Rachel was, you know, asking about, but I wanted to know, Marc, what you guys are hearing from your customers and multinationals that operate over there and what they're saying to you regarding their assumptions on China retaliating and maybe excluding them from the region. I know it seems pretty unlikely and it's probably going to be limited, but is this something that is on their radar or some of those conversations that you're having?

Lisa: And follow up on what ratio was asking about but.

I wanted to know Mark what you guys are hearing from your customers and multinationals that operate over there and what they are saying to you regarding their assumptions on China retaliating in maybe excluding them from the region I know it seems pretty unlikely.

Lisa: And could probably going to be limited, but is this something that is on their radar or some of those conversations that youre having.

Marc N. Casper: Yeah, you know, I can't really speculate on how or whether this thing will even come to pass. And if it comes to pass, what will be the response to it? You know, our job is to do a great job of supporting our customers globally, to comply with global regulations, both the actual regulations and the spirit of the regulations, of the various countries, and we'll do a good job navigating that. So that's how I would think about it.

Lisa: Yeah.

Lisa: Hey.

Mark: I can't really speculate we'll be prudent on how whether this thing will even come to pass and if it comes to pass what is the response.

To it.

Mark: Our job is to do a great job of supporting our customers globally.

Mark: To comply with the global regulations, both the actual regulations on the spirit of the regulations.

The various <unk>.

Mark: Those countries will do a good job navigating it so.

Mark: That's how I would think about them.

Luke England Sergott: Yeah, okay. And then, Stephen, for you on the life science margin, so very, very strong here from Life Science Solutions. You know, I understand that the destocking is less of an issue, but how much of this step up in the quarter was from the restocking, just kind of walk through and double-click on the drivers there? And should we consider this as kind of the jump-off point, or will it be around this range for the rest of the year, or anything from a modeling perspective? Sure.

Speaker Change: Yeah Okay.

Speaker Change: And then Steven for you on the life Science margin, so very very strong here from life Science solutions.

Speaker Change: I understand that the Destocking has less of an issue, but how much of the step up in the quarter was from the restocking just kind of walk through and double click on the drivers there.

Steven: And should we consider this as kind of the jump off point or it will be around this range for the rest of the year or anything anything from a modeling perspective.

Stephen Williamson: So Luke, the really good margin profile in the segment, and it's really about addressing the cost base in that business, given the lower volumes, both from the pandemic unwind and the kind of the bioproduction aspect to it. It's really just fundamentally addressing the costs that we have in that business. The team's done a great job of doing that. That's the way to think about that.

Steven: Luke.

Steven: Really good margin profile in the segment and it's really about addressing the cost base in that business given the lower volumes both from the pandemic unwinding.

The bio production aspect to it so it's really just fundamentally addressing the costs that we have in that business teams done a great job of doing that.

Steven: The way to think about that.

Marc N. Casper: So, so thank you. Thanks, everyone, for the thanks, everyone, for the questions. Let me wrap up.

Speaker Change: So thank you Luc and thanks, everyone for.

Speaker Change: Thanks, everyone for the questions. So let me wrap up.

Marc N. Casper: Very pleased to deliver a very strong quarter. We are incredibly well positioned to deliver differentiated performance as we continue to create value for all of our stakeholders and build an even brighter future for our company. I look forward to updating you on our second quarter results in July and discussing our very bright future as well as our outlook at our upcoming Investor Day on September 19. As always, thank you for your support of Thermo Fisher Scientific. Thanks, everyone.

Speaker Change: Very pleased to deliver very strong quarter incredibly well positioned to deliver differentiated performance as we continue to create value for all of our stakeholders build an even brighter future for our company.

Speaker Change: Look forward to updating you on our second quarter results in July and discussing our very bright future as well as outlook at our upcoming Investor Day on September 19.

Speaker Change: As always thank you for your support Thermo Fisher scientific thanks, everyone.

Speaker Change: Okay.

Speaker Change: Thank you. This concludes today's call. Thank you all for joining you may now disconnect your lines.

Operator: Thank you. This concludes today's call. Thank you all for joining us. You may now disconnect your line.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].