Q2 2024 Thermo Fisher Scientific Inc Earnings Call
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Speaker Change: www.circlelineartschool.com
Operator: Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2024 second quarter conference call. If you would like to ask a question, please press the star followed by one on your telephone keypad now. If you change your mind, please press the star followed by two.
Speaker Change: Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2024 second quarter conference call. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two.
Operator: I would like to introduce our moderator for the call, Mr. Rafael Tejada, Vice President, Investor Relations. Mr. Tejada, you may begin the call. 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 August 7th, 2024. A copy of the press release about our second quarter 2024 earnings is available in the investor section of our website under the heading Financial. So before we begin, let me briefly cover our safe harbor safety.
Speaker Change: I would like to introduce our moderator for the call, Mr. Rafael Tejada, Vice President, Investor Relations. Mr. Tejada, you may begin the call.
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. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's most recent annual report on Form 10-K and subsequent quarterly report on Form 10-Q, which are on file with the SEC and available in the investor section of our website under the heading Financials, SEC 5.
Rafael Tejada: Good morning, and thank you for joining us.
Rafael Tejada: 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.
Speaker Change: 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.
Speaker Change: until August 7th, 2024. A copy of the press release of our second quarter 2024 earnings is available in the investor section of our website under the heading financials.
Rafael Tejada: While we may like to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. Also, during this call, we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAPs.
Speaker Change: So, before we begin, let me briefly cover our Safe Harbor Statement.
Speaker Change: Various remarks that we may make about the company's future expectations, plans, and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Security Litigation Reform Act of 1995.
Speaker Change: Actual results may differ materially from those indicated by these forward-looking statements.
Speaker Change: and subsequent quarterly report on Form 10-Q , which are on file with the SEC and available in the investor section of our website under the heading Financials, SEC Filings.
Speaker Change: While we may like to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.
Speaker Change: Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.
Rafael Tejada: A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release for our second 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. Raph. Thank you. Good morning, everyone.
Speaker Change: Also, during this call, we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles, or GAAP.
Speaker Change: A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release of our second quarter 2024 earnings and also in the investor section of our website under the heading financials.
Marc N. Casper: And thanks for joining us today for our second quarter call. As you saw in our press release, we had great results for the quarter. We're making excellent progress to deliver differentiated results for the, and I'm proud of our team as they execute it at a very high level to enable our customers to make the world healthier, cleaner, and safer. This continued success is a result of our proven growth strategy and our PPI business. So first, let me recap the financials. Our revenue in the quarter was $10.54 billion. Our adjusted operating income was $2.35 billion.
Speaker Change: So with that, I'll now turn the call over to Marc.
Marc N. Casper: Raph, thank you. Good morning, everyone, and thanks for joining us today for our second quarter call. As you saw in our press release, we had great results from the quarter. We're making excellent progress to deliver differentiated results for the year.
Marc N. Casper: I'm proud of our team as they execute it at a very high level to enable our customers to make the world healthier, cleaner, and safer.
Marc N. Casper: This continued success is a result of our proven growth strategy and our PPI business system.
Marc N. Casper: So first let me recap the financials. Our revenue in the quarter was 10.54 billion dollars. Our adjusted operating income was 2.35 billion dollars.
Marc N. Casper: Adjusted operating margin increased in Q2 to 22.3%, and we delivered another quarter of strong adjusted EPS performance, achieving a 4% increase year over year to $5.37. Our performance in the second quarter is allowing us to raise our guidance once again and continues our track record of delivering differentiated results. Turning to our performance by end market in the second quarter, underlying mark conditions played out as we'd expected. Our team's excellent execution drove share gains in the quarter, and we delivered a sequential improvement in growth in all four of our end markets. Let me provide you with some additional content.
Marc N. Casper: Adjusted operating margin increased in Q2 to 22.3%, and we delivered another quarter of strong adjusted EPS performance, achieving a 4% increase year-over-year to $5.37 per share.
Marc N. Casper: Our performance in the second quarter is allowing us to raise our guidance once again and continues our track record of delivering differentiated results.
Marc N. Casper: Turning to our performance by end market, in the second quarter, underlying mark conditions played out as we'd expected.
Marc N. Casper: Our team's excellent execution drove share gain in the quarter, and we delivered a sequential improvement in growth in all four of our end markets.
Marc N. Casper: Starting with pharma and biotech, we declined in the low single digits for the quarter. The vaccine and therapy revenue runoff resulted in a four-point headwind for this customer segment. Performance in the second quarter was led by our Biosciences and Clinical Research Business, and academic in government and in industrial and applied, we grew in the low single digits during the quarter. In both these end markets, we delivered strong growth in our electronic class. Finally, in Diagnostics and Healthcare, we declined in the low single digits.
Marc N. Casper: Let me provide you with some additional context.
Marc N. Casper: Starting with pharma and biotech, we declined in the low single digits for the quarter. The vaccine and therapy revenue runoff resulted in a four-point headwind for this customer segment.
Marc N. Casper: Performance in the second quarter was led by our biosciences and clinical research businesses.
Marc N. Casper: An academic in government and an industrial and applied we grew in the low single digits during the quarter. In both these end markets we delivered strong growth in our electron microscopy business.
Marc N. Casper: Finally, in Diagnostics and Healthcare, we declined in the low single digits. As a reminder, the reported growth in this end market is impacted by the runoff of COVID-19 testing-related revenue.
Marc N. Casper: As a reminder, the reported growth in this end market is impacted by the runoff of COVID-19 testing-related revenue. However, during the quarter, the team delivered good core revenue growth, highlighted by our transplant diagnostics and immunodiagnostics businesses, as well as our healthcare market channels. As I reflect on our performance during the quarter and on a year-to-day basis, I feel very good about the progress we've made at the halfway point of the year. Our end markets are playing out as we expected, and our team's execution has been excellent. I'll now turn to an update on our growth strategy. As a reminder, our strategy consists of three pillars.
Marc N. Casper: During the quarter, the team delivered good core revenue growth, highlighted by our transplant diagnostic and immunodiagnostics businesses, as well as our healthcare market channel.
Marc N. Casper: As I reflect on our performance during the quarter and on a year-to-day basis, I feel very good about the progress we've made at the halfway point of the year. Our end markets are playing out as we expected, and our team's execution has been excellent.
Marc N. Casper: I'll now turn to an update on our growth strategy. As a reminder, our strategy consists of three pillars.
Marc N. Casper: High Impact Innovation, our trusted partner status with customers, and our unparalleled commercial. Starting with the first pillar, it was a fantastic quarter of innovation as we launched a number of high-impact new products across our business. I'll begin with the new technologies we launched at the American Society for Mass Spectrometry Conference, further strengthening our industry-leading position in analytical engineering. At the conference, we introduced a thermoscientific stellar mass spectrometer, which extends our leadership in proteomics. The thermoscientific stellar is used to validate biomarkers. It offers unprecedented analytical capabilities for targeted quantitation, enabling the insights needed by researchers to advance their work.
Marc N. Casper: High Impact Innovation, our trusted partner status with customers, and our unparalleled commercial engine.
Marc N. Casper: Starting with the first pillar, it was a fantastic quarter of innovation as we launched a number of high-impact new products across our businesses.
Marc N. Casper: It's a perfect complement to our groundbreaking thermoscientific Orbitrap Astro used for protein discovery that we launched last year. It was incredibly exciting to hear the customer testimonials sharing the power of the Orbitrap Astro. To date, we've had more than 40 publications that incorporate the impact of this breakthrough, and we're really just getting started. Also at ASMS, we launched three new built-for-purpose editions of the Thermo Scientific Orbitrap Ascend TriBIT mass spectrometer, bringing it to specific applications for multi-omics, structural biology, and biopharma.
Marc N. Casper: I'll begin with the new technologies we launched at the American Society for Mass Spectrometry Conference, further strengthening our industry-leading position in analytical instruments.
Marc N. Casper: At the conference, we introduced the Thermo Scientific Stellar Mass Spectrometer, which extends our leadership in proteomics. The Thermo Scientific Stellar is used to validate biomarker candidates.
Marc N. Casper: It offers unprecedented analytical capabilities for targeted quantitation, enabling the insights needed by researchers to advance their work.
Marc N. Casper: It's a perfect complement to our groundbreaking Thermo Scientific Orbitrap Astrobe.
Marc N. Casper: used for protein discovery that we launched last year.
Speaker Change: It was incredibly exciting to hear the customer testimonials sharing the power of the Orbitrap Astro. To date, we've had more than 40 publications that incorporated the impact of this breakthrough, and we're really just getting started.
Speaker Change: Also at ASMS, we launched three new built-for-purpose editions of the Thermo Scientific Orbitrap Ascend TriBIT mass spectrometer tailored to specific applications for multiomics, structural biology, and biopharma.
Marc N. Casper: These instruments continue to elevate our industry-leading thermoscientific Orbitrap portfolio by offering enhanced speed and sensitivity to detect and characterize the most difficult protein samples, including complex biological. This quarter, we also launch products to help our customers meet their own sustainability. In our bioproduction business, we introduce the first of its kind bio-based film for our single-use technology. These new bioprocess containers use plant-based materials rather than fossil fuel materials to provide lower carbon solutions for the manufacture of biologics.
Speaker Change: These instruments continue to elevate our industry-leading thermoscientific Orbitrap portfolio by offering enhanced speed and sensitivity to detect and characterize the most difficult protein samples, including complex biologics.
Speaker Change: This quarter we also launch products to help our customers meet their own sustainability goals.
Speaker Change: In our bioproduction business, we introduce the first-of-its-kind bio-based film for our single-use technologies.
Speaker Change: These new bioprocess containers use plant-based material rather than fossil fuel materials to provide lower carbon solutions for the manufacture of biologics.
Marc N. Casper: And in our laboratory products business, we launched a new line of ENERGY STAR certified thermoscientific TSX universal series ULT freezers that deliver industry-leading performance and energy efficiency. The Health Labs Meet Their Sustainability, Now turning to the highlights of our second and third pillars of our growth strategy. During the quarter, we continued to strengthen our industry-leading commercial engine and the trusted partner status we've gained with our customers. Our customers rely on us to help accelerate their innovation, increase their productivity, and advance their important work.
