Q4 2024 Danaher Corp Earnings Call
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Madison: My name is Madison and I will be your conference facilitator. This morning.
Madison: At this time I would like to welcome everyone to Danaher Corporation's fourth quarter 2024 earnings results Conference call.
Madison: All lines have been placed on mute to prevent any background noise.
Madison: After the Speakers' remarks, there will be a live question and answer session. If you would like to ask a question during that time simply press Star then the number one on your telephone keypad.
Madison: If you would like to withdraw your question. Please press Star then the number two on your telephone keypad.
Speaker Change: I will now turn the call over to Mr. John Bedford, Vice President of Investor Relations. Mr. Bedford You May begin your conference.
John Bedford: Good morning, everyone and thanks for joining us on the call.
Rainer Blair: With us today are Rainer Blair, our president and Chief Executive Officer, and Matt Mcgrew, Our executive Vice President and Chief Financial Officer.
Rainer Blair: I'd like to point out that our earnings release, the slide presentation supplementing today's call.
Rainer Blair: The reconciliations and other information required by SEC regulation G and a no containing details of historical and anticipated future financial performance are all available on the investors section of our website www Dot Danaher dot com under the heading.
Rainer Blair: Quarterly earnings.
Rainer Blair: The audio portion of this call will be archived on the investors section of our website later today under the heading events and presentations.
Rainer Blair: And will remain archived until our next quarterly call.
Rainer Blair: A replay of this call will also be available until February 12 2025.
Rainer Blair: During the presentation, we will describe certain of the more significant factors that impacted year over year performance.
Rainer Blair: The supplemental materials describe additional factors that impacted year over year performance.
Rainer Blair: Unless otherwise noted.
Rainer Blair: All references in these remarks and supplemental materials to company specific financial metrics relate to results from continuing operations and relate to the fourth quarter of 2024.
Rainer Blair: All references to period to period increases or decreases in financial metrics are year over year.
Rainer Blair: We may also describe certain products and devices, which have applications submitted submitted and pending for certain regulatory approvals or.
Rainer Blair: Or are available only in certain markets.
Rainer Blair: During the call we will make forward looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future.
Rainer Blair: These forward looking statements are subject to a number of risks and uncertainties.
Rainer Blair: Including those set forth in our SEC filings.
Rainer Blair: And actual results might differ materially from any forward looking statements that we make today.
Rainer Blair: These forward looking statements speak only as of the date that they are made.
Rainer Blair: And we do not assume any obligation to update any forward looking statements, except as required by law.
With that I'd like to turn the call over to Rainer.
Rainer Blair: Thank you John and good morning, everyone and we appreciate you joining us on the call today.
Yeah.
Rainer Blair: So we finished the year strong with better than anticipated core revenue in all three of our segments.
Rainer Blair: And we were particularly encouraged by another quarter of positive momentum in our bio processing business and the improving performance in our life Sciences instrument businesses.
Rainer Blair: Our team's disciplined execution also drove solid cash flow and operating profit margin expansion.
Rainer Blair: Now throughout 2024, or 63000 associates demonstrated an unwavering commitment to leading and executing with the danaher business system, which enabled us to successfully navigate a dynamic operating environment.
Rainer Blair: Dedication not only drove meaningful process improvements across our businesses.
Rainer Blair: It also delivered impactful innovations for our customers both of which are positioning danaher for sustainable long term success.
Rainer Blair: Now looking to 2025 and beyond.
Rainer Blair: We believe danaher is better positioned than at any point in our 40 year history.
Rainer Blair: Transformation in our portfolio since the beginning of the pandemic has shaped us into a focused life sciences and diagnostics innovator with a re rated long term growth margin and cash flow profile.
Our differentiated science and technology portfolio paired with the power of DBS and our talented team positions us well to create long term shareholder value, while making a meaningful positive impact on human health.
Rainer Blair: So with that let's take a closer look at our full year 2024 financial results.
Rainer Blair: Sales were $23 9 billion and core revenue declined one 5%.
Rainer Blair: Our adjusted operating profit margin of 28, 6% was essentially flat year over year and adjusted diluted net earnings per common share were $7 48.
Rainer Blair: We also generated $5 $3 billion of free cash flow, resulting in a free cash flow to net income conversion ratio of approximately 135%.
Rainer Blair: <unk> free cash flow generation as one of the most important metrics at Danaher and 2024 marks the 30 <unk> consecutive year of free cash flow to net income conversion.
Rainer Blair: Which exceeded 100% and speaks to the differentiated quality of our earnings and business models.
Rainer Blair: Now through 2024 and into the start of 2025, we deployed approximately $7 billion of capital towards the repurchase of 28 million shares of Danaher common stock. This includes approximately 20 million shares purchased in the second and third quarters and approximately $8 million.
Rainer Blair: Shares purchased in the fourth quarter and into January 2025.
Rainer Blair: We also remain active on the M&A front, completing several strategic acquisitions during the year.
