Q1 2025 Danaher Corp Earnings Call
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Chelsea: My name is Chelsea and I will be your conference facilitator. This morning.
Chelsea: At this time I would like to welcome everyone to Danaher Corporation's first quarter 2025 earnings result conference call.
Chelsea: All lines have been placed on mute to prevent any background noise.
Chelsea: After the Speakers' remarks, there will be a question and answer session.
Chelsea: If you would like to ask a question during that time simply press star one on your telephone keypad.
Chelsea: If you would like to withdraw your question. Please press Star then the number two on your telephone keypad.
Chelsea: 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.
Speaker Change: With us today are Rainer Blair, our president and Chief Executive Officer, and Matt Mcgrew, Our executive Vice President and Chief Financial Officer.
Speaker Change: I'd like to point out that our earnings release quarterly report on Form 10-Q, the slide presentation supplementing today's call the reconciliations and other information required by SEC regulation G relating to any non-GAAP financial measures provided during the call.
Speaker Change: And of note containing details of historical and anticipated.
Speaker Change: <unk> financial performance are all available on the investors section of our website Www Danaher dotcom.
Speaker Change: Under the heading quarterly earnings.
Speaker Change: The audio portion of this call will be archived on the investors section of our website later today under the heading events and presentations and will remain archived until our next quarterly call.
Speaker Change: A replay of this call will also be available until May six 2025.
Speaker Change: During the presentation, we will describe certain of the more significant factors that impacted year over year performance.
Speaker Change: Our Form 10-Q, and the supplemental materials describe additional factors that impacted year over year performance.
Speaker Change: Unless otherwise noted all references in these remarks and supplemental materials to company specific financial metrics relate to the first quarter of 2025, and all references to period to period increases or decreases in financial metrics are year over year.
Speaker Change: We may also describe certain products and devices, which have applications submitted and pending for certain regulatory approvals.
Speaker Change: Or are available only in certain markets.
Speaker Change: During the call we will make forward looking statements within the meaning of the federal Securities laws.
Speaker Change: Including statements regarding events or developments that we believe or anticipate will or may occur in the future.
Speaker Change: These forward looking statements are subject to a number of risks and uncertainties.
Speaker Change: Including those set forth in our SEC filings.
And actual results might differ materially from any forward looking statements that we make today.
Speaker Change: These forward looking statements speak only as of the date that they are made and we do not assume any obligation to update any forward looking statements, except as required by law.
Rainer Blair: With that I'd like to turn the call over to Rainer.
Thank you John and good morning, everyone and thank you for joining us on the call today.
Speaker Change: Our first quarter revenue earnings and cash flow. All came in ahead of our expectations highlighted by continuing strong momentum in bio processing and higher than anticipated respiratory demand at Cepheid and.
Speaker Change: And our team executed well leveraging the danaher business system to accelerate innovation drive share gains and deliver meaningful productivity improvements.
Speaker Change: Now as you all know the macro backdrop has become more dynamic since the start of the year with rising geopolitical and trade tensions contributing to greater uncertainty across global markets. So before we get into our first quarter results I'd like to share a few thoughts on how we're approaching this environment.
Speaker Change: First off we're navigating this evolving landscape from a position of strength supported by our talented team and with the Danaher business system as our driving force.
Speaker Change: Now, it's early and the macro environment remains dynamic.
Speaker Change: But it is in times like these that danaher is positioning and capabilities truly standout.
Speaker Change: Our businesses are well positioned in attractive typically non discretionary end markets with strong secular growth drivers United by a common set of more durable business models in fact more than 80% of our revenues are recurring the majority of which are consumables that are specified.
Speaker Change: [noise] into regulated manufacturing processes or specific to the equipment that we supply.
Speaker Change: It's not just a relative durability of our portfolio. It's how we run the business using the Danaher business system, we're leveraging DBS to proactively manage our supply chain and drive process improvements to help ensure we continue to reliably support our customers each and every day.
Speaker Change: Now at the same time, we're taking thoughtful actions to protect our financial position, including addressing structural costs, while continuing to invest for the long term.
Speaker Change: Now looking into Q2 and beyond our focus remains clear delivering for our customers supporting our associates and creating long term value for our shareholders.
Speaker Change: We've operated through uncertain times before and have come out stronger than we entered.
Speaker Change: Our team is accustomed to tackling challenges head on and turning them into opportunities and we expect that mindset and momentum to continue as we move forward.
Speaker Change: So with that.
Speaker Change: Let's take a closer look at our first quarter 2025 results.
Speaker Change: Sales were $5 $7 billion in the first quarter and core revenue was flat year over year.