Speaker Change: And in our laboratory products business, we launched a new line of ENERGY STAR certified thermoscientific TSX universal series ULT freezers that deliver industry-leading performance and energy efficiency to help labs meet their sustainability goals.
Speaker Change: Turning to the highlights of our second and third pillars of our growth strategy, during the quarter we continue to strengthen our industry-leading commercial engine and the trusted partner status we've earned with our customers.
Speaker Change: Our customers rely on us to help accelerate their innovation, increase their productivity, and advance their important work. I spend a lot of time connecting with customers to understand their near and long-term priorities so that we can enable their success.
Marc N. Casper: I spend a lot of time connecting with customers to understand their near and long-term priorities so that we can enable their success. As a result of these unique relationships, we continue to advance our capabilities to be an even stronger partner for our customers. Let me give you a couple of examples from the second quarter.
Speaker Change: As a result of these unique relationships, we continue to advance our capabilities to be an even stronger partner for our customers.
Marc N. Casper: We expanded our leading clinical trial supply services with a new ultracold facility in Bliswick, in the Netherlands, to offer pharma and biotech customers tailored end to end support throughout the clinical supply chain for high-value therapies, including cell and gene therapies, biologics, antibodies, and vaccines. We also opened a state-of-the-art innovation lab at our site in Center Valley, Pennsylvania, to showcase our innovative solutions for global clinical trial supply, including new packaging solutions, real-time tracking and tracing, and enhanced clinical trial setup and planning. In addition, we promote partnerships and collaborations with our customers. Let me give you a couple of examples from the Asia-Pacific region.
Speaker Change: Let me give you a couple of examples from the second quarter.
Speaker Change: We expanded our leading clinical trial supply services with a new ultracold facility in Blythewyk in the Netherlands.
Speaker Change: to offer pharma and biotech customers tailored end-to-end support throughout the clinical supply chain for high value therapies including cell and gene therapies, biologics, antibodies and vaccines.
Speaker Change: We also opened a state-of-the-art innovation lab at our site in Center Valley, Pennsylvania to showcase our innovative solutions for global clinical trial supply, including new packaging solutions, real-time tracking and tracing, and enhanced clinical trial setup and planning.
Speaker Change: In addition, we advance partnerships and collaborations with our customers during the quarter.
Marc N. Casper: To support Indonesia's growing investments in healthcare, scientific research, and renewable energy, we further expanded our presence and capabilities in the country. We are collaborating with the National Battery Research Institute to advance battery technology and energy storage, as well as with the Mendiah Hospital Group to help advance stem cell research and cell therapy development. In Singapore, we announced a collaboration with the National University Hospital and Marexis, a local RNA technology company, to develop and clinically validate advanced next-generation sequencing genomic testing solutions specifically made to address the needs of the Southeast Asian population.
Speaker Change: Let me give you a couple of examples in the Asia Pacific region.
Speaker Change: To support Indonesia's growing investments in healthcare, scientific research, and renewable energy, we further expanded our presence and capabilities in the country.
Speaker Change: We are collaborating with the National Battery Research Institute to advance battery technology and energy storage, as well as with the Mendiah Hospital Group.
Speaker Change: to help advance stem cell research and cell therapy development.
Speaker Change: In Singapore, we announced a collaboration with the National University Hospital and Marexis.
Speaker Change: A local RNA technology company to develop and clinically validate advanced next-generation sequencing genomic testing solutions specifically made to address the needs of the Southeast Asian population.
Marc N. Casper: So another strong quarter of executing our growth. Let me now turn to our PPI business system, which enabled excellent execution during the quarter. PPI engages and empowers all of our colleagues to find a better way every day.
Speaker Change: So, another strong quarter of executing our growth strategy.
Speaker Change: Let me now turn to our PPI business system, which enabled excellent execution during the quarter. PPI engages and empowers all of our colleagues to find a better way every day.
Marc N. Casper: During the quarter, I had the opportunity to see the PPI efforts to further improve manufacturing of our lab equipment products, and I came away incredibly impressed with the progress to drive operational efficiency in this business. It's also great to see how PPI has been adopted in our clinical research business, where it is driving meaningful improvements in our efficiency and customer loyalty. Ultimately, you see the positive impact of our PPI business system and our Q2 results reflected in the strong profitability and cash flow that we delivered in the quarter.
Speaker Change: During the quarter, I had the opportunity to see the PPI efforts to further improve manufacturing of our lab equipment products, and I came away incredibly impressed with the progress to drive operational efficiency in this business.
Speaker Change: It's also great to see how PPI has been adopted in our clinical research business where it is driving meaningful improvements in our efficiency and customer allegiance.
Speaker Change: Ultimately, you see the positive impact of our PPI business system and our Q2 results reflected in strong profitability and cash flow that we delivered in the quarter.
Marc N. Casper: We also advanced our corporate social responsibility priority story in the quarter. As a mission-driven company, we help to make the world a better place by enabling the important work of our customers. We also create a positive impact by supporting our communities and being a good steward of our planet.
Speaker Change: We also advanced our corporate social responsibility priorities during the quarter. As a mission-driven company, we help to make the world a better place by enabling the important work of our customers.
Speaker Change: We also create a positive impact by supporting our communities and being a good steward of our planet.
Marc N. Casper: We continue to make progress on our environmental sustainability roadmap in Q2. As part of our commitment to safeguarding the world's natural resources, we have set targets for 2025, which include zero waste certification for 30 manufacturing and warehouse sites. During the quarter, three more of our sites achieved zero waste certification, and we're on track to achieve our goal. You can learn much more about our progress in our 2023 Corporate Social Responsibility Report, which was published during the quarter.
Speaker Change: We continue to make progress on our environmental sustainability roadmap in Q2.
Speaker Change: As part of our commitment to safeguarding the world's natural resources, we have set targets for 2025, which include zero waste certification for 30 manufacturing and warehouse sites.
Speaker Change: During the quarter, three more of our sites achieved zero waste certification, and we're on track to achieve our goals.
Speaker Change: You can learn much more about our progress in our 2023 Corporate Social Responsibility Report, which was published during the quarter. The report provides a transparent account of our journey as we fulfill our commitments to society and all of our stakeholders.
Marc N. Casper: The report provides a transparent account of our journey as we fulfill our commitments to society and all of our stakeholders. 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. Shortly after the quarter ended, we completed our acquisition of Olink, and it was great to welcome our new colleagues to the company earlier this month. As you know, O-Link is a leading provider of next-generation proteomic solutions. The addition of O-Link's proven and transformative technology is highly complementary to our industry-leading mass spectrometry.
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: Shortly after the quarter ended, we completed our acquisition of O-Link, and it was great to welcome our new colleagues to the company earlier this month. As you know, O-Link is a leading provider of next-generation proteomic solutions.
Speaker Change: The addition of OLINC's proven and transformative technology is highly complementary to our industry-leading mass spectrometers.
Marc N. Casper: O-Link further advances our leadership as it is a great addition to our differentiated protein research ecosystem. Our world-class commercial engine will enable us to bring this technology to scientists around the world. By increasing the use of next-gen proteomics and providing industry-leading data quality at scale, Data Quality at Scale, we're in a great position to further enhance the understanding of human biology and meaningfully accelerate scientific research.
Speaker Change: O-Link further advances our leadership as it is a great addition to our differentiated protein research ecosystem.
Speaker Change: Our world-class commercial engine will enable us to bring this technology to scientists around the world.
Speaker Change: By increasing the use of next-gen proteomics and providing industry-leading data quality at scale,
Speaker Change: Data Quality at Scale, we're in a great position to further enhance the understanding of human biology and meaningfully accelerate scientific breakthroughs.
Marc N. Casper: So as I reflect on the quarter, I'm proud of what our team accomplished and grateful for their contributions to us. Let me now turn to our guidance. Given our strong performance in the second quarter, we're raising our 2024 guidance. We now expect revenue to be in the range of $42.4 billion to $43.3 billion and adjusted EPS to be in the range of $21.29 to $22.07 per share. Stephen will take you through the details in his remarks.
Speaker Change: So as I reflect on the quarter, I'm proud of what our team accomplished and grateful to their contributions to our success.
Speaker Change: Let me now turn to our guidance. Given our strong performance in the second quarter, we're raising our 2024 guidance.
Speaker Change: We now expect revenue to be in the range of $42.4 billion to $43.3 billion, and adjusted EPS to be in the range of $21.29 to $22.07 per share. Stephen will take you through the details in his remarks.
Marc N. Casper: So to summarize our key takeaways from Q2, we delivered another quarter of strong results driven by our proven growth strategy and PPI business. We continue to enable customer success, and this reinforces our trusted partner status and industry leadership. Our strong results in Q2 allowed us to raise our guidance again for the year. We're well positioned 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. With that, I'll now hand the call over to our CFO, Stephen Williamson. Stephen.
Stephen Williamson: So to summarize our key takeaways from Q2, we delivered another quarter of strong results driven by our proven growth strategy and PPI business system.
Stephen Williamson: We continue to enable our customer success, and this reinforces our trusted partner status and industry leadership.
Stephen Williamson: Our strong results in Q2 allowed us to raise our guidance again for the year. We're well positioned 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. Thanks, Marc, and good morning, everyone. I'll take you through an overview of our second quarter results for the total company, then provide color on our four business segments. And I'll conclude by providing our updated 2024 guidance.
Stephen Williamson: Thanks, Marc, and good morning, everyone. I'll take you through an overview of our second quarter results for the total company and then provide color on our four business segments. And I'll conclude by providing our updated 2024 guide. Before I get into the details of our financial performance, let me provide you with a high-level view of how the second quarter played out versus our expectations at the time of our last earnings. As Marc mentioned in the quarter, market conditions were as we'd expected, yet another quarter of excellent execution.
Stephen Williamson: Before I get into the details of our financial performance, let me provide you with a high-level view on how the second quarter played out versus our expectations at the time of our last earnings call.
Stephen Williamson: As Marc mentioned in the quarter, market conditions were as we'd expected, yet another quarter of excellent execution, and this enabled us to deliver Q2 financials ahead of what we'd assumed in our prior guidance.
Stephen Williamson: And this enabled us to deliver Q2 financials ahead of what we'd assumed in our prior guidance. Starting with the top line, core organic revenue growth was a little over half a percentage point ahead of what we'd assumed in the prior guidance for Q2. That translates to approximately $60 million of revenue, which is partially offset by slightly higher FX revenue headwinds.