Rainer Blair: Now these acquisitions bring innovative technologies and solutions that further strengthen our competitive advantages and position us for sustained long term success.
Rainer Blair: Now we also continued to make substantial investments in innovation throughout the year, enabling the launch of several groundbreaking technologies that are advancing our customers' critical work.
Speaker Change: And biotechnology sativa introduced the surface of cell therapy manufacturing platform, which is helping address critical cost and capacity constraints associated with car T cell therapy manufacturing the.
Speaker Change: The efficiencies customers gained through the Cepheid platform has the potential to increase patient access to these lifesaving therapies.
Speaker Change: In life Sciences, Beckman Coulter life Sciences introduced the site and VT automated cell culture system, which simplifies and accelerates the cell line development process, enabling pharmaceutical researchers to bring therapies to market faster.
And in diagnostics Beckman Coulter diagnostics made significant strides in expanding the cardiac and blood virus menus on the Dx side 9000, our next generation high resolution immunoassay analyzer with sensitivity 100 times greater than traditional immunoassay systems. The <unk> thousand is.
Speaker Change: Going faster and more accurate patient diagnoses and ultimately paving the way for precision diagnostics.
Speaker Change: These are just a few examples of how our innovation engine is driving long term growth and helping customers solve some of the most important health challenges impacting patients around the world.
Speaker Change: So now, let's turn to our fourth quarter 2024 results in more detail.
Speaker Change: Sales were $6 $5 billion in the fourth quarter, and we delivered 1% core revenue growth.
Speaker Change: Geographically core revenues in developed markets were essentially flat with a low single digit decline in North America, and a low single digit increase in Western Europe high.
Speaker Change: High growth markets were up low single digits with solid performance outside of China.
Speaker Change: More than offsetting a mid single digit decline in China.
Speaker Change: Our gross profit margin for the fourth quarter increased 50 basis points year over year to 59, 5%.
Speaker Change: Our adjusted operating profit margin of 29, 6% was up 90 basis points, driven primarily by the positive impact of cost savings initiatives.
Speaker Change: Adjusted diluted net earnings per common share of $2.14 were up two 4% year over year, and we generated $1 $5 billion of free cash flow in the quarter.
Speaker Change: So now let's take a closer look at our results across the portfolio and give you some color on what we're seeing in our end markets today.
Speaker Change: Core revenue in our biotechnology segment increased high single digits year over year with our bio processing business up high single digits and our discovery medical business is up low double digits.
Speaker Change: And bio processing the gradual recovery, we saw through the year continued into the fourth quarter.
Speaker Change: We were particularly encouraged by the sustained positive momentum in our order book, which grew high single digits sequentially and this represents the sixth consecutive quarter of high single digit sequential order growth.
Speaker Change: Revenue growth in the quarter was primarily driven by consumables.
Speaker Change: <unk> by robust demand for commercialize therapies.
Speaker Change: Equipment demand, while improved remained subdued as customers continue to be cautious with their capital spending.
Speaker Change: Now on China underlying activity levels were relatively stable weak as customers face ongoing challenges in a difficult funding environment.
Speaker Change: With the continued progress, we're making in our business coupled with healthy underlying market trends reinforces our confidence in the long term outlook for <unk> bio processing franchise.
Speaker Change: Monoclonal antibodies, which comprise more than 75% of our bio processing revenues remain the largest investment area for our customers and 2024 with a near record year of FDA approvals for new monoclonal antibodies.
Speaker Change: At the same time Biosimilar development and production are increasing as patents on high volume therapies expire.
Speaker Change: Lifesaving treatments more accessible and driving broader adoption.
Speaker Change: With our comprehensive portfolio and an innovation engine focused on increasing yields and enhancing manufacturing efficiencies. We believe we're very well positioned to support our customers today and for the long term.
Speaker Change: Now turning to our life Sciences segment core revenue increased by 1%.
Speaker Change: Core revenue in our life Sciences instrument business was up slightly exceeding our expectations.
Speaker Change: The us and Europe, we saw modest demand improvements at our pharma and applied customers.
Speaker Change: In China, while we did see a modest benefit from the ongoing stimulus program market conditions continued to be challenging as customers remain cautious with their investments.
Speaker Change: In October <unk>.
Speaker Change: Microsystems expanded at Dolores Confocal microscopy platform with the introduction of spectrum Plex, a cutting edge solution for <unk> imaging and spatial biology.
Speaker Change: <unk> triplex enables researchers to gain deeper insights into cellular organization interactions and spatial phenotyping advancing the understanding of disease progression and aiding in the identification of potential therapeutic targets.
Speaker Change: Now core revenue in our genomics consumables business declined in the quarter.
Speaker Change: The cross next generation sequencing products in basic research was more than offset by declines in proteins plasmids in gene, writing and editing solutions.
Speaker Change: Moving to our diagnostics segment core revenue decreased 2%, our clinical diagnostics businesses collectively delivered low single digit core revenue growth Leica Biosystems led the way with nearly 10% growth driven by strength across core histology advanced staining.