Speaker Change: Geographically core revenues in developed markets were down slightly with a low single digit decline in North America, and a low single digit increase in Western Europe high growth markets were up low single digits with solid performance outside of China more than offsetting a high single digit decline within China Dick's.
Speaker Change: Clines in China were primarily driven by volume based procurement and reimbursement changes implemented in late 'twenty, 'twenty, four which impacted our diagnostics businesses, while the rest of the portfolio collectively delivered modest growth.
Speaker Change: Our gross profit margin for the first quarter of 61, 2% was up 100 basis points year over year.
Speaker Change: And our adjusted operating profit margin of 29, 6% was down 50 basis points as the favorable impact of higher volume leverage in our biotechnology segment and disciplined cost management was more than offset by productivity investments to reduce our structural costs.
Speaker Change: Adjusted diluted net earnings per common share were $1.88 we.
Speaker Change: <unk> $1 $1 billion of free cash flow in the quarter, resulting in a free cash flow to net income conversion ratio of more than 110%.
Speaker Change: As I mentioned earlier, we're continuing to make significant investments in long term growth initiatives across danaher during the first quarter. The investments we've made over the past several years resulted in several impactful new product launches and these innovations are not only reinforcing our long term competitive advantage.
Speaker Change: They are also helping customers improve quality yields and reduce costs, while helping bring new therapies and diagnostic tests to market faster and more effectively so let me highlight a few of these key launches.
Speaker Change: In biotechnology sativa introduced the 502000 liter formats of the accelerates X platform bio reactor at the Interfax trade show earlier this month.
Speaker Change: Now the X platform is designed to increase cell culture productivity and process intensity, helping drive higher yields while reducing the time and cost of biologic drug manufacturing with these next generation technologies scientists can now seamlessly scale from 50 to 2000 liters to meet growing.
Speaker Change: Demand ranging from clinical trials to commercial production.
Speaker Change: In life Sciences, and Beckman culture life Sciences added spectral flow cytometry capabilities to the side of flex platform with the launch of the Mosaiq spectral detection module.
Speaker Change: And mosaic enables researchers to switch seamlessly between conventional and spectral flow cytometry, while leveraging machine learning assisted data analysis for more precise characterization of multiple parameters simultaneously now these capabilities are especially valuable in the fields of oncology where are they.
Speaker Change: Facilitate tumor cell profiling and May also help uncover novel therapeutic targets.
Speaker Change: And in diagnostics, Leica Biosystem leverage the capabilities of our newly established center for enabling precision medicine to launch two new primary antibodies.
Speaker Change: D L. One in her two widely used in setting breast lung and other cancers with the goal of helping customers accelerate cancer research and therapy development.
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 7% with bio processing up high single digits, and discovery and medical up low single digits.
Speaker Change: And bio processing, we were very encouraged by the better than expected start to the year.
Speaker Change: Consistent positive momentum in our order book continued into the first quarter with orders increasing sequentially for the seventh consecutive quarter.
Speaker Change: Revenue growth in the quarter was led by low double digit growth in consumables with particularly robust demand for commercialized therapies.
Speaker Change: On the equipment front funnel and order trends are improving but revenue declined as expected.
Speaker Change: Now the long term health and the biologic market is incredibly strong with a growing number of therapies advancing through development and into commercial production given.
Speaker Change: Given the significant growth opportunities ahead, we're investing to help ensure our leading bio processing franchise continue supporting customers as they develop and deliver life saving therapies to patients.
Speaker Change: In addition to the new product innovation I mentioned earlier, we've invested approximately $2 billion since 2020 to expand capacity and help ensure supply security for both us and our customers.
Speaker Change: These additions include new single use technology facilities in South Carolina filter capacity expansions in Florida and in cell culture media expansion in Utah, all of which are now online as well as the resins manufacturing plant in Michigan that is nearing completion.
Speaker Change: Near term this capacity is critical for supporting existing customer demand, but it's equally important to support such he was robust long term growth outlook and illustrates our in region for region manufacturing strategy.
Speaker Change: Now turning to our life Sciences segment.
Speaker Change: Core revenue decreased by 4%.
Speaker Change: Core revenue in our life Sciences instrument businesses collectively declined low single digits.
Speaker Change: Demand across pharma and clinical and applied markets, which make up the majority of our revenues in these businesses held up well globally, while academic and government demand softened through the quarter, particularly in the United States.
Speaker Change: In China demand remained stable sequentially and we were encouraged to see a modest benefit from stimulus programs.
Speaker Change: Core revenue in our genomics consumables businesses declined in the quarter. We saw continued positive momentum in next generation sequencing products, but this was more than offset by weaker demand for plasmids in mrna at two of our larger customers.
Speaker Change: Now in March IDT announced a partnership with Allergan a leader in next generation DNA manufacturing to offer customers early access to allergens Infineon plasmid DNA.