Speaker Change: Starting with the top line, core organic revenue growth was a little over half a percentage point ahead of what we'd assumed in the prior guide for Q2. That translates to approximately 60 million dollars of revenue, which is partially offset by slightly higher FX revenue headwind.
Stephen Williamson: Turning to the bottom line, Adjusted EPS was $0.25 ahead of what we'd assumed in the prior guide for Q2. $0.08 was from some strong operational performance, $0.06 was from favorable FX and timing of discrete tax planning benefits within the year, and $0.11 was from lower net interest expense. In my prior guidance, I took a prudent approach to the O-Link transaction from a financing cost standpoint.
Speaker Change: Turning to the bottom line, adjusted EPS was $0.25 ahead of what we'd assumed in the prior guide for Q2. $0.08 was from strong operational performance, $0.06 was from favorable FX and timing of discrete tax planning benefits within the year.
Speaker Change: and $0.11 was from lower net interest expense.
Speaker Change: In my prior guidance, I took a prudent approach to the O-Link transaction from a financing cost standpoint.
Stephen Williamson: We're also executing well on free cash flow generation. Year-to-date free cash flow is 68% higher than the same period last year. So we continue to deliver strong performance, and we're well positioned at the halfway point of the year. Let me now provide you with some additional details on Q2. Beginning with the earnings to share. In the quarter, Adjusted EPS grew by 4% to $5.37. Gap EPS in the quarter was $4.04, up 15% from Q2 last year. On the top line, in Q2, reported revenue was 1% lower year over year.
Speaker Change: We're also executing well on free cash flow generation. Year-to-date free cash flow is 68% higher than the same period last year.
Speaker Change: So we continue to deliver strong performance and we're well positioned at the halfway point of the year.
Stephen Williamson: The components of our Q2 reported revenue change included 1% lower organic revenue, a 1% headwind from foreign exchange, and a slight contribution from acquisitions. We delivered another strong sequential improvement in core organic revenue growth this quarter. And in Q2, core organic revenue growth rounded up to flat on a year-over-year basis. In the quarter, pandemic-related revenue was approximately $115 million. This was mainly from vaccines and therapies. This represents a 3% headwind to organic revenue. Turning to our organic revenue performance by geography, in Q2, North America declined mid-single digits, Europe grew low single digits, and Asia-Pacific grew mid-single digits, which includes China, which also grew mid-single digits.
Speaker Change: Let me now provide you with some additional details on Q2.
Speaker Change: Beginning with the earnings per share. In the quarter, adjusted EPS grew by 4% to $5.37. Gap EPS in the quarter was $4.04, up 15% from Q2 last year.
Speaker Change: On the top line, in Q2, reported revenue was 1% lower year over year. The components of our Q2 reported revenue change included 1% lower organic revenue, a 1% headwind from foreign exchange, and a slight contribution from acquisitions.
Speaker Change: We delivered another strong sequential improvement in core organic revenue growth this quarter. And in Q2, core organic revenue growth rounded up to flat on a year-over-year basis.
Speaker Change: In the quarter, pandemic-related revenue was approximately $115 million. This was mainly from vaccines and therapies.
Speaker Change: This represents a 3% headwind to organic revenue growth.
Speaker Change: Turning to our organic revenue performance by geography, in Q2, North America declined mid-single digits
Speaker Change: Europe grew low single digits and Asia Pacific grew mid-single digits, which includes China, which also grew mid-single digits.
Stephen Williamson: With respect to our operational performance, we delivered $2.3 billion of adjusted operating income in the quarter. The adjusted operating margin was 22.3 percent, 10 basis points higher than Q2 last year and 30 basis points higher than Q1 2024. Total company adjusted gross margin in the quarter came in at 42.1%, 110 basis points higher than Q2 last year.
Speaker Change: With respect to our operational performance, we delivered $2.3 billion of adjusted operating income in the quarter, and adjusted operating margin was 22.3%, 10 basis points higher than Q2 last year and 30 basis points higher than Q1 2024.
Speaker Change: Total company adjusted gross margin in the quarter came in at 42.1 percent, 110 basis points higher than Q2 last year. In the quarter we continue to deliver very strong productivity, reflecting our continued focus on cost management, as well as the carryover benefit from the cost actions put in place last year.
Stephen Williamson: In the quarter, we continue to deliver very strong productivity, reflecting our continued focus on cost management, as well as the carryover benefit from the cost actions put in place last year. This enabled us to more than offset the impact of low volumes while appropriately funding investments to further advance our industry leadership. Moving on to the details of the P&L, adjusted SG&A in the quarter was 16.6% of revenue.
Speaker Change: This enabled us to more than offset the impact of low volumes while appropriately funding investments to further advance our industry leadership.
Speaker Change: Moving on to the details of the P&L. Adjusted SG&A in the quarter was 16.6% of revenue. Total R&D expense was $340 million in Q2, reflecting our ongoing investments in high-impact innovation.
Stephen Williamson: Total R&D expense was $340 million in Q2, reflecting our ongoing investments in high-impact innovation. R&D is a percent of our manufacturing revenue, with 7.1% in the quarter. Looking at results below the line, our Q2 net interest expense was $59 million, which is $89 million lower than Q2 2023 due to higher cash and investment balances. I had just a 10% tax rate in the quarter, and Average Diluted Shares were $383 million in Q2, approximately $5 million lower year-over-year driven by share repurchases net of option dilution. Turning to free cash flow and the balance sheet, year-to-date cash flow from operations was $3.2 billion. Year-to-date free cash flow was $2.6 billion after investing $630 million of net capital expenditure.
Speaker Change: R&D is a percent of our manufacturing revenue with 7.1% in the quarter.
Speaker Change: Looking at results below the line, our Q2 net interest expense was $59 million, which is $89 million lower than Q2 2023 due to higher cash and investment balances.
Speaker Change: I had just a tax rate in the quarter was 10%.
Speaker Change: An average diluted shares were $383 million in Q2, approximately $5 million lower year-over-year driven by share repurchases net of option dilution.
Speaker Change: Turning to free cash flow and the balance sheet, year-to-date cash flow from operations was $3.2 billion, year-to-date free cash flow was $2.6 billion after investing $630 million of net capital expenditures.
Stephen Williamson: We ended the quarter with $8.8 billion in cash and short-term investments and $35.4 billion of total debt. Our leverage ratio at the end of the quarter was 3.3 times gross debt to adjusted EBITDA and 2.5 times on a net debt basis, including my comments on our total company performance suggested ROIC was 11.8%, reflecting the strong returns on investment that we're generating across the company. Now I'll provide some color on our performance in our four business segments, starting with Life Sciences Solutions. Q2 reported revenue in this segment declined 4%, and organic revenue was 3% lower than the prior year quarter.
Speaker Change: We ended the quarter with $8.8 billion in cash and short-term investments and $35.4 billion of total debt. Our leverage ratio at the end of the quarter was 3.3 times gross debt to adjusted EBITDA and 2.5 times on a net debt basis.
Speaker Change: Including my comments on our total company performance, suggested ROIC was 11.8%, reflecting the strong returns on investment that we're generating across the company.
Speaker Change: Now I'll provide some color on our performance of our four business segments, starting with Life Sciences Solutions.
Speaker Change: Q2 reported revenue in this segment declined 4% and organic revenue was 3% lower than the prior year quarter. Growth in this segment was led by a biosciences business that was more than offset by the impact of the pandemic.
Stephen Williamson: Growth in this segment was led by a biosciences business that was more than offset by the impact of the pandemic. In Q2, Adjusted Operating Income for Life Science Solutions increased 6%, and Adjusted Operating Margin was 36.7%, up 350 basis points versus the prior year quarter. During Q2, we delivered exceptionally strong productivity, which was partially upset by unfavorable volume pulls. 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 grew 2%, and organic growth was 3% higher than the prior year quarter. We continue to see very strong growth in our electron microscopy.
Speaker Change: Q2 Adjusted Operating Income for Life Science Solutions increased 6% and Adjusted Operating Margin was 36.7%, up 350 basis points versus the prior year quarter.
Speaker Change: During Q2, we delivered exceptionally strong productivity, which was partially upset by unfavorable volume pull-through.
Speaker Change: The team continues to do an excellent job to appropriately manage the cost base and deal with the unwind of the pandemic.
Speaker Change: In the analytical instrument segment, reported revenue grew 2% and organic growth was 3% higher than the prior year quarter. We continue to deliver very strong growth in our electron microscopy business.
Stephen Williamson: In this segment, Q2 adjusted operating income increased 1% and adjusted operating margin was 24.6%, 10 basis points lower year over year. In the quarter, we delivered strong productivity, which was more than offset by unfavorable mix and strategic investment. Specialty Diagnostics and Specialty Imaging both reported organic revenue 1% higher than the prior year quarter.
Speaker Change: In this segment, Q2 Adjusted Operating Income increased 1% and Adjusted Operating Margin was 24.6%, 10 basis points lower year over year. In the quarter, we delivered strong productivity, which is more than offset by unfavorable mix and strategic investments.
Speaker Change: In terms of specialty diagnostics, in Q2, both reported and organic revenue were 1% higher than the prior year quarter. In Q2, we continued to see strong underlying growth in the core led by our transplant diagnostics and immunodiagnostics businesses, as well as in our healthcare market channel.
Stephen Williamson: In Q2, 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 channel. For Q2, Adjusted Operating Income for Specialty Diagnostics increased 1%, and Adjusted Operating Margin was 26.7%, which is flat compared to Q2 2023. During the quarter, we delivered good productivity, which was offset by strategic investment. And finally, in the biotechnology products and biopharma services segment, both reported revenue and organic growth decreased 1% in Q2 versus the prior year quarter.
Speaker Change: Q2 Adjusted Operating Income for Specialty Diagnostics increased 1%, and Adjusted Operating Margin was 26.7%, which is flat compared to Q2 2023. During the quarter, we delivered good productivity, which was offset by Strategic Invest.
Speaker Change: And finally, in the biotech products and biopharma services segment, both reported revenue and organic growth decreased 1% in Q2 versus the prior year quarter. This is driven by the runoff of vaccines and therapies revenue.