Speaker Change: And digital pathology.
Speaker Change: Notably flanker placed a record number of its GT $4 50 digital pathology slide scanners. This quarter as conditions are increasingly looking to leverage its predictive algorithms and productivity gains to deliver more accurate and timely patient diagnosis.
Speaker Change: To further enhance the digital pathology capabilities like our recently established a strategic partnership with <unk> Labs, a global leader in AI powered digital pathology software.
Speaker Change: This partnership aims to accelerate the development of next generation cancer diagnostics by combining Leica biosystems expertise in instrumentation and extensive global footprint with <unk> labs leadership in enterprise software and artificial intelligence.
Speaker Change: Core revenue at Beckman Coulter diagnostics was essentially flat with mid single digit core revenue growth outside of China offset by the impact volume based procurement in China.
Speaker Change: Earlier this month Beckman introduced several cutting edge research use only assays for neuro degenerative disease research on the <unk> 9000, and these assays allow researchers to detect and quantify emerging neurodegenerative biomarkers with exceptional sensitivity and specificity providing valuable insights into.
Speaker Change: <unk> such as Alzheimer's disease.
Speaker Change: In addition, the U S food and drug administration granted breakthrough device designation to Beckman <unk> 17, beta amyloid $1 42 assay designed to aid clinicians in identifying patients with Alzheimer's.
Speaker Change: Designation reflects the potential of Beckman test to transform how clinicians diagnose and manage alzheimers ultimately leading to improved outcomes for patients and families affected by this devastating disease.
Speaker Change: In molecular diagnostics, increasing menu adoption in system utilization contributed to another quarter of mid teens core revenue growth in cepheid core non respiratory reagent portfolio.
Speaker Change: All of these product lines delivered double digit growth in the quarter led by over 20% growth in sexual health as customers are increasingly adopting our multiplex vaginitis panel or MVP.
Speaker Change: The rapid growth of the MVP panel since its introduction highlights the value rapid turnaround diagnostics brings to women's health clinicians at the point of care.
Speaker Change: Cepheid multiplex panel enables physicians to quickly and accurately diagnose infections and prescribe targeted treatments.
Speaker Change: Loosing the need for multiple office visits.
Speaker Change: Now beyond enabling improved clinical outcomes MVP underscores the significant growth opportunities ahead, as we continue to expand our women's health business and is also a great example of how Cepheid is unlocking long term growth opportunities in outpatient settings.
Speaker Change: That's the respiratory revenue of approximately $550 million in the quarter exceeded our expectation of $350 million as we saw both higher volumes and a favorable mix of our foreign one test for COVID-19 flu, a flu b and RSV.
Speaker Change: In 2020 for Cepheid installed base grew by high single digits and is now more than 60000 instruments globally and.
Speaker Change: In recent quarters, we've seen health care systems, and integrated delivery network customers accelerating the placement of new instruments at alternate care sites, such as clinics and urgent care centers.
Speaker Change: This expansion beyond the hospital helps customers improve clinical outcomes and reduce cost by standardizing care across their networks.
With the continued expansion of our leading global installed base the largest test menu on the market and a robust innovation pipeline cepheid is well positioned for sustained long term growth.
Speaker Change: Now, let's briefly look ahead at expectations for the first quarter and the full year 2025.
Speaker Change: For the full year 2025, we anticipate core revenue growth of approximately 3% and.
Speaker Change: In addition, we expect an approximately 2% revenue headwind due to recent strengthening of the U S dollar.
Speaker Change: We also expect a full year adjusted operating profit margin of approximately 28, 5%.
Speaker Change: In the first quarter, we expect core revenue to decline in the low single digit percentage range.
Speaker Change: Additionally, we expect the first quarter adjusted operating profit margin of approximately 26, 5%.
Speaker Change: So to wrap up we are pleased with our fourth quarter performance and look forward to building on this momentum as we move into 2025.
Speaker Change: Our team successfully executed through a dynamic environment to deliver strong financial results, while continuing to invest for the future.
Speaker Change: Looking ahead the transformation in our portfolio paired with our organic growth investments has created a lineup of outstanding franchises that are very well positioned and highly attractive end markets.
Speaker Change: And we're a better stronger company today positioned for higher long term growth expanded margins and stronger cash flow with tremendous opportunities to continue building. Upon this foundation.
With the powerful combination of our leading portfolio talented team and strong balance sheet. All powered by the Danaher business system, we feel well positioned to deliver long term shareholder value for years to come.
Speaker Change: So with that I'll turn the call back over to John.
Speaker Change: Thanks, Brian that concludes our formal comments operator, we're now ready for questions.
Speaker Change: Thank you and at this time, if you would like to ask a question. Please press the star and one on your telephone keypad you may remove yourself from the queue at any time by pressing star Q. Once again that is star one to ask a question.