Speaker Change: This collaboration enables ITT to deliver cost effective.
Speaker Change: Long and high complexity clonal genes alongside its highly differentiated portfolio of custom synthetic biology solutions with Infineon DNA life science and drug discovery researchers can integrate high quality DNA directly into their synthetic biology workflows with minimal or no cloning.
Speaker Change: Saving weeks or even months of development time.
Speaker Change: Now moving to our diagnostics segment core revenue declined one 5%.
Speaker Change: Core revenue in our clinical diagnostics businesses was essentially flat with mid single digit growth outside of China.
Speaker Change: Beckman Coulter diagnostics had a solid quarter with both instruments and consumables growing mid single digits outside of China.
Speaker Change: Selecting strong demand and continued traction in commercial execution.
And during the quarter Beckman Coulter received five 10-K clearance from the U S food and drug administration for the Dx C 500, I integrated chemistry, and immunoassay analyzer.
Speaker Change: The <unk> 500 is purpose built to improve efficiency and meet the unique workflow needs for low volume laboratories, such as those in community hospitals.
Speaker Change: This approval strengthens beckman position across the health care network, enabling it to offer a comprehensive portfolio of solutions for low mid and high throughput core labs.
Speaker Change: In molecular diagnostics cepheid respiratory revenue exceeded our expectations driven by elevated levels of circulating respiratory illness paired with continued share gains.
Speaker Change: Strong growth across Cepheid is non respiratory test menu was led by mid teens growth in virology.
Speaker Change: And sexual health U S revenue for our multiplex Vaginitis panel was up 40% as women's health clinicians are increasingly recognizing the value that rapid diagnostics at the point of care brings to patients.
Speaker Change: Cepheid healthcare system, an integrated delivery network customers continue to increase instrument placements at alternate alternative care sites, such as clinics and urgent care centers.
Speaker Change: So as health care decision makers work to most efficiently allocate resources Cepheid is point of care molecular testing is proving increasingly valuable offering greater efficiency through fewer total tests higher rates of correct treatment and ultimately lower treatment costs compared to other testing strategies.
Speaker Change: So now let's frame, how we're thinking about the second quarter.
Speaker Change: And the full year 2025.
Speaker Change: We expect end market demand remains relatively consistent with the first quarter for the remainder of 2025.
Speaker Change: Regarding tariffs based on what is currently implemented we believe we can largely offset the impact from these tariffs through a combination of supply chain adjustments surcharges manufacturing footprint changes and other cost actions.
Speaker Change: Now for the full year 2025, there is essentially no change to our previous expectations. We continue to expect core revenue growth of approximately 3%, which assumes better performance in our bio processing business will be offset by slightly more modest expectations for life Sciences.
Speaker Change: Additionally, we're initiating full year adjusted diluted EPS guidance in the range of $7 60.
Speaker Change: $7 75.
Speaker Change: Given the current environment, we believe providing adjusted EPS guidance offers the best anchor point for assessing business performance and will provide better clarity for our investors.
Speaker Change: In the second quarter, we expect core revenue to grow in the low single digit percent range and Additionally, we expect our second quarter adjusted operating profit margin of approximately 25, 5%, reflecting normal seasonality in cepheid respiratory business and continued productivity investments.
Speaker Change: So to wrap it up we're confident in our positioning and what could be choppy waters and we're leveraging the danaher business system to ensure we navigate this environment from a position of strength CBS is what enables us to turn challenges into opportunities drive meaningful productivity gains and support our customers.
Speaker Change: When it matters most.
Speaker Change: At the same time, the strength of our balance sheet and financial position allows us to invest for the future both organically and through strategic capital deployment.
Speaker Change: To further enhance our portfolio and our competitive positioning.
Speaker Change: So as we move forward, we believe the combination of our talented team the differentiation of our portfolio and our strong financial profile will enable us to continue generating sustainable long term value for shareholders in 2025 and beyond.
John Bedford: So with that I'll turn it back over to you John.
John Bedford: Thanks Ryder.
Speaker Change: Operator that concludes our formal comments, we're now ready for questions.
John Bedford: Thank you.
John Bedford: And as a reminder, that is star one to ask a question.
Speaker Change: And our first question will come from Michael Ruskin with Bank of America. Your line is open.
Michael Ruskin: Great. Thanks for taking my question and congrats on the strong start guys.
Speaker Change: Ryan first I want to start off on on Bioprocess, just had a lot of comments there on the order strength you saw in the quarter.
You're raising the full year bioprocess expectation modestly just wondering is that coming more from the consumable side of things is it equipment and I think when we spoke on the fourth quarter call you talked a little bit about how you want to see some of the trends continuing so could you just talk about what you've seen over the last three months that gives you a little more confidence in bioprocess and if there.