Stephen Williamson: This is driven by the runoff of vaccines and therapies. Growth in this segment in Q2 was led by a clinical research business. Q2 Adjusted Operating Income declined 10% and Adjusted Operating Margin was 12.9%, which is 120 basis points lower than Q2 2023, flat sequentially to Q1 2024.
Speaker Change: Growth in this segment in Q2 was led by a clinical research business.
Speaker Change: Q2 Adjusted Operating Income declined 10% and Adjusted Operating Margin was 12.9%, which is 120 basis points lower than Q2 2023, flat sequentially to Q1 2024.
Stephen Williamson: In the quarter, we delivered strong productivity, which was more than offset by an unfavorable volume mix and strategic investment. Turning now to guidance, as Marc outlined, given our strong performance in Q2, we're raising our 2024 full-year guidance. We now expect revenue to be in the range of $42.4 billion to $43.3 billion and adjusted EPS to be in the range of $21.29 to $22.07. The improved revenue guidance does not change the core organic revenue growth rounding for the year, so we still 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 will decline below single digits this year.
Speaker Change: In the quarter, we delivered strong productivity, which is more than offset by unfavorable volume mix and strategic investments.
Speaker Change: Turning now to guidance, as Marc outlined, given our strong performance in Q2, we're raising our 2024 full-year guidance.
Speaker Change: We now expect revenue to be in the range of $42.4 billion to $43.3 billion and adjusted EPS to be in the range of $21.29 to $22.07.
Marc N. Casper: The improved revenue guidance does not change the core organic revenue growth rounding for the year, so we still continue to assume core organic revenue growth will be in the range of minus 1% to positive 1% for 2024.
Stephen Williamson: A proven growth strategy and PPI business system execution will enable us to continue to take share once again. Our 2024 updated guidance range assumes an adjusted operating income margin between 22.5% and 22.8%, slightly higher than the prior guidance. Our PTI business system is continuing to enable excellent execution, manage costs appropriately, and fund the right long-term investments to enable us to further advance our industry leadership. We now expect net interest costs to be in the range of $380 to $400 million for the year.
Marc N. Casper: And we continue to assume that the market declines low single digits this year. A proven growth strategy and PPI business system execution will enable us to continue to take share once again.
Marc N. Casper: Our 2024 updated guidance range assumes an adjusted operating income margin between 22.5% and 22.8%, slightly higher than the prior guide.
Marc N. Casper: Our PTI business system is continuing to enable excellent execution, manage costs appropriately, and fund the right long-term investments to enable us to further advance our industry leadership.
Marc N. Casper: We now expect net interest cost to be in the range of 380 to 400 million dollars for the year.
Stephen Williamson: And the raised or adjusted EPS guidance range reflects a $0.15 increase on the low end and a $0.05 increase on the high end, which results in an increase in the midpoint by $0.10. Thus, another strong quarter of execution enabled an increase in the guidance outlook for the year. We remain really 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 guidance that remain unchanged from the previous guidance.
Marc N. Casper: And the raised or adjusted EPS guidance range reflects a $0.15 increase on the low end and a $0.05 increase on the high end, which results in an increase in the midpoint by $0.10.
Marc N. Casper: So another strong quarter of execution, enabling an increase in the guidance outlook for the year. We remain really well positioned to continue to deliver differentiated performance.
Marc N. Casper: 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.
Stephen Williamson: In 2024, we're assuming just under 100 million dollars of testing revenue and 300 to 400 million dollars 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.
Marc N. Casper: In 2024, we're assuming just under $100 million of testing revenue and $300 to $400 million of vaccines and therapies related revenue.
Marc N. Casper: In total, this represents a year-over-year headwind of $1.3-$1.4 billion, or 3% of revenue.
Stephen Williamson: We've seen that FX would be roughly neutral year over year to both revenue and adjusted EPS. And we're assuming that the three cents of FX adjusted EPS beat that we saw in Q2 is offset for the remainder of the year, leading to no change for the year as a whole for FX versus the prior guide. We continue to expect the adjusted income tax rate will be 10.5% in 2024.
Marc N. Casper: We've seen that FX would be roughly neutral year over year to both revenue and adjusted EPS. And we're assuming that the three cents FX adjusted EPS beat that we saw in Q2 is offset for the remainder of the year, leading to no change for the year as a whole for FX versus the prior guidance.
Marc N. Casper: We continue to expect adjusted income tax rate will be 10.5% in 2024.
Stephen Williamson: And for the year, 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 already completed in January. We expect to return approximately $600 million of capital to shareholders this year through dividends, and we deployed $3.1 billion to acquire Olink shortly after Q2. The full year average diluted share count is assumed to be approximately 383 million shares.
Speaker Change: And for the year, 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.
Speaker Change: In terms of capital deployments, we're assuming $3 billion of share buybacks, which were already completed in January . We expect to return approximately $600 million of capital to shareholders this year through dividends. And we deployed $3.1 billion to acquire Olink shortly after the Q2 closed.
Speaker Change: Full year average diluted share count is assumed to be approximately 383 million shares.
Stephen Williamson: Finally, I wanted to touch on quarterly phasing to help you with your model. Relative to the midpoint of the guide, I recommend modeling Q3 organic revenue growth 1% higher than we delivered in Q2. Also, it is good to model core organic revenue growth in Q3 1% higher than we delivered in Q2. And in terms of adjusted EPS in Q3, I recommend modeling it to be just over 24% of the full year. So to conclude, we continue to deliver on our commitments, and at the halfway point, we're in a great position to deliver differentiated performance for all our stakeholders in 2020. With that, I'll turn the call back over to Raf.
Speaker Change: Finally, I wanted to touch on quarterly phasing to help you with your modeling.
Speaker Change: Relative to the midpoint of the guide, I recommend modeling Q3 organic revenue growth 1% higher than we delivered in Q2. Also good to model core organic revenue growth in Q3 1% higher than we delivered in Q2.
Speaker Change: And in terms of adjusted EPS in Q3, I recommend modeling it to be just over 24% of the full year.
Speaker Change: So to conclude, we continue to deliver on our commitments, and at the halfway point, we're in a great position to deliver differentiated performance for all our stakeholders in 2020. With that, I'll turn the call back over to Raph.
Operator: Operator, we're ready for the Q&A portion of the call. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad now.
Raph: Operator, we're ready for the Q&A portion of the call.
Operator: Thank you. 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 2.
Operator: If you change your mind, please press star followed by, 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. Our first question is from Michael Ryskin with Bank of America. Michael, your line is now open. Please go ahead.
Raph: 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.
Raph: Our first question is from Michael Ryskin with...
Speaker Change: Bank of America, Michael your line is now open, please go ahead.
Michael Leonidovich Ryskin: Great. Thanks for taking the questions, guys. Congratulations on the quarter. Marc, a high level one for you to start off.
Michael Riskin: Great. Thanks for taking the questions, guys. Congrats on the quarter.
Michael Leonidovich Ryskin: At our Vegas Health Fair Conference in May, you made some initial comments about 2025 market expectations. And you said that you expect the tool market next year would be just below the 4 to 6 level it has historically been, just given the way the year is playing out, how you're exiting 2024 and entering 2025. It's been a couple of months since then.
Michael Riskin: Marc, a high level one for you to start off, maybe. At our Vegas Healthcare Conference in May, you made some initial comments about 2025 market expectations and you said that you expect the tools market next year would be just below the four to six level it has historically been.
Speaker Change: Just given the way the year is playing out, how you're exiting 2024 and entering 2025. It's been a couple months since then. You've got, hopefully, a clearer view of how 2024 is going to play out.
Michael Leonidovich Ryskin: You've got, hopefully, a clearer view of how 2024 is going to play out. So, given where you sit now, do you have more confidence in that 2025 market assumption and maybe how Thermo can deliver differentiated performance above that? Mike, thanks for the question.
Speaker Change: Given where you sit now, do you have more confidence in that 2025 market assumptions and maybe how Thermo can deliver differentiated performance above that?
Marc N. Casper: It was a pleasure to be with you earlier in the quarter. So let me start actually one level down, kind of frame a few of my general thoughts, and I'll talk about 2025. So, when I think about Q2, you know, the team executed really well, really good financial performance, it was ahead of our expectations and allowed us to raise our guidance. The other aspect of the performance is the actual performance, as opposed to relative to expectations. Clearly, they are very differentiated and very strong.
Speaker Change: Mike, thanks for the question. It was a pleasure to be in with you earlier in the quarter. So let me start actually one level off, kind of just frame a few of my general thoughts, and I'll talk about 2025.
Speaker Change: When I think about Q2, you know, team executed really well, really good financial performance. It was ahead of our expectations. It allowed us to raise our guidance.
Speaker Change: The other aspect of the performance is the actual performance as opposed to relative to expectations.
Marc N. Casper: It was good to see that core has now, you know, elevated to it's now flat, which is great, 4% adjusted EPS growth, and an expansion of margins. So I feel very good about the performance. And when I think about the market, they were in line with our expectations. So it's good to see the visibility that we've enjoyed for decades, you know, as returns in terms of how the market's playing out.
Speaker Change: Clearly very differentiated and very strong. It was good to see that core has now, you know, elevated to it's now flat, which is great.
Speaker Change: 4% adjusted EPS growth and expansion of margins. So I feel very good about the performance. And when I think about the market, you know, they were in line with our expectations. So it's good to see the visibility that we've enjoyed for decades, you know, as returns in terms of how the market's playing out.
Marc N. Casper: And, you know, when I think about our own performance within the markets, it was good to see that in all four of our markets, we had sequential improvement in our growth across all four. So really, you know, a very positive development. The PPI business system is really delivering outstanding impact, and I ultimately feel good about the performance. Capital deployment has been active and good. We've deployed over $6 billion of capital in the first half of the year, half of it on the return of capital, and half of it on a very exciting acquisition of O-Link.
Speaker Change: You know, when I think about our own performance within the markets, it was good to see that all four of our markets, we had sequential improvement in our growth across all four, so really, you know, very positive development.
Speaker Change: PPI business system is really delivering outstanding impact and ultimately
Speaker Change: I feel good about the performance. Capital deployment has been active and good.
Speaker Change: We've deployed over six billion dollars of capital to the
Speaker Change: First half of the year, half of it on return to capital, and half of it on a very exciting acquisition of Olink.