Speaker Change: And we will take our first question from Jackson Nihon with Nephron Research. Please go ahead.
Jackson Nihon: Thank you good morning.
Speaker Change: Good morning, Jack.
Speaker Change: Good morning wanted to start by digging more into the guide for life Sciences in 2025, that's where I'm getting most of the questions, notably the pacing starting down mid singles getting the low single digits up for the year.
Speaker Change: As you look at the operating businesses. There can you just call out is there anything that.
Speaker Change: Stands out as one off or notable in terms of the ramp.
Speaker Change: When in the year will you return to growth is <unk> reasonable or is it more back half weighted.
Speaker Change: So Jack good morning, and thanks for the question.
Speaker Change: For 2025 and life Sciences.
Speaker Change: Yes, it's the one segment, where we see a little bit of noise right now.
Speaker Change: The external environment, but given that we're trying to take a reasonably prudent approach to the guide for 2025.
Speaker Change: And we're assuming life science tools.
Speaker Change: For up low single digits.
Speaker Change: And Paul and genomics will be down so it will possibly do better, but where we sit today. This is probably a good starting point as we think about the phasing.
Speaker Change: We would expect each quarter to get a little better.
Speaker Change: Okay got it.
Speaker Change: Q1, like you said, it's kind of down mid single digits. I think we probably are kind of flattish as we head into Q2, and then kind of ramp up from there.
Speaker Change: Q1, the big the big kind of.
Speaker Change: Comp issue is a lot of it really as Paul and particularly some of the things in the industrial business both year over year.
Speaker Change: Big projects that we saw there and then also sequentially kind of the step down if you will from Q4 and life Sciences. They were they were a double digit grower here in Q4, I think theyre going to be negative.
Speaker Change: Here in Q1 given.
Speaker Change: Given the size of that business, it's almost $2 billion. It does kind of move the needle.
Speaker Change: The core tools, we think is still in pretty good shape in kind of at the high end of low single digits.
Speaker Change: Alright, okay.
Speaker Change: And then Brian or you alluded to this a little bit obviously, you had the change in administration.
Speaker Change: U S academic government funding has been a hot topic a lot of headlines.
Speaker Change: I was curious if you could give us a state of the state what youre seeing in the market today and.
Speaker Change: How did that influence the way that you set the guide.
Speaker Change: So while it's only been a couple of weeks here of the New administration, Jack but in general we would expect the environment to be more business friendly.
And yes, certainly the election has not changed our view of our portfolio, which which we know is positioned towards the most attractive secular growth trends in life Sciences and diagnostics.
Speaker Change: And sure and we plan for this and as you said, we've talked about that here in the life Science guide for 2025.
Speaker Change: There is likely going to be some puts and takes but we.
Speaker Change: We're confident we can leverage our portfolio and the danaher business system to continue to outperform.
Speaker Change: But Jack I do think it's fair to to to call out that this is the one segment in life Sciences, where where the noise around like Brian said the noise around it is higher because I think thats, where where we've seen most of the noise. That's been around that segment. So I think we're trying to take some of that noise into account I think.
Speaker Change: Mostly it's going to be in life Sciences is where you see that.
Speaker Change: And I think it probably it's probably fair to say that we took a fairly prudent approach to how we thought about starting the year here given some of the.
Speaker Change: Given some of the recent news.
Speaker Change: That all makes sense. Thank you guys.
Jack: Thanks Jack.
Speaker Change: Thank you and we will take our next question from Michael Riskin with Bank of America. Please go ahead.
Speaker Change: Yeah. Thanks, Thanks, taking the question guys first I want to touch on what you called out for the diagnostics segment.
Speaker Change: Whatever the shortfall there versus expectations in the guide you called out specifically.
Speaker Change: Cepheid respiratory youre looking for $1 7 billion versus I think 195 in fiscal year 'twenty four and then for volume based procurement in China and you talked about.
Speaker Change: $50 million for the year.
Speaker Change: Versus previously you were expecting sort of a steady cadence of 50 per year. So just talk can you just talk through those both pretty quickly one is what's changed in the Pvp siloed changed a little bit of a fourth quarter as well and just how you think CVP headwinds coming through in 2025, and 26, and then for Cepheid respiratory wise one seven the right number I mean, we saw.
Speaker Change: About this for a while.
Speaker Change: At what point do you say okay. This is the new endemic so you did $1 95 in 2024, why why isn't that just the new normal going forward, where we're four years plus call. It feels like respiratory sort of settled down a little bit. So what are you seeing in January to take near revise that.
Speaker Change: Yes, Mike let me see if I can capture all of that.
Speaker Change: So first Pvp $1 50 versus the 50 that we thought before that is that is correct. I think we think now and we saw 50 here in 2000 and <unk>.
Speaker Change: Q4, so probably 200, all up but 200.
Speaker Change: Two years instead of the three that we thought so I think I think that's right as.
Speaker Change: As far as why did that and how would it accelerated in Q4, we just saw in Q4, a lot more aggressive stance.