Speaker Change: Is there any change that you've noticed from customer order behaviors in the last.
Speaker Change: The last month or two just given what's going on globally.
Speaker Change: Thanks, Mike.
Mike: Mike Thank you and good morning.
Speaker Change: Look we had a solid start here to the year and the bio processing business is clearly a part of that and we're really encouraged by the continued positive momentum. We saw here in Q1, so to your to your point around orders.
Speaker Change: Strong orders and revenue performance, which we now expect to be high single digits core revenue growth for 2025.
Speaker Change: And those orders grew sequentially now for the seventh consecutive quarter with a book to Bill solidly over one.
Speaker Change: Now consumables continued to lead the way globally, no doubt about that and we saw low double digit growth in consumables, which was driven by strong commercial demand at large pharma and CMO customers and smaller customers were stable, but still below historical levels.
Speaker Change: Now as we think about equipment, it's not quite back to normal, but our order and finals are a little better and I suspect. The current environment is probably causing a couple of order delays there, but our commercial programs here on the equipment side and the demand related to them remains healthy.
Speaker Change: Now we haven't seen any meaningful change in demand from the current tariff situation or restoring efforts.
Speaker Change: But we're really well positioned for that.
When that occurs so if you put it all together.
Speaker Change: We're really encouraged by the strong start to the year and.
Speaker Change: We reaffirm our belief that bio processing is a high single digit grower, both in 2025 and for the long term.
Speaker Change: Okay. Thanks and for my for my follow up I mean.
Speaker Change: Touched on tariffs you spoke about it earlier.
Speaker Change: In the 10-Q, you called out several $100 million gross impact, but sounds like you're offsetting most of it.
Speaker Change: Could you just between those various levers you talked about supply chain the pricing surcharges the manufacturing footprint.
Speaker Change: Any sense, you can give us for how youre using those levers, which once they're giving you a little bit more confidence and ability to offset that and I think the risk with tariffs is right now we're a little bit of a holding period if that comes back or if additional tariffs are implemented.
Speaker Change: Give us some visibility into your confidence to offset that in this dynamic environment. Thanks, Mike we have a number of levers there and it's it's important but it's important to think about this.
Speaker Change: And in the following frame.
Speaker Change: And including that we have to avoid some false precision here given some of the assumptions involved but.
Speaker Change: Right.
Speaker Change: We sit here today, we think our tariffs could be several hundred million dollars of impact something like.
Speaker Change: $350 million.
Speaker Change: But actually we don't think that the current state so where we sit today is where things ultimately end up.
Speaker Change: But regardless, we're really well positioned to largely offset these headwinds and here are some of the levers that we think about for instance, we've been executing to regionalize, our manufacturing network of over 100 plants for several years now which allows us to rebalance. These trade flows over time think China.
Speaker Change: For China, I talked about the billions that we've invested here to increase our U S capacity. So we have a combination of both short term and long term countermeasures such as surcharges.
Speaker Change: My chain management again cost actions, but also relocating manufacturing and of course DBS is a real advantage to us is here as well.
Speaker Change: We're focused on on this topic, so again as as things change year over time, we've got a number of levers that we can deploy to address the tariff situation and if Mike if things if things get.
Speaker Change: Worse here are higher or the actions that we find aren't enough I mean, we can be much more aggressive if we need to be.
Speaker Change: We've got all of those levers to pull I would say everything is on the table here in that situation. If that's what we get to.
Speaker Change: So I think we'd be looking at more significant surcharges I think we'd be going after cost even harder and we probably be looking at our manufacturing footprint, even harder so everything would be on the table at that point, but we feel like that's what we're given that's what we're going to deal with and we will.
Speaker Change: We'll make it work.
Speaker Change: Alright, Thanks, a lot guys I appreciate it.
Speaker Change: Thank you. Our next question will come from Tycho Peterson with Jefferies. Your line is open.
Tycho Peterson: Hey, Thanks, I wanted to probe a little bit on the last point on tariff offsets pricing in particular I think in the first quarter. Obviously, you have got the V. P headwinds on the diagnostics side, but I think biotech and life science pricing was below what wed expected can you maybe just talk on your comfort in your ability to take price areas, where you think you can push it more.
Tycho Peterson: And maybe the mechanism to do it is this going to be kind of rolling over the course of the year and what is your pricing assumption for the year at this point.
Tycho Peterson: I mean, I think from a price perspective, yet cycled like you said you saw sort of a little bit below where we've been historically, but im not sure its meaningfully below so I think our our price for the year is kind of flattish is the assumption at this point and that's largely due to the GBP that we've got already baked in so that kind of brings everything else from from a little bit.