Marc N. Casper: And we're very well positioned at this point to deliver strong results. When I think about 2025, I think the way I would just think about it is that we're going to give you that in January of 2025.
Speaker Change: We're very well positioned at this point to deliver strong results. When I think about 2025,
Speaker Change: I think the way I would just think about it is we're going to give you that in January of 2025. When we have the benefit of the year behind us, you know, and we're focused on delivering a great year, we'll be able to give you a view of not only our performance, but how we saw the underlying market conditions.
Marc N. Casper: When we have the benefit of the year behind us, you know, and we're focused on delivering a great year, we'll be able to give you a view of not only our performance but how we see the underlying market conditions. The year is progressing as we expected. So we expect that the market will continue to improve modestly in the back half of the year, each quarter being a little better than the quarter before, and that our performance will also continue to step up.
Speaker Change: The year is progressing as we expected so we expect that the market will continue to
Speaker Change: improve modestly in the back half of the year, each quarter being a little better than the quarter before, and that our performance will also continue to step up.
Marc N. Casper: And that will give us momentum going into 2025. And the details we'll give you back, we'll give you in a few months. Okay, fair enough. And then for my follow-up, I want to focus on China.
Speaker Change: That will give us momentum going into 2025, and the details we'll give you in a few months' time.
Michael Leonidovich Ryskin: I think if I heard correctly, you called out that it grew by amidst single digits in the quarter. I want to make sure I heard that right. But if so, that's a bit surprising.
Speaker Change: Okay, fair enough. And then for my follow-up...
Michael Leonidovich Ryskin: And you can say, in terms of what you're seeing there, is that also ahead of your expectations? And is this just a temporary bump in the quarter or something, you know, one-time thing? Or are you seeing some real traction here? And you think that can continue into your end? Yeah, you know, your hearing is excellent.
Marc N. Casper: So yes, we delivered single-digit growth in the quarter. The team did a nice job, really good execution. Therefore, comparison was relatively easy in the quarter.
Marc N. Casper: So, and I would still characterize the conditions as muted, in terms of the environment, but nice, a nice job by the team to deliver, you know, a very solid Q2 result. Thanks, Mike. Thank you very much.
Operator: Our next question is from Jack Meehan. Jack, your line is now open. Please go ahead.
Jack Meehan: Thanks. Thanks. Good morning, guys.
Jack Meehan: I wanted to start by asking about LSS. So this had some nice sequential improvement in the growth rate. I heard biosciences led to growth. Can you talk about the relative improvement you're seeing there, also genetic sciences and bioprocessing, and any updates on where you think your customers stand in terms of e-stock? Yeah, Jack, thanks for the question.
Marc N. Casper: When I think about probably the most important points about our life science solutions segment, it's nice to see the growth in our biosciences business, which is, you know, every lab every day, really nice adoption in the pharma and biotech segments there. So that was a very nice, positive development in terms of terms. And maybe I'll dive a little bit into bioproduction, which is always an area of great interest to our investors.
Marc N. Casper: The business is actually progressing exactly as we expected, a really nice quarter of performance. So when I think about the most salient facts around bioproduction, sequentially, really nice revenue growth in Q2. When I look at orders, we had really nice sequential growth in orders. We had year over year growth in orders, and we had a favorable book to them.
Speaker Change: This is actually progressing really exactly as we expected really nice quarter performance. So.
Speaker Change: When I think about the most salient facts around bio production.
Speaker Change: Sequentially really nice revenue growth in Q2.
Speaker Change: When I look at orders, we had really nice sequential growth in orders, we had year over year growth in orders and.
Speaker Change: And we had a favorable book to bill so poor.
Marc N. Casper: So we are progressing well, and when I look at others that are reported, I feel very good about our performance. So when I think about the life science solution segment, those are two of the drivers. And then you've seen some announcements in the previous few months about important companion diagnostics, our clinical sequence business, which is doing quite well. So, Jack, thanks for the question on LSS. Excellent. Okay, and then I wanted to rotate to AI.
Speaker Change: Crossing while and when I look at others that have reported I feel very good about our performance. So.
Speaker Change: When I think about the life Science solutions segment.
Speaker Change: Two of the drivers and then you've seen some announcements.
Chuck: In the previous few months about important companion diagnostics sharp clinical sequencer business clinical sequencing business is doing quite well so Chuck thanks for the question on <unk>.
Jack Meehan: So this also came in a bit better than I was expecting. Can you talk about how the book to bill was in the segment during the quarter and just updates on customer spending patterns? Yeah, so when I think about analytical instruments, you know, it was nice to see the 3% growth in the quarter and very positive. I would say the market conditions are playing out pretty much as we expected. They're not at normal levels yet.
Speaker Change: Excellent Okay, and then wanted to rotate to AI. So this also came in a bit better than I was expecting.
Speaker Change: You talk about how the book to Bill was in the segment in the quarter and just updates on customer spending patterns.
Speaker Change: Sure.
Speaker Change: Yes, so when I think about analytical instruments.
Speaker Change: <unk>.
Speaker Change: It was nice to see.
Speaker Change: The 3% growth in the quarter and very positive I would say the market conditions are still playing out pretty much as we expected, but not at the normal levels yet.
Marc N. Casper: We certainly see the impact of the muted conditions in China. We have really excellent momentum in those differentiated products that we have where innovation matters. You know, on orders, as well as on revenue. When you look at electron microscopy, you look at the Orbitrap Astro, you know, just the cutting-edge work, you see incredibly strong momentum there. So that's where the highlights are.
Speaker Change: Certainly see the impact of.
Speaker Change: Muted conditions in China.
Speaker Change: We have really excellent momentum.
Speaker Change: In those differentiated products that we have where innovation matters.
Speaker Change: On our borders.
Speaker Change: As well as on revenue when you look at electron microscopy, you look at the the orbit trap Astro just a cutting edge work, you're seeing incredibly strong momentum there. So that's where the highlights are and I would say in the more routine ish aspects of the portfolio Youll see more muted conditions.
Jack: Thanks Jack.
Jack: Thank you. Our next question is from Rachel.
Marc N. Casper: And I would say in the more routine-ish aspects of the portfolio, you see more muted conditions. Thanks, Jack. Thank you. The question is from Rachel, but in style with J.P. Morgan. Rachel, your line is now open. Please go ahead.
Rachel: But in stock.
Speaker Change: With J P. Morgan Rachel Your line is now open. Please go ahead.
Operator: Perfect. Hi, good morning, you guys. Thanks so much for taking the questions. I wanted to follow up on some of the China comments. You mentioned that China grew mid-single digits, partly due to the comp there. Can you just walk us through what you are seeing from the China Stimulus? You know, we heard that this first tranche of funding was released earlier this quarter. So, have you seen any orders related to the China stimulus?
Rachel: Hi, Good morning, guys. Thanks, so much for taking the question I wanted to follow up on some of the China comment you mentioned that China grew mid single digits, partly due to the comp. There can you just walk us through what are you seeing signs in China. We heard that this first tranche of funding was released earlier this quarter and so have you seen anything or.
Operator: Do you think that you'll benefit from this first tranche? And then also, have you seen any customers holding back spending related to the Stimulus program? Kind of getting at this air pocket idea that we've heard some of your peers talk about.
Speaker Change: It is related to Chinese stimulus do you think that Youll benefit from this first tranche and then also have you seen any customers holding back spending related to the stimulus program kind of getting at this like air pocket. The ethylene <unk> talk about any comments there would be helpful.
Rachel Marie Vatnsdal Olson: Any comments there would be helpful. Rachel, thanks for the question. It's an important question.
Marc N. Casper: So let me start at the sort of high level and then get down to the Charter was, as much transparency as I possibly can. You know, first of all, I think the world was surprised at how weak China was economically as this year unfolded. The stimulus programs announced early in the year were a sign that the government wanted to get the economy going, which is a good thing, right, in terms of sort of what the macro backdrop is in terms of a tough economic environment.
Speaker Change: Rachel Thanks for the question important question so.
Speaker Change: Let me start at the sort of high level, and then get down to the stimulus and then try to as much transparency as I, possibly can.
Speaker Change: First of all.
Speaker Change: I think the world was surprised at how weak China was economically.
Speaker Change: As this year unfolds.
Speaker Change: The stimulus programs announced early in the year was a sign that the government wanted to get the economy going which is a good thing right in terms of sort of what is the macro backdrop in terms of the tough economic environment.
Marc N. Casper: When I think about stimulus in our industry, and what we're seeing tremendous amounts of activity with our customers, actually to help them with figuring out what to apply for, and so we know there's quite a bit of interest in our products from a stimulus perspective. And we're helping our customers in that process. When I think about how I expect it to play out, my expectation is that it's largely going to show up in revenue in 2025 and is likely to have some small effect in the fourth quarter of 2024 as well.
Speaker Change: When I think about stimulus in our industry.
Speaker Change: And what we're seeing.
Tremendous amount of activity with our customers actually to help them with figuring out what to apply for.
Speaker Change: And so we know there's quite a bit of interest in our products from a stimulus perspective.
Speaker Change: We're helping our customers in that process.
Speaker Change: When I think about how do I expect it to play out.
Speaker Change: My expectation is that it's largely going to show up in revenue in 2025 and likely to have some some small effect in the fourth quarter of 2024 as well.
Marc N. Casper: I did ask the question about the air pocket to the team, and I'm actually heading off to China in a couple weeks' time, so I'm looking forward to that. However, our team didn't highlight any air pocket or anything like that.
Speaker Change: I did ask the question about and.
Speaker Change: An air pocket to the team and I'm actually heading off to China in a couple of weeks' time, so I'm looking forward to that.
Speaker Change: Our team didn't highlight any air pocket or anything like that so it's kind of muted conditions when customers are.
Marc N. Casper: They said kind of muted conditions, and customers are working on looking at the investments associated with the additional government funding. So we didn't see any pauses in the activity, and I'm proud of the team's mid-single-digit growth in the quarter. Great, and then just as my follow-up here, on the CRO, you've called out clinical research with an outperformer this quarter that drove some of the growth. So we've seen a few volatile prints from your peers, so can you walk us through what you have seen from an RFP standpoint and how much you booked in the quarter for PPD?