Speaker Change: In China, particularly from the central government to sort of really get after VP.
Speaker Change: And do some some some other things outside of just straight Pvp also going and doing some reimbursement cuts and so I think the combination of the tenders that we saw come through the reimbursement cuts really accelerated here late in the quarter frankly, just kind of a November almost in December.
Speaker Change: Phenomenon, so that kind of came through and informed our guide as we think about going forward.
Speaker Change: From a respiratory perspective, you're right. We are we're here 107, we've always thought that that was a bout the normal range for free.
Speaker Change: Normal respiratory season, and an epidemic state.
Speaker Change: The last two years, we did about $2 billion and I think what we saw the last couple of years was we sort of had a bit of a double double dip. If you will we had a big spike.
Speaker Change: In September October as people sort of return to school.
Speaker Change: And then returned to work returned to school and then we saw another one here usually a typical respiratory season in January and February we didn't really see that this year.
Speaker Change: And so that was kind of assuming that we're going to go back to that normal respiratory pattern, where we see bit of a spike up in the ili like we are seeing now did not see it as much here in Q3 like we normally do and so I feel pretty comfortable that $1 seven as the endemic great. We did a little bit better the last couple of years.
Speaker Change: But that's no real different than.
Speaker Change: What it was like prior to Covid.
Speaker Change: We had respiratory season, some are some are better than others.
Speaker Change: Not better but.
Speaker Change: From a from a testing perspective more testing versus not so I feel pretty comfortable with the $1 seven still.
Speaker Change: Versus two being some sort of new number.
Speaker Change: Maybe were proven wrong, but given what we've seen in the data I think $1 7 million.
Speaker Change: Are we going to be a pretty regular pretty normal respiratory season.
Speaker Change: Okay.
Speaker Change: If I could squeeze in a follow up on on Bioprocess and biotechnology to talk about.
Speaker Change: 6% to 7% for for.
Speaker Change: For the year and biotechnology same thing for the first quarter.
Speaker Change: It seems like sort of a pretty steady throughout the year.
Speaker Change: We've talked about bioprocess being maybe more of a high single digit business I'm thinking more of like an 8% maybe 7% to 8%.
Speaker Change: Is the Delta there really just the instrumentation part of it sort of if it wasn't for that would you be.
Speaker Change: At that 8% rate for the year and if so if it is instrumentation just any signs of that any hope of that coming back as we go through the year, just sort of like what's holding that back.
Speaker Change: That's also subdued if the consumables are really back in the demand continues to be there.
Speaker Change: Well I'll tell you we're very encouraged by what we're seeing in the bio processing business and the orders growth six consecutive quarters now of high single digit orders growth. We don't normally talk about the year over year numbers that even in the fourth quarter of well over 30%.
Speaker Change: Orders growth there.
Speaker Change: And probably one of the biggest quarters that we've had in.
Speaker Change: In two years in terms of orders growth. So we think the bio processing.
Speaker Change: Very nicely not to your point look we expect 6% to 7% core growth in 2025.
Speaker Change: That's essentially similar to what we saw in the fourth quarter and what we're seeing is consumables are essentially also back to normal here with large customers driving that and we do see some improvement there with smaller customers as well, but they are still not back to normal. So to your question and then as it relates to equipment. It's also better.
Speaker Change: But not quite back to normal so we continue to be really encouraged by what we're seeing in the recovery is clearly underway.
Speaker Change: Alright, thank you.
Speaker Change: Thank you and we will take our next question from Scott Davis with Melius Research. Please go ahead.
Scott Davis: Hey, good morning, guys.
Speaker Change: Good morning, Scott.
Speaker Change:
Speaker Change: So.
Speaker Change: Im going to go into a completely different direction and because guidance we can.
Speaker Change: Kind of fixate on for the rest of the call I'm sure lots of people will it was maybe a little disappointing but.
Speaker Change: Hi, I wanted to get a sense from you guys just in talking about seeing some of the.
Speaker Change: Build out a test case.
Speaker Change: Capabilities in Cepheid, what does AI do for you guys.
Speaker Change: It can be broader than just cepheid, but when you think about ability to kind of lever that.
Speaker Change: Computing power into something that may be.
Speaker Change: Materially or meaningfully increases your.
Speaker Change: Our ability to broaden out those test kits and really make them more ubiquitous.
Speaker Change: Think about that.
Speaker Change: Well thanks for the question Scott, we're well into the application of artificial intelligence throughout the corporation here.
And to your question also in research and development and essentially how we're applying it is to accelerate the development time.
Speaker Change: Not only of our assays, so certainly the technical and research aspect of R&D.
Speaker Change: Also in terms of how we get at the integrated evidenced plan that you need to get that.
Speaker Change: Assay to market.
Speaker Change: More quickly and broadly on top of of course, the decision support systems that we're building. Another example is at Leica Biosystems, where you just saw us do a deal with <unk>.