Tycho Peterson: Growth in price down to flat so no.
Tycho Peterson: That would not include anything to do with surcharges, where tariffs that is sort of not included in that that concept to that number so that would be something in addition to that would be out there, but as you know a surcharge sort of price with no with no <unk> associated with it so I think from a normal perspective, how we.
Tycho Peterson: Think of price, that's kind of where I would I would put us.
Speaker Change: Okay and then following up on Bioprocess, obviously equipment has kind of lagged in terms of the recovery. We've seen I think a 160 billion in new Capex announced including Roche today in the U S. When when do you think that becomes a tailwind for you guys. You're obviously in a great position is that 26 do you think you start to see some benefit from some of that.
Tycho Peterson: Build out do you think it's 27, what's what's kind of the time horizon for you guys.
Speaker Change: Hi, Joe it's a little bit early to say right now, but generally speaking where existing plants are.
Speaker Change: Our being debottleneck, so additional capacity being added to existing footprint that would come a little bit quicker here, we're not yet seeing that in our orders.
Speaker Change: Then as you think about Greenfield investments, that's likely going to take a little bit longer but as you say, we feel as though we're very well positioned there to support those expansions right here, where they are being built.
Speaker Change: Okay, and then just last one crazy I have to ask this given all the moving pieces anything you can say on kind of the long range outlook.
Speaker Change: 26, the Street's got you just under 7% I think that's the big debate for tools as you know in general can this group get back to high single digit growth. So anything from your perspective sitting here in April that.
Speaker Change: Concern you for for next year.
Speaker Change: Yes, there's nothing that we see in our end markets that makes us think differently about our long range plans and as we've talked about before some of the headwinds that we've talked about for 2025, we believe to be transient and once we comp those we expect to be.
Speaker Change: Back at those higher growth rates for the long term plan. So we believe the end markets and how we're dialed into those with our leading franchises plus getting through some of these had a one time headwinds leaves us well positioned here for the long term.
Speaker Change: Thank you.
Tycho Peterson: Thanks Tycho.
Speaker Change: Thank you.
Speaker Change: Our next question will come from Scott Davis with Melius Research Your line is open.
Speaker Change: Hey, good morning, Ryan and Matt and John Hart Scott.
Speaker Change:
Speaker Change: Hey, guys can you give us a little bit more color on China, and when I think about that.
Speaker Change: And.
Speaker Change: What it's done to your diagnostics business there how do you guys think about that.
Speaker Change: The algorithm of kind of long term growth there versus kind of the reality that maybe that the.
Speaker Change: On the pricing environment is never going to make it a very attractive business, but I suppose there is a certain level of scale or maybe it is again, but how do you guys think about.
Speaker Change: About China and in that context.
Speaker Change: Let's go ahead, I think longer term, we believe China will be either the second or the largest diagnostic market in the world and we believe we have a real role to play there.
Speaker Change: The pricing adjustments that you've seen really bring China closer to what global pricing is in other markets and.
Speaker Change: And continues to be an attractive end market for us so as we digest.
Speaker Change: The reimbursement as well as the volume based procurement topics here in 2025, we look forward to having a.
Speaker Change: Strong business development here in China.
Speaker Change: Fair enough.
Speaker Change: Okay.
Speaker Change: As for balance sheet Optionality, you guys. I think you bought back something like $1 billion in the quarter as stock I think you did something like $6 billion last year, but what I mean, the market is re rated lower.
Speaker Change: <unk> assets have re rated lower in the M&A world, Although we.
Speaker Change: We don't have a lot of data points there yet.
Speaker Change: How do you guys think about the.
Speaker Change: That environment I guess, just overall the balance sheet Optionality and what your preferences are here in 2025.
Speaker Change: Well, Scott I mean, as you know our our bias is to M&A and our capital allocation and we continue to evaluate all of the capital allocation.
Speaker Change: Alternatives they compete against each other for our investments no doubt that the current environment has pulled in valuations.
Speaker Change: And we're going to have to measure that.
Speaker Change: The degree of uncertainty in relation to those valuations, but one thing's for sure we're going to add.
Speaker Change: Stick with our framework attractive end market outstanding asset and then of course the valuation framework.
Speaker Change: To work as well.
Scott: Scott we've seen this before back.
Scott: Back in the day, so you get some shock like this right and Theres sort of an initial freeze where everybody tries to figure out what's going to happen and as we sort of work our way through the process of how this is all going to work itself out.
That's why I think having balance sheet that we've got from a position of strength here. We have seen historically that this is a really good time to do M&A wants that.
Scott: That.
Scott: The wind start to blow if you will so I like where we're at we've got the ability to be aggressive there.