Speaker Change: Working on looking at the investments associated with the additional government funding. So so we didn't see any pauses in the activity and I'm proud of the team's mid single digit growth in the quarter.
Speaker Change: Great and then just as my follow up here on the CRM, you've called out clinical research with an outperformer. This quarter I think drove some of that growth. So we've seen a few volatile things from your peers. So can you walk us through what are you seeing from an RFP standpoint, and book to Bill in the quarter for PPD and then have we turned the corner on emerging.
Rachel Marie Vatnsdal Olson: And then have we turned the quarter on emerging biotech funding and kind of how is that flowing through the model as well? Yes, so Rachel, your team's doing a really nice job executing very well in our clinical research business. And, you know, when I think about our performance, you know, we delivered positive, you know, organic revenue growth despite a really substantial headwind from the runoff of vaccines and therapies in that activity. So the team's doing a nice job.
Speaker Change: <unk> funding and kind of highlight that slowly into the model as well.
Rachel: Yes, so Rachel.
Team's done a really nice job executing very well in our clinical research business.
Sure.
Rachel: And.
Rachel: When I think about our performance we.
Speaker Change: We delivered positive <unk>.
Speaker Change: Organic revenue growth, despite a really substantial headwind from the runoff of vaccines and therapies in that activity. So team is doing a nice job commercial execution was very strong in the quarter alright and.
Marc N. Casper: Commercial execution was very strong in the quarter, right? And, you know, customers value our capabilities. And when I sort of went under the details of the commercial performance and looked at some of the underlying trends, it was very clear that in Q2, we really did see some of the biotech funding activity that we talked about as a green shoot in Q1. That would give us confidence that the year, in aggregate across our business, would be improving from a market perspective.
Speaker Change: Customers value, our capabilities and when I sort of went under the details of the commercial performance and looked at some of the underlying trends.
Speaker Change: It was very clear that in Q2.
Speaker Change: We really did see some of the biotech funding activity that we talked about as a green shoot in Q1 that would give us confidence that the year in aggregate across our business would be improving from a market perspective, we saw that in Q2 actually translate into an acceleration of authorizations in our bio.
Marc N. Casper: We saw that in Q2 actually translate into an acceleration of authorizations in our biotech customer base, and that really does bode well for that. And as you know, this business really translates more into revenue in 25 and 26 in terms of how long it takes to get the clinical trials up and going, but the authorization momentum was very encouraging in the quarter. Thank you, Rachel.
Speaker Change: <unk> customer base and that really does bode well for that and as you know well this business.
Speaker Change: That really translates more into revenue and 25 and 26 in terms of how long it takes to get the clinical trial is up and going but the authorization momentum.
Speaker Change: Very encouraging in the quarter.
Speaker Change: Thank you rich.
Speaker Change: Thank you. The next question is from.
Operator: Thank you. The next question is from Doug Schenkel with Wolf Research.
Douglas Anthony Schenkel: Doug Schenkel.
Douglas Anthony Schenkel: At Wolfe research.
Speaker Change: Your line is now open. Please go ahead.
Operator: Doug, your line is now open. Please go ahead. Okay, thank you, and good morning, everybody. Marc, when we look at, When, Marc, when we look at your stacks, calculate keggers going back pre-pandemic.
Douglas Anthony Schenkel: Okay. Thank you and good morning, everybody.
Douglas Anthony Schenkel: Mark Good morning look at.
Mark: When mark when we look at two year stacks and.
Speaker Change: Calculate CAGR going back pre pandemic.
Douglas Anthony Schenkel: It seems like most business lines within Thermo continue to trend positively. I think your commentary is consistent with that on the call this morning. With that in mind, I think one of the key questions is, you know, what's going to be the pace of improvement from here? So with that in mind, two questions. First... Where is the recovery occurring more quickly than you may have expected? Where are things lagging?
Speaker Change: It seems like most business lines within thermo continue to trend positively.
Speaker Change: I think your commentary is consistent with that on the call. This morning with that in mind I think one of the key questions is what's going to be the pace of improvement from here.
Douglas Anthony Schenkel: You know, and I'm kind of thinking about this both in terms of, you know, how you guided for the year, but also just based on what you've seen through previous cycles. Um, so that's one question. And then the second would be just keeping in mind your assumption that this market grows 4 to 6% on a normalized basis. Is it fair to assume that, you know, recognizing you're making progress here, but just seeing what the pacing is, is it fair to assume that the move back into that range is going to be gradual versus a snapback? And, you know, essentially, this move into the four to six range is going to take several quarters. Yeah, so Doug, there's a lot in that question. It's a good question.
Speaker Change: So with that in mind two questions first.
Speaker Change: Where is the recovery the recovery occurring more quickly than you may have expected where are things lagging.
Speaker Change: Kind of thinking about this both in terms of.
Speaker Change: How you guided for the year, but also just based on what you've seen for previous cycles.
Speaker Change: So thats one question and then the second would be just keeping in mind your assumption that.
Speaker Change: This market grows 4% to 6% on a normalized basis.
Speaker Change: Is it fair to assume that recognizing youre, making progress here, but just seeing what the pacing is.
Is it fair to assume that the move back into that range is going to be gradual versus a snapback and essentially that this move into the 4% to six range is going to take several quarters.
Speaker Change: Yes.
Speaker Change: There's a lot in that question. It's a good question.
Marc N. Casper: So let me just start with, I think, things around the market and our performance that's important to our investors, right? Pre-2023, you know, holding aside some of the amazing market and our performance in the pandemic period, a very predictable, visible market without a lot of volatility and really a great underlying set of growth, right? So there are never debates about market growth in the sort of pre-pandemic or even in the early parts of the pandemic.
Speaker Change: So <unk>.
Speaker Change: Well, let me just start with.
Speaker Change: I think the things around the market and our performance is important to our investors right.
Speaker Change: Pre 2023, holding aside some of the amazing market and our performance in the pandemic period.
Speaker Change: Barry.
Predictable visible market without.
Barry: A lot of volatility and really a great underlying set of growth right. So it was never debates about market growth.
Barry: Sort of pre pandemic or even in the early parts of the pandemic so and.
Marc N. Casper: So, and then obviously, a difficult year for the industry in 2023, you know, comparisons and a lot of other factors related to the pandemic directly and indirectly. So when I think about what we're seeing in the industry now for three quarters in a row, the visibility is pretty good. We have a good feel for what's going on. It's playing out as we expected. There's always things a little better, a little worse. But they're all so irrelevant on the margin. They're all in the factor of the aggregate.
Barry: And then obviously a difficult year for the industry and in 2023 comparisons and a lot of other factors related to the pandemic directly and indirectly. So when I think about what we're seeing in the industry now for three quarters in a row. The visibility is pretty good I think we have a good feel for what's going on.
Barry: One is playing out as we expected there is always things a little better a little worse or also irrelevant on the on the margin. They are all in the factor of the aggregate. So I feel very good about the progression.
Marc N. Casper: So I feel very good about the progression when what's embedded in our guidance for the market, right, is that, you know, for the full year, it continues to step up a little bit more in Q3 and further in Q4. And when I think about what we've assumed about market growth and back in, you know, in the January timeframe, when we gave our guidance, as we said, the market was going to be down low single digits.
Barry: What's embedded in our guidance in the market.
Barry: Is that for the full year is that it continues to step up.
Barry: A little bit more in Q3 and further in Q4.
Barry: And when I think about what we've assumed in the market growth in packaging in the January timeframe. When we gave our guidance as we said the market was going to be down low single digits, but when you looked at sort of the phasing implied it probably is flattish.
Marc N. Casper: But when you looked at sort of the phasing implied, it probably is flattish, maybe up slightly in the fourth quarter in terms of the market progression. We don't have a perfect crystal ball, but that sort of implied it. And so it's progressing well, when I think about how it's going to progress exactly each quarter thereafter. You know, when we get to January, I'll have a much better feel for it. But I think what's really relevant is how I feel about the four to six, right?
Barry: Maybe up slightly in the fourth quarter in terms of the market progression that we don't have a perfect crystal ball, but that's sort of what's implied in the map.
Speaker Change: <unk> is progressing well when I think too.
Speaker Change: How it's going to progress exactly each quarter thereafter.
Speaker Change: When we get the January I'll have a much better feel for.
Speaker Change: But I think what's really relevant is how do I feel about a four to six right and I'm looking forward to Investor day, I feel great about the long term <unk> that doesn't mean I can predict it to a quarter or the specific year, but what I am talking of three to five year timeframe and do I believe that the market growth is going to be $4 six 100% confidence.
Marc N. Casper: And I'm looking forward to investor day. I feel great about the long term. That doesn't mean I can predict it to a quarter or a specific year. But when I'm talking about a three to five year time frame, and do I believe that market growth is going to be four to six? One hundred percent confidence in that.
Marc N. Casper: The underlying scientific drivers are phenomenal in terms of our industry, what's going on in pipelines, in our customer base. Fantastic. Right. So I don't lose any sleep over that. And I always question it because it's important.
Speaker Change: And that bet.
Speaker Change: Underlying scientific drivers of phenomenal in terms of our industry whats going on in pipelines in our customer base fantastic right. So I don't lose any sleep over that and I always question. It because it's important as salt Lake was taken from a dogmatic standpoint, but from a fact and underlying drivers I feel great about it and then the other thing that's important to me.
Marc N. Casper: It's not like, you know, I just take it from a dogmatic standpoint, but from the facts and underlying drivers, I feel great about it. And then the other thing that's important to me, important to our hundred and twenty five thousand colleagues, and actually quite important to our investors is our customers meaningfully choosing us more often than their other choices and the ability to grow three percent faster than the market. I feel great about it.
Speaker Change: Important to 125000 colleagues and actually quite important to our investors is our customers meaningfully choosing us more often than their other choices and the ability to grow 3% faster than the market I feel great about and we have an incredible track record this quarter at least in looking at what we've seen so far once again.
Marc N. Casper: And we have an incredible track record this quarter, at least looking at what we've seen so far. We have once again delivered on that. So hopefully, that puts it in the context of my enthusiasm and will provide you with transparency as the year wraps up. So what do we see as a reasonable assumption for the next year? And I think our forecast accuracy is pretty good. Okay, and Marc, if I can ask one more high-level follow-up question, you know, over the years and in working with you and following Thermo, you know, what one of the neat things has been in these tougher periods in the market, you know, Thermo, and you specifically have, you know, you've played offense when others have played defense. Recognizing that every cycle is difficult and different. You know, I would say the last year and a half have been, you know, maybe tougher than normal, even for Thermo.