Speaker Change: Bio labs, where clearly the journey takes us to a digital diagnostics and pathology that is supported by artificial intelligence, helping those pathologists to bank not only faster diagnosis, but to see things that they might not normally see.
Speaker Change: So we are definitely down the path here and there.
Speaker Change: Investing significantly in accelerating cycle times throughout the corporation, but certainly in R&D as well.
Speaker Change: Okay.
Speaker Change: Helpful guys, just as a completely different follow up but.
Speaker Change: Where does have cam and out out of Iran.
Speaker Change: <unk>, However, you pronounce it where do they sit versus the deal model and when you guys closed those deals are we still ahead of the deal model on those it sounds like we may have taken a little bit of a step backwards, but maybe I misheard that.
Speaker Change: No I think I think going into <unk>, we're still pretty close that's still pretty new Scott that's only about a year old. So I think we're pretty much tracking close there.
Speaker Change: We're behind and I don't think Theres any any any way to say it other than that and largely it has to do with the end markets of genomics are proving to take a little bit longer sort of to round themselves out.
Speaker Change: But ultimately well behind on the deal model.
Speaker Change: Disappointing working hard to make sure that we try and close that gap.
Speaker Change: But it's still a business that we are going to want to we need to be in genomics, we're going to be in genomics. If youre in life Sciences, you have to have that presence, we feel as though that business is a fantastic business with really well positioned to take advantage of the genomics market when it does sort of ramp.
Speaker Change: The current levels and I think it will so for the long term I think it's the right business to own for sure.
Speaker Change: But we're working hard to kind of catch back up on the deal model, but I would say that we are behind you.
Speaker Change: Okay. Thank you for the integrity of that answer I'll pass it on thank you guys.
Speaker Change: Thank you and we will take our next question from Dan Brennan with TD Cowen. Please go ahead.
Dan Brennan: Great. Thank you thanks for the questions.
Speaker Change: Maybe just starting on bioprocess for a moment is back to Mike's question.
Speaker Change: You talked about really strong order growth in the fourth quarter. I think you had the same thing really in the third quarter. So call it probably maybe north of 30% north of 20.
Speaker Change: Can you just remind us ryan or of the linkage between orders and the forward growth for your bioprocess business and as our thinking that such strong second half order growth Shouldnt.
Speaker Change: And for potentially much stronger growth in 'twenty five for revenues.
Speaker Change: Well I mean, it certainly sets us up well some of our customers get their orders in very early.
Speaker Change: And it has implications for the second half of 2025 and others do that with the shorter lead times that we're able to deliver on for the first half. So again as we think about our.
Speaker Change: Our orders development of course that is what is in our guide and supports our guide for the year and we really like where we're positioned here both competitively, but also we are seeing the recovery here clearly underway essentially in all segments.
Speaker Change: Got it Okay, and then maybe just kind of a big picture question.
Speaker Change: For the next five years I know pharma patent explorations are set to grow versus the prior five I think 28, particularly big year in your prepared remarks, you talked about the benefit of Biosimilars to bio production business. Just how do we think about the impact of Danaher is kind of your overall growth from these patent expirations.
Speaker Change: This is going to be more of a tailwind or a headwind. If you want to think about maybe separating between bio processing them are R&D related areas. Thank you.
Speaker Change: Okay.
Speaker Change: As we think about bio processing that business is driven by volume.
Speaker Change: And it's really critical to understand that the more volume there is.
Speaker Change: More we benefit and drive growth, both top and bottom and we're still well positioned there we've talked about the number of monoclonal antibody is being approved and you can expect that we are participating in all of those and that momentum of monoclonal antibodies going forward with.
Speaker Change: Represent 75% of the business is really what drives the train. So as you think about these biosimilars starting to penetrate other patient groups that heretofore have not been able to tap.
Speaker Change: Candidly afford.
Speaker Change: To buy these kind of therapies or even payers.
Speaker Change: Have been unable to.
Speaker Change: Pay for those kinds of <unk>.
Speaker Change: Therapies, that's a tailwind for us and so biosimilars.
Speaker Change: As an important category to understand.
Speaker Change: What's interesting about Biosimilars once again in biologics.
Speaker Change: And product cannot be.
Speaker Change: Perfectly characterized so the regulators tend to lockdown the process to ensure consistency there and so even biosimilar manufacturers.
Speaker Change: We try to use the <unk>.
Speaker Change: Input that had been previously approved by those regulators to ensure speed to market and a minimum of delay to getting to patients. So biosimilars higher volumes tailwind for danaher.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you and we will take our next question is from Doug Schenkel with Wolfe Research. Please go ahead.
Doug Schenkel: Hey, good morning, guys. Thank you for taking my questions. So I.
Doug Schenkel: I wanted to start on diagnostics, and then kind of pivot over to a philosophical question. So first on diagnostics.
Doug Schenkel: If I'm doing the math right on the respiratory headwind and the GBP incremental headwinds.