Scott: Does break itself free probably just the beginning here, but if we keep going down the path like we have very good buying opportunity in the future.
Scott: Okay makes sense best of luck guys I'll pass it on thank you. Thanks, Scott. Thank you.
Scott: Thank you.
Speaker Change: Our next question will come from Doug Schenkel with Wolfe Research.
Scott: Yeah.
Scott: Good morning, guys and thank you for taking the questions I wanted to talk about two topics.
Scott: One is on the.
Scott: Genomics segment and one is on the earnings guidance. So first on genomics. It seems like <unk> Ron remains under pressure due to.
Scott: Really stocking at.
Scott: One large gene therapy, and one large mrna customer.
Scott: I just want to make sure. This is a continuation of trend and not really anything new in terms of a further deterioration relative to recent quarters I don't think there's anything new there, but just wanted to make sure.
Scott: Kind of building off of that when do you move past.
Scott: That dynamic so.
Scott: So that's the first topic.
Scott: The second is on earnings.
Speaker Change: You gave us the top line guidance.
Scott: Guidance, you gave us a lot of detail below the operating line.
Scott: I don't think you gave us full year operating margin targets, but I think mathematically it looks like you're maintaining that 28, 5% target that you've talked about.
Scott: Coming off of the Q4 call.
Scott: If that's right.
Scott: I'm, just wondering kind of where the offsets are built into the P&L, especially given that in Q1.
Scott: Came in I think about 300 basis points ahead of operating margin target. So I just wanted to see what the offsets are.
Scott: Is that a function of prudent conservatism given the environment. We're in or is there something else we should be contemplating. Thank you.
Scott: Yeah, No I think you're right Doug on the on the margin side.
Scott: Part of the reason that we gave EPS guidance, we just felt like in this environment.
Scott: There are going to be moving pieces in your P&L depending on.
Scott: How do you tackle these tariffs some surcharges cost out et cetera. So.
Scott: I think we felt like an adjusted EPS Guide was.
Scott: Place for us to anchor.
Scott: And make sure that as things move in the P&L as they play out during the year. There was a point of anchor which is so why are we sort of did the EPS guide for everybody as far as what's that.
Scott: Margin translate soon youre about right with.
Scott: With the 25% that you talked about so I don't think that thats different.
Scott: Far as offsets I think if you sort of I think what youre kind of getting at is you know look we had a.
Scott: 25 beat here in Q1, and probably have some FX tailwind.
Scott: We've got a little bit of cost out tailwind behind us too when you start to add those up you probably can get to a number that's above that.
Scott: That range and I think that's I think your math is correct there.
Scott: But we do have some some cushion in this environment it probably I think Brian and I believe that.
Scott: Strikes the right balance given the uncertainty in the macro today, a lot of positives to start the year here.
Scott: We told you guys, we're going to get after that cost structure, we're making really good progress on that got after the first quarter gives us a head start as we head into the year.
Scott: But in this world we are in.
Scott: I think it makes sense for us to frame the guide of.
Scott: So having 60 to 70 75, we've got some cushion there obviously.
Scott: To the degree things sort of get worst and if they don't and.
Scott: And we see there's probably further upside I think you're right if things don't get any worse from here. So let's see how things progress lots to do on the policy front too to get us through some resolution, but that's sort of our philosophic philosophy on how we're thinking about the Scott.
Scott: Doug and as it relates to <unk> as you suggest there's really nothing new there.
Scott: Anticipated this to occur and we see those two customers progressing as we thought and.
Scott: And we expect that to get better here to your question and the second half of the year as we come through it.
Scott: Thanks, guys.
Scott: Thank you.
Speaker Change: Our next question will come from Vijay Kumar with Evercore ISI. Your line is open.
Speaker Change: Hi, Ryan good morning, and thanks for taking my question.
Speaker Change: Okay.
Speaker Change: My first question on.
Speaker Change: The tariffs Max here.
Speaker Change: 350 million effect gross headwinds is that a full year impact or a partial year impact and maybe if you could parse out.
Speaker Change: Is this the majority of it is coming from China.
Speaker Change: It's being assumed for ex China.
Speaker Change: And this is tariffs the primary reason.
Speaker Change: Why second Florida margins are.
Speaker Change: Trending down Q on Q.
Speaker Change: Let me start with the last one <unk> trend down that has nothing to do with tariffs.
Speaker Change: So the Q2 sequential trend down has everything to do with.
Speaker Change: Lower respiratory volume at Cepheid.
Speaker Change: We've got.
Speaker Change: <unk> of Q2 revenue for respiratory of about $250 million down from $625 million.
Speaker Change: A very similar dynamic to what we saw last year when respiratory I had that same big step down.
Speaker Change: So it's unfortunately that is just part of our seasonality now.