Speaker Change: On that so hopefully that puts it in the context of my enthusiasm and we'll provide you transparency as the year ramps up so what do we see as a reasonable assumption for the next year and I think our forecast accuracy is pretty good.
Speaker Change: Okay, and Mark if I can ask one more high level follow up over the years and working with you and following thermo.
Mark: One of the neat things has been in these tougher periods in the market.
Speaker Change: Thermo and <unk> specifically.
Mark: You've played offense when others are playing defense.
Mark: Recognizing every cycle.
Speaker Change: Difficult and different.
Speaker Change: Say, the last year and a half spend you know maybe tougher than normal even for thermo.
Douglas Anthony Schenkel: You know, as things start to improve a little bit, but again, it's gradual. Do you feel you're in a position now to maybe get even more aggressive like you have in previous cycles when it comes to capital deployment, evolving the business, and other initiatives? Are you feeling more comfortable, more confident in making those moves that we've seen in previous cycles? Thank you.
Speaker Change: As things start to improve a little bit but again, it's gradual do you feel you are in a position now to maybe get even more aggressive like you have in previous cycles. When it comes to capital deployment.
Speaker Change: <unk> the business and other initiatives.
Speaker Change: Are you feeling more comfortable board more confident in making those moves that we've seen in prior cycles. Thank you.
Marc N. Casper: Doug, thanks for the question. When I think about the company's strategy and the trusted partner status that we've earned with our customers over many, many years, you know, we're able to take a long-term perspective while holding ourselves accountable for delivering excellent short-term results. And I love periods where not everybody's performing at the same level. That creates opportunities. I love the fact that during the fact that the pandemic, we were able to accelerate our investments in innovation. Wow, I mean, I talked probably for five of my, you know, 15 minutes today on innovation, and I had to cut it short because the list was so long. It is super cool.
Speaker Change: So thanks for the question when I think about the company's strategy and the trusted partner status that we've armed with our customers over many many years.
Speaker Change: We're able to take a long term perspective, while holding ourselves accountable for delivering excellent short term results and I love periods, where.
Speaker Change: Not everybody is performing at the same level that creates opportunities.
Speaker Change: I loved tour and the fact that the pandemic, we were able to accelerate our investments in innovation.
Speaker Change: I talked probably for five of my 15 minutes today on innovation and I have to truncate it.
Speaker Change: Because the list for so long it is super KOL and our job is to differentiate our competitive position deliver superior organic growth to.
Marc N. Casper: And our job is to differentiate our competitive position deliver superior organic growth to others and translate into great results. And I'm very excited about our ability to continue to do that and further differentiate our industry leadership going forward. So thanks for the question, Doug. Thank you very much. Our next question is from Tycho Peterson. Tycho, your line is now open. Please go ahead.
Speaker Change: So the others and translate into great results and I'm very excited about our ability to continue to do that and further differentiate our industry leadership going forward. So thanks for the question Doug.
Speaker Change: Thank you very much. Our next question is from Tycho Peterson Tyco. Your line is now open. Please go ahead.
Tycho Peterson: Thanks. Hey, Marc, a question on operating margins, or maybe for Stephen, you know, lab products and services. Obviously, you felt the headwinds from the vaccine and therapy roll off, but, you know, it was effectively at a two-year low.
Tycho Peterson: Hey, Mark a question on the operating margins or maybe for Steven lab products and services. Obviously, you felt the headwinds from the vaccine and therapy roll off but you know it was effectively at a two year low. So just curious about how you think about margin for lab products going forward and then as we think about 2025, if PPD and <unk> can grow above the corporate average.
Tycho Peterson: So just curious about how you think about margins for lab products going forward. And then, as we think about 2025, you know, if PPD and Patheon can grow above the corporate average, do you still have the ability to drive 40 to 50 bps of margin expansion, or potentially could it be higher or lower? Thank you. Thanks for the questions, and good to hear from you again.
Speaker Change: You still have the ability to drive 40% to 50 bps of margin expansion or potentially could it be higher or lower.
Yes.
Marc N. Casper: So, in terms of the margin profile in the quarter, we're going through largely the impact of the transition of the vaccine-related capacity and sterile fill-finished products translating into other modalities, so that's probably the biggest factor that you see there. And when I think about the margin profile for our businesses, I feel good about the ability to drive strong margin expansion as we, as top-line growth comes back and certain parts of our business where we've appropriately adjusted the cost base down, where volumes have come down, and as those volumes come back, we're going to get some good pull-through that comes from that.
Speaker Change: Tycho Thanks for the questions and good to hear from you again, so in terms of the margin profile in the quarter, we that we're going through this largely the impact of the transition of the vaccine related capacity sterile fill finished translating into other modalities. That's probably the biggest factor that you see there and I think about that the margin profile for <unk>.
Speaker Change: Businesses.
Speaker Change: I feel good about the ability to drive strong margin expansion as we.
Speaker Change: Topline growth comes back in certain parts of our business, where we have appropriately adjusted the cost base down.
Speaker Change: Volumes have come down and was as volumes come back when it is a good good pull through that comes from that so before to give you. The details on 25, when we get to the January call, but in terms of the margin profile and kind of the mix of business I feel good about the ability to expand our margins.
Marc N. Casper: So, look forward to giving the details on 25 when we get to the January call, but yeah, in terms of the margin profile and kind of the mix of business, I feel good about the ability to expand that margin. Okay, and then one follow-up on, you know, CDMO capacity. You doubled fill finish over the last couple years. Just curious, Marc, how do you think about additional capacity expansion? What do you think about capacity utilization in the industry?
Tycho Peterson: And, you know, how actively you may look at some of the capacity that could get freed up, freed up from some of the recent M&A, or potentially around biosecure in the Yeah, so take a... When I think about our pharma services business and our capacity, where we play, I feel very good about our position. We've had very strong demand for our sterile fill finish capabilities, which is our largest activity, and we're doing well there. We've been expanding the number of lines we have at our sites, and demand has been strong for that.
Speaker Change: Okay, and then one follow up on CDMA capacity, you doubled fill finish over the last couple of years, just curious mark how do you think about additional capacity expansion. How do you think about capacity utilization in the industry and how actively you may look at some of the capacity that could get freedom freed up from some of the recent M&A or potentially around Biosecurity U S.
Tycho Peterson: Yeah, So tycho.
Tycho Peterson: When I think about our pharma services business and our capacity.
Speaker Change: Where we play I feel very good about our position.
Speaker Change: We've had very strong demand for our sterile fill finish capabilities.
Speaker Change: Which is our largest activity and.
Speaker Change: We're doing well there we've been expanding the number of lines, we have at our sites and demand has been strong for that so.
Marc N. Casper: So I feel good about that outlook. You know, in clinical trials and supplies, which is the other really large portion of our business and where we really have an unparalleled position, I highlighted a couple examples of capabilities we're expanding. You know, effectively, we make sure that our capacity lines up with our forecasted demand so that it's not really an overcapacity viewpoint. And on the other parts of the business, I feel okay about our position, and there are no things of note there. So that's pretty positive.
Speaker Change: Feel good about that outlook.
Speaker Change: In the clinical trials.
Speaker Change: <unk>, which is the other really large portion of our business.
Speaker Change: Where we really have any unparalleled position I highlighted a couple of examples of capabilities, we're expanding effectively we make sure that our capacity lines up with our forecasted demand.
Speaker Change: Not really an overcapacity.
Speaker Change: Viewpoint.
Speaker Change: The other parts of the business.
Speaker Change: I feel okay about our position and nothing of note there.
Marc N. Casper: And, you know, what we're going through right now as a reminder is that we're transitioning a lot of the COVID-related activities to normal therapies, and the team's doing a good job. It certainly impacts our growth in terms of headwinds in 2024, but it becomes better in 25 and 26 as the new therapies and the tech transfers are complete, and new lines come on, you know, on pace. So, pretty good times ahead. Thanks. I appreciate your time. Thanks, Taika.
Speaker Change: That's a pretty positive.
Speaker Change: Going through right now as a reminder, as we're transitioning.
Speaker Change: A lot of the Covid related activities.
Speaker Change: Two the normal therapies and the team's doing a good job it certainly impacts our growth in terms of a headwind in 2024, but.
Speaker Change: It becomes better and 25 and $26.
Speaker Change: As the new therapies in the tech transfers are complete new lines come on.
Speaker Change: So pretty good times.
Speaker Change: Thanks, I appreciate the color.
Tycho Peterson: Thanks Tycho.
Operator: Thank you. Our next question is from Puneet Souda, with Lyrinx, Lee Renk, sorry, Partners. Puneet, your line is now open. Please go ahead.
Speaker Change: Thank you our next.
Speaker Change: The question is from Puneet Sudan.
Speaker Change: With <unk>.
Leerink sorry partners.
Speaker Change: Your line is now open. Please go ahead.
Puneet Souda: Yeah, hi, thanks, Marc and Stephen. Thanks for taking the question. So Marc, a higher level question for you, maybe with your conversations, the CC conversation with therapeutics teams out there, what are you seeing and hearing from your larger biopharma customers, and maybe to some extent, these mid-cap ones as well, versus the smaller and earlier stage customers? How much of a divergence are you seeing between these groups? And when can that divergence narrow?
Puneet Sudan: Yes, hi, Thanks, Marc Steven Thanks for taking the question so Mark a higher level question for you maybe with your.
Puneet Sudan: When you have conversations with C suite conversation with therapeutics teams out there what are you seeing and hearing from your larger biopharma customers and maybe to some extent the smid cap ones as well versus the smaller earlier stage customers how much of a divergence are you seeing within these groups and when can that divergence.
Puneet Sudan: Narrow.
Marc N. Casper: Yeah, so Puneet, thanks for the question. So, the things that jump out to me, the patterns, if you will, and I see lots of customers, and I'm looking forward to being back on the road tomorrow. Seeing our customers is a great thing, and our larger customers. These would be the companies with many products that are both commercial and in their pipeline. You're seeing a few things.
Puneet Sudan: Yeah, So puneet.