Doug Schenkel: I think this implies kind of what's embedded into your guidance is implied 5% core and normalized diagnostic growth rate.
Speaker Change: Is that right and if not why isn't this a little bit higher and then when would we see evidence of you getting back to that high single digit growth rate that I believe you are still targeting so that's the diagnostic topic.
Speaker Change: The second one which I will just get out of the way as the guidance philosophy question.
Speaker Change: So if you go back and look at how 2025 EPS expectations.
Speaker Change: Have progressed over time, if you go back to the beginning of 2023.
Speaker Change: Street was at $11 20 at the beginning of last year. The Street was around 80 80 yesterday estimate for at 809, and if I'm doing the math right. I think you essentially guided to around 760. So it's hard for a stock to work when the estimates keep moving in the wrong direction.
Speaker Change: Just wondering how much does.
Speaker Change: Are these things factor into your guidance philosophy, this year, especially as it seems like your end markets are continuing to improve.
Speaker Change: And related to that.
Speaker Change: The bigger biggest risks to guidance.
Speaker Change: From an earnings and EBITDA standpoint, and what are the biggest sources of potential upside. Thank you.
Speaker Change: Yeah sure let me see if I captured all of that.
Speaker Change: As far as diagnostics goes I think you're right, Doug I mean, I think if you sort of think about diagnostics, maybe just outside of China.
Speaker Change: We are kind of mid to high single digits here for the guide so I think youre right I think we're pretty much in the zone of where we thought we would be I think China is the big piece with CBP.
Speaker Change: In the respiratory headwind. So I think those are the two pieces. So I think we're pretty close to where we thought we would be.
Speaker Change: Or where we aspire to be which is high single digits.
Speaker Change: I feel pretty good about where we are from a diagnostics perspective outside of what we're seeing in China really in respiratory.
Speaker Change: I guess as far as guidance philosophy goes I mean.
Speaker Change: I kind of.
Speaker Change: I don't necessarily look backwards, when we think about guidance and philosophy I think we always try and do a bottoms up what the what our businesses are telling us what we are seeing.
Speaker Change: We try and incorporate that into the guidance, we do probably.
Speaker Change: It includes some external factors like I talked about I think in particular life Sciences. Currently there's been just kind of a lot of news and maybe noise around that segment here.
Speaker Change: I think we try to incorporate some of that news and noise into it to be prudent, especially from a planning perspective early in the year I want to make sure that not only for your purposes, but for my purposes internally that we're setting the cost structure right and we're setting expectations at a level that.
Speaker Change: But we can that we can overdrive. If you will so that's sort of our overall philosophy I understand stock doesn't work when earnings are going down, but but I would I would.
Speaker Change: I would posit that.
Speaker Change: There were some some external things that we had to work through in Bioprocess, Inc. As well as stimulus in China and some other things I think we worked through them I think we've done a pretty good job of managing the cost structure I think we are.
Speaker Change: From a margin perspective, despite the fact that we have been down two years in a row I really like where our margin profile is so.
Speaker Change: Look we try and build it from the bottom up we try and tell you what we're seeing in the moment.
Speaker Change: And give you that information.
Speaker Change: We've always thought about it and continue to do that.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thank you and we will take our next question from Vijay Kumar with Evercore.
Speaker Change: Hey, guys. Thanks for taking my question, maybe my question, Brian I think.
Speaker Change: Good morning to you.
Speaker Change: You mentioned something around life Sciences, Q1 was there anything one off in Q1, maybe.
Speaker Change: Which is definitely versus the rest of the year I think you mentioned, Paul maybe if you could elaborate on what the Q1 headwind is.
Speaker Change: We'll stop there.
Speaker Change: Okay and Paul in the prior year. So Q1 2024, we had a very very large tens of millions.
Speaker Change: Energy project and that that's giving us a one off effect here in the first quarter.
Speaker Change: Along with some of the other things we talked about more specifically.
Speaker Change: And again looking at the first quarter guide here.
Speaker Change: In general.
Speaker Change: Yes.
Trends really remain the same as they were in the fourth quarter with the exception of diagnostics, Matt just talked about that so bio processing, 6% to 7% core growth that's consistent with the Q4 exit rate life Sciences.
Speaker Change: They are expected to be consistent here in the tool sector and here. We go you know Paul and the rest of the segment is getting off to a slower start in the first quarter talked about the comp here just a minute ago, but we really saw two meaningful changes in diagnostics in the fourth quarter.
And Matt.
Speaker Change: Described some of those one was the acceleration of volume based procurement in China and.
Speaker Change: And the second is a slower start to the respiratory season, you bring that together between volume based procurement in respiratory that's about a 350 basis point headwind versus Q1, 2024, but the underlying market.
Speaker Change: As we just talked about in diagnostics everywhere at.
Speaker Change: Our growing mid to high single digits with the exception of China. So we view this as an isolated topic and we see that in the first quarter and certainly expect every quarter thereafter to be better.