Speaker Change: If you do get a good start to the respiratory season in Q1.
Speaker Change: Also in Q2, there is some restructuring as we talked about we are getting after some of the cost structure in particular in diagnostics, which is probably where it will show up the most.
Speaker Change: Given the BBB headwinds there and some of the things that they're doing to globally Recenter. If you will.
Speaker Change: Some of their some of their go to market.
Speaker Change: Exercises that is where we're seeing the biggest piece so thats sort of Q2.
Speaker Change: As far as as I think about the 350 that is a rest of year tariffs in place now number.
Speaker Change: So that is that's just kind of what we expect for four here in 'twenty five as far as what we might see in 2006 for.
Speaker Change: For a full year I wouldn't take that and multiply it by two.
Speaker Change: We're a long way away from December.
Speaker Change: <unk> of <unk> 26, or December 25, So I think it's very difficult to kind of.
Speaker Change: To just.
Speaker Change: Double that number and assume that's what it's going to be we're going to need to get a little bit more information before we before we can.
Speaker Change: Elevate that for next year.
Speaker Change: And then sort of where is that exposure coming from was your other question I think the easiest the frame that we've that we sort of have as it's kind of 50% of it is coming from.
Speaker Change: Yes.
Speaker Change: <unk> of our headwind if you will is coming from U S to China.
Speaker Change: And most of that is diagnostics, where we sell where we sell into from our from an assay perspective. The other half of that exposure is mostly U S from Europe.
Speaker Change: So that's I mean, there are some others, obviously with the 10% global but the easiest way to think about it as half is U S to China. The other half is U S from Europe.
Speaker Change: Okay. That's extremely helpful. Matt Refiner, maybe one for you on the on the Biopharma.
Speaker Change: Some of the pharma customers talking about it.
Speaker Change: Potential R&D cuts.
Speaker Change: The face some tariffs.
Speaker Change: What is danaher total exposure to pharma pharma overall, including of bio processing and how much of that is.
Speaker Change: Your production or manufacturing, which which shouldnt be impacted even if R&D goes down maybe and maybe some commentary on R&D versus production.
Speaker Change: So as you think about.
Speaker Change: Life Science life Science R&D.
Speaker Change: For pharma.
Speaker Change: <unk> is really represented in our primarily in our instruments groups, there and it probably represents a third of that so.
Speaker Change: This is relatively small exposure keep in mind.
Speaker Change: Our life science instruments. So the research tools exposure overall for Danaher is less than 10%.
Speaker Change: Sales and then once again now we're talking about a third of that.
Speaker Change: Also if you think about our performance here in Q1, we actually saw that pharma segment be fairly robust here and we haven't seen yet any additional deterioration as it relates to that particular.
Speaker Change: Segment, so pharma.
Speaker Change: We see steady and investing independent of what one pharma company does versus another but overall, we see this segment is fairly robust here from a research perspective.
Speaker Change: And we continue to see bio processing as I mentioned, we took up the guide here, we're really encouraged by what we see there.
Speaker Change: And as far as Vijay is kind of the exposure wise I mean, maybe the easiest way to think about it is.
Speaker Change: Bioprocess thing is.
Speaker Change: $6 billion of revenue and that's that's probably the one that you're most worried about given the size of how big that is versus anything else, we might have in life sciences or elsewhere, and that's all essentially commercial right. It's up 75% of that is going to be on market or phase III. So that's.
Speaker Change: Kind of the frame of how I think about our pharma exposure.
Speaker Change: That's helpful. Thank you guys.
Speaker Change: Thank you.
Speaker Change: Our next question will come from Rachel Vince <unk> with J P. Morgan Your line is open.
Rachel Vince: Hey, Good morning, you guys. Thanks, so much for taking the question I wanted to dig into the life Sciences performance. So you took down your assumptions for the life Sciences guidance to now be flat for the year versus the prior assumption of low single digit growth. We also called out some of the weakness in U S academic and government. So I was wondering if you could unpack that for us what types of.
Speaker Change: <unk> seen the most weakness in that research market and then specifically regarding your academic and.
Speaker Change: How much was it down in the quarter and what are you assuming for the full year for U S academic and government, especially in light of the reports last week that the new administration is going to be proposing a 48%.
Speaker Change: Rich.
Speaker Change: Yeah.
Speaker Change: So to start with morning, Rachel and and just a reminder, as I just mentioned to Vijay.
Speaker Change: Shocking life science tools here, which are less than 10% of our revenue so keep that in mind as you read across.
Speaker Change: For Q1, our life Sciences finished modestly better than anticipated and the reasons are that the comps are beginning to ease and to your point outside of U S government and academic.
Speaker Change: The market conditions are stable and why is that because we've dialed our portfolio into what we believe are the more attractive market segments here for the long term pharma clinical and applied our by far how we've positioned our business now again to your point academic and government demand did.
Speaker Change: Soft and through the quarter.
Speaker Change: That's particularly a U S phenomenon.
Speaker Change: Geographies.
Speaker Change: We're a little more stable there so.
Speaker Change: So as we think about the guide here in 2025, we have taken account of the fact that we expect the U S.
Speaker Change: Government and academic market to continue to soften with the noise that we're hearing.
And that is basically offset by the strength that we're seeing in bio processing the kinds of instruments and the kinds of products that we're talking about here are the instruments that you're familiar with.
Speaker Change: And research.
Speaker Change: But also then some of the laboratory consumables and reagents that you would use in that research with some of these government U S government funded labs.
So just a word on the academic I mean, this is not a huge number for us obviously.
Speaker Change: I think for for Q1, it was kind of down mid single digit type range just to give you some sense of it now orders, we're getting worse than that so I think that's the the read through if you will to why we've taken a bit more cautious stance, but again. This is a this is a pretty small for us.
Speaker Change: Yes, correct.
Speaker Change: Yeah.
Speaker Change: NIH, Rachel is less than 1% of our revenue and government and academic globally is low single digits.
Speaker Change: Perfect. Yes, thanks for that color, maybe just a follow up on some of the earlier answers regarding bioprocess. Thanks, you mentioned that book to Bill was comfortably above one this quarter net orders grew sequentially for the seventh quarter in a row.
Speaker Change: Digging into that a little bit more last quarter, you noted that bio processing orders grew high single digits sequentially.
So did you see orders grow high single digits again, this quarter sequentially or with order growth slightly last thing given that standard seasonality that you typically see and then on a go forward basis should we expect the bio processing orders continue to step up throughout the year or are we kind of reset back to this normal seasonality at this point.
Speaker Change: Yes.
Speaker Change: Yes, maybe I'll say a word on orders and the expectations. We've got we guide to revenue here. So from an order perspective, we're not going to kind of have an order guide annual revenue guidance.
Speaker Change: But like we said, we think it's going to be high single digit from a growth perspective in the orders, obviously will support that so as.
Speaker Change: As far as this quarter it was sort of in that range.
Speaker Change: From a sequential perspective I think.
Speaker Change: The really good news from my Chair here is that our book to Bill that was as we said solidly over one is encouraging that is.
Speaker Change: It is a good first step here to support the rest of the year.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Our next question will come from Dan Brennan with TD Cowen Your line is open.
Speaker Change: Great. Thanks, Thanks for the questions, maybe just on the life Science Guide.
Speaker Change: I know you gave some color earlier on Aldebaran, but Q2 guide down low single I think mid singles and a little bit below us and then the full year guide would imply a nice step up in the back half of the year. So just can you walk through some of the visibility and drivers of the step up in the back half of the year.
Speaker Change: Yes, I mean from a number perspective as I think about it I mean, I think about the seasonality both for our life Sciences, but just generally speaking for danaher.
Speaker Change: I look at the seasonality last year from a revenue perspective. It was kind of first half was 48% in the second half was something like 52%. So it's pretty similar.
Here and what we're assuming on a revenue perspective in 'twenty five at the Danaher level. So I think thats kind of the way I look at it is theres some puts and takes I'm sure within the segments, but just in total feel.
Speaker Change: I feel like we're kind of in the same same zone that we were here.
Speaker Change: Here last year and it kind of has been that way historically frankly, if we go way back but those are at different times.
Got it thanks, Matt and then maybe just on China I know you talked about I think SVP things look pretty good could you just unpack it a little bit how we're thinking about the rest of the year, we get a lot of questions on just the tit for tat here with the tariffs and kind of what China is doing maybe to take a more sharper view against kind of western vendors. So just if you could unpack a little bit.
Speaker Change: How to think about the rest of the year and then kind of any activity from the government.
Speaker Change: And kind of reaction to the tariff wars. Thank you.
Speaker Change: So we're seeing a fair amount of stability other than this.
Speaker Change: Volume based procurement and reimbursement.
Speaker Change: Issue for diagnostics and patient volumes patient volumes continued to be strong.
Speaker Change: We don't see.
Speaker Change: China looking to move western suppliers out of their supply chain certainly like all customers around the world customers are looking for supply chain security and want to make sure theyre going to be supplied.
Speaker Change: And as we think about bio processing.
Speaker Change: That continues to be stable as well.
Speaker Change: <unk> reached the bottom there and we're starting to see a little bit of life and we talked about life Sciences life Sciences is stable on the back of a little more stimulus than we'd seen in the past, making up for some of the demand contraction that we had seen so.
Speaker