Puneet Sudan: Thanks for the question so when I think about.
Puneet Sudan:
Speaker Change: The things that jump out to me the patterns, if you will and I see lots of customers.
Speaker Change: Im looking forward to being back on the road Tomorrow is seeing our customers with great thing.
Speaker Change: In our larger customers.
And these will be the companies with many products that are both commercial and in their pipeline.
Marc N. Casper: One, they're focused on the resiliency of their supply chain. So where, maybe historically, pre-pandemic, they would have had single-site in-house manufacturing, you're seeing much more of the second site leveraging our capabilities. And that's great in terms of just making sure that they can meet their customer demand, if you will. But you're also seeing the desire for how we can help them be more innovative and productive and basically fund all of the exciting things in their pipeline by just helping them really prioritize the most important work and do that in the most effective way.
Speaker Change: A few things one.
Speaker Change: They're focused on.
The resiliency of their supply chain, so where maybe historically pre pandemic. They would've had single site in house manufacturing, you're seeing much more of the second site, leveraging our capabilities and thats, great and in terms of just making sure that they can meet their <unk>.
Speaker Change: Customer demand if you will for medicines Youre also seeing the desire for how do we help them be more innovative and productive and we basically fund all of the exciting things in our pipeline by just helping them.
We really prioritize the most important work and do that in the most effective way. So it's really about helping them do more.
Marc N. Casper: So it's really about helping them do more to maximize the impact of what's in their. When I think about the smaller customers, because we had gone through a period in 2023 where funding was challenged, right? A lot of the tone was around how would they get through the period. When I think about the first six months of dialogue, much higher confidence, right?
Speaker Change: Maximize the impact of whats in their pipeline when I think about the smaller customers because we we had gone through a period of 2023, where funding was challenge right a lot of the tone was around how do they get through the period when I think about the first six months of dialogue much higher confidence rise funding is happy.
Marc N. Casper: Funding is happening, but also the confidence that funding will be available, at a very different place. And you're seeing that really translate into, you know, the earliest indicators of that, which are authorizations of new clinical trials and new activity. But I would expect that that would sort of flow through the rest of the types of work we do, you know, as the year continues to unfold and as we get closer to 25. So I think that's a very positive development. Okay, great.
Speaker Change: But also the confidence of funding will be available really at a very different spot and youre seeing that really translate into the.
Speaker Change: The earliest indicators of that which is authorizations of new clinical trials of new activity, but.
Speaker Change: But I would expect that that would sort of flow through the rest of the types of work we do as the year continues to unfold and as we get into 'twenty five so I think thats.
Speaker Change: Very positive development.
Puneet Souda: And just to follow up for Steve, on the EPS beat, it was about $0.25 at the midpoint, but you raised the guide only by, you know, $0.10. So just wondering how much of that is a reflection of the end market versus what's within your control in terms of cost management. Or is there anything specific that you would point out too?
Speaker Change: Okay, Great and just a follow up for Stephen.
Speaker Change: On the EPS beat was about 25.
Speaker Change: At the mid point, and but you raised the guide only by.
Speaker Change: 10 cents. So just wondering how much of that is a reflection of the end market versus what's within your control in terms of cost management.
Speaker Change: Or is there anything specific that you would point out too.
Stephen Williamson: Yeah, Puneet, so 6 cents of the beating in Q2 is really timing-related. When I think about the FX rates and kind of the outlook for the rest of the year, 3 cents of that 6 cents is going to be offset in the second half. And then from a tax standpoint, we're not assuming a change in the overall rate for the year, so that's timing with that.
Speaker Change: Yes, its opinion, so <unk> of the beating Q2 is really timing related when you think about the FX rates in kind of the outlook for the rest of the year <unk>.
Speaker Change: That six senses could it be offset in the second half and then from a tax standpoint, we're not assuming the change in the overall rate for the year as timing with that so that's <unk>.
Speaker Change: As good beat in Q Q2, but it's.
Speaker Change: A net neutral for the year as a whole and then with the rest we've raised the low end 15th and we raised the high at the high end <unk>.
Stephen Williamson: So that 6 cents is good, beating Q2, but it's net neutral for the year as a whole. And then with the rest, we know we've raised the low end by 15 cents, and we raised the high end by 5 cents. And I think that's a strong raise at this point. I think it's appropriate and enables us to be better positioned for the second half of the year. And I wouldn't really read anything else into that.
Speaker Change: Our strong raised at this point I think is appropriate and enables it to be better positioned for the second half of the year and I wouldn't really read anything else into that assist I think thats just appropriate at this point.
Speaker Change: Got it great. Thank you.
Stephen Williamson: It's just, I think that's just appropriate at this point. Got it. Thanks. All right, thank you, Operator. We have time for one more question. Yes, our next question is from Dan Arias with Schieffel. Then your line is now open, please go ahead. Guys, thank you. Marc, where do you think the academic markets are headed here? The mixed data points there; the NIH budget isn't particularly robust this year, so I'm curious what expectations we should have for the second half and then into the next cycle.
Speaker Change: Operator, we have time for one more question.
Dan Areas: Yes. Our next question is from Dan areas.
Daniel Anthony Arias: With Stifel.
Speaker Change #101: Your line is now open. Please go ahead.
Dan Areas: Hi, guys. Thank you Mark where do you where do you think the academic markets are headed here.
Dan Areas: Mixed data points, there NIH budget isn't particularly robust this year. So curious what expectations, we should have for the second half and then into the next cycle.
Stephen Williamson: Yeah, you know, I was encouraged by what I saw in academic and government in Q2. We had low single-digit growth and relatively challenging comparisons, so those teams did a good job. What I'm seeing is on the high end, differentiated products. Customers are getting money. I mean, if I think through, customers get money for really great innovation, and given our track record on innovation, we're seeing strong demand for the Orbitrap Astro, and I know that there's a lot of excitement around the Thermo Scientific Stellar Mass Spectrometer and, you know, the Eclipse series. These are really, or SENS series.
Dan Areas: Yes.
Speaker Change #102: I was encouraged by what I saw in.
Speaker Change #103: Academic and government in Q2, we had low single digit growth.
Speaker Change #104: Relatively challenging comparison.
Speaker Change #105: So those teams did a good job what im seeing is on the high end.
Speaker Change #105: Differentiated products customers are getting money I mean, I think the customers get money for the really great innovation and given our track record on innovation, we're seeing strong demand for the arbitrage Astro and I know that there is a lot of excitement around it.
Speaker Change #106: The thermo scientific stellar mass spectrometer and.
Speaker Change #106: You know the Eclipse series these are really.
Operator: These are really, really positive developments, and so I think it's good. I always think long-term academic and government globally is kind of a low single-digit growth market, sometimes a little better than that, and our performance is playing out in line with that. Okay, and then I just have to follow up on your comments on China's stimulus and the ability to see money get spent there. Do you see that as primarily just a function of time?
Speaker Change #106: Our sensor is and these are really really positive.
Developments. So I think that's good I always think long term.
Speaker Change #106: Academic and government globally. It was kind of a low single digit growth market, sometimes a little better than that.
Speaker Change #106: For our performance is playing out in line with that right now.
Speaker Change #107: Okay, and then if I just ask a follow up on your comments on China's stimulus and the ability to see money gets spent there do you see that is primarily just a function of time customers need time to have it slow and get to them or are there sort of.
Daniel Anthony Arias: Customers need time to have it flow and get to them, or are there sort of... discrete triggers and specific things that need to happen in order for demand actually to make its way to you. Yeah, I mean, the process is, they have to apply. And there's central government funding, matched by their other funding sources, usually provincial, or it could be local, depending on the institution.
Speaker Change #108: Discrete triggers and specific things that need to happen in order to have demand actually make its way to you. Thanks.
Marc N. Casper: So they're going through that process. As it gets approved, they then have the ability to go out and place the order. So that's the view. I think because these institutions are funded by the government at all times, whether it's stimulus or not, I think they have a mechanism to understand what's likely to happen.
Speaker Change #109: Yes, I mean the process is.
Speaker Change #110: They have to apply.
Speaker Change #111: And there is a central government funding and matched by.
Speaker Change #112: There are other funding sources, usually provincial or it could be local depending on on the institution, so they're going through that process.
Speaker Change #112: As it gets approved.
Speaker Change #112: We then have the ability to go out and place the orders. So that's the view I think because these institutions are funded by the government and at all times, whether it's stimulus or not I think they have a mechanism to understand what's likely to happen. So this is not giant mystery to them I think theyre working through it and it's.
Marc N. Casper: So this is not a giant mystery to them. I think they're working through it, and it's kind of normal from that perspective.
Speaker Change #112: Normal from our perspective, and what we're doing is reminding them of the importance of the <unk>.
Speaker Change #112: Important instrumentation that we launched in the relevance of it so that they prioritize their funding request to support our instrumentation.
Speaker Change #112: Dan Thanks for the question and I'll turn to just wrapping up.
Marc N. Casper: And what we're doing is reminding them of the importance of the, you know, the important instruments that we've launched and the relevance of them so that they prioritize their funding requests to support our instruments. Dan, thanks for the question, and I'll turn to just wrapping up. So thanks, everyone, for joining us on the call today. You know, we're pleased to deliver another strong quarter, well positioned to deliver differentiated performance as we continue to create value for all of our stakeholders, and we'll build an even brighter future for our company.
Speaker Change #113: So thanks, everyone for joining us on the call today.
Marc N. Casper: We're looking forward to talking about that bright future at our upcoming investor day on September 19th in New York and updating you on our third quarter performance in October. As always, thank you for your support of Thermo Fisher. Thank you very much. This concludes today's call. You may now disconnect your line, www.microsoft.com.ca www.microsoft.com.ca
Speaker Change #114: Pleased to deliver another strong quarter.
Speaker Change #114: Well positioned to deliver differentiated performance as we continue to create value for all of our stakeholders, we will build an even brighter future for our company. We're looking forward to talking about that bright future of our upcoming Investor day on September 19th work and updating you on our third quarter performance in October as always thank you for your support.
Speaker Change #115: Part of Thermo Fisher scientific.
Speaker Change #115: Okay.
Speaker Change #115: Okay.
Speaker Change #116: Thank you very much this concludes today's call.
Speaker Change #117: You may now disconnect your lines.
Speaker Change #117: [music].