Speaker Change: Understood and maybe my one follow up is on the capital deployment. It looks like Q1 is assuming a big.
Speaker Change: Share repurchase how much of that is being contemplated in Q.
Speaker Change: Q1, and rest of the year and can you just remind us on.
Speaker Change: M&A criteria I think there's been some chatter about deal activity picking up in the tool space.
Speaker Change: How's the pipeline looking for you guys.
Speaker Change: Yes, Vijay so in Q4 and in Q1 collectively.
Speaker Change: Started in Q4 and kind of spilled over into Q1. If you will we did buy back about 8 million shares for about $1 billion nine or so.
Speaker Change: That is complete.
Speaker Change: Yes.
Speaker Change: The deal front.
Speaker Change: We see more activity out there no doubt and we see that in our funnels as well. So we're very active across all three segments cultivating assets and as it relates to the environment not everywhere, but we're starting to see some pockets where evaluations are getting a little bit better. So we feel very well positioned here Vijay with.
Speaker Change: The way our balance sheet sets up in <unk>.
Speaker Change: And we're going to remain disciplined as we always do around our deal philosophy, where we have to be in the right end market with those secular growth drivers.
Speaker Change: Like the asset or the company.
Speaker Change: And then of course, the valuation framework the model has to work as well so we feel good about where we're positioned.
Markets are a little more active.
Balance sheet looks good we're going to remain disciplined.
Speaker Change: Understood. Thank you guys.
Thanks Vijay.
Speaker Change: Okay.
Speaker Change: Thank you and we will take our last question from Rachel Veterans Day with J P. Morgan. Please go ahead.
Rachel: Hi, Thanks. Good morning. Thanks, so much for squeezing me in so I wanted to ask on some of the export control headlines that we got earlier this month surrounding flow cytometry and mass back can you walk us through are you expecting danaher to be impacted by this at all and then more conceptually.
Rachel: Sciences, we usually viewed as a sector that was more insulated from some of these export controls. So how are you thinking about the risk here going forward and do you expect that we can see other instruments potentially added to the list as well.
Rachel: Well good morning, Rachel Thanks for the question. So the current export controls that have recently been published are really not meaningful for us our portfolio is positioned differently.
And more generally speaking this category has required export licenses for many years. So it's really not that new for life Sciences.
Rachel: But what they've done is expanded the category a little bit to include some other technologies. So as we go forward.
Rachel: I think during the normal course of any administration. These kind of export controls are regularly reviewed and adjusted.
Rachel: But we don't expect anything particularly different than than the standard process here and at least to date have not.
Rachel: <unk> seen a meaningful impact to what we do.
Speaker Change: Got it and then my follow up I just have a multipart question here on bio processing.
Speaker Change: You mentioned that the recovery is underway. So how should we think about the pace of recovery throughout the year on bio processing and really what can we be exiting this year at for growth in that portion and then other areas. Just how are you thinking about some of the comps and by that especially in the first part of the year you had some easy one year comps, but also appreciate some of the multiyear stacks and then lastly, what.
Speaker Change: Are you guys assuming at this point for standard seasonality by quarter and bio processing now that's a lot in there. Thanks. So much you guys.
Speaker Change: Thanks Rachel.
Speaker Change: But let me let me start off with.
One more time that the recovery in bio processing is well underway and we're really seeing it.
Speaker Change: Nearly every category of the bio processing portfolio. So.
Speaker Change: We see a positive development here throughout the year that said no.
Speaker Change: We've set up the guide is 6% to 7% core growth.
Speaker Change: Essentially on a quarterly basis.
Speaker Change: That's how we're starting our perspective on the year here.
Speaker Change: And then we will see how that plays out if you look at the multi year stacks.
Speaker Change: And that makes sense to do Youll see that the math shows that this is right in line with sort of a high single digit.
Speaker Change: Growth rate, which is what we've talked about this market.
Speaker Change: Its long term growth rate. So we think that this is the right perspective, and we sure like the fact that the momentum is building here.
Speaker Change: As far as seasonality goes Rachel we sort of Q1 in that business is usually the.
Speaker Change: Lightest, we see a bit of a step up in Q2, and we do have a phenomenon there where Q3 is lower than Q2, that's always sort of been in that business and some of the pandemic that didn't happen, but that is a normal trajectory, where we see a step down Q2 to Q3, and then obviously a step up in Q4, so sort of Q1 is your low point.
Speaker Change: Up in Q2 down in Q3, and then a big step up in Q4.
Speaker Change: Great. Thank you guys.
Speaker Change: Yeah.
Speaker Change: Thanks Rich.
Speaker Change: Thank you Andrew.
Speaker Change: And it appears that we have reached our allotted time for questions I will now turn the program back to our presenters for any additional or closing remarks.
Speaker Change: Thanks, everybody, we're around all day for questions.
Speaker Change: Thank you. This does concludes today's presentation. Thank you for your participation you may disconnect at any time.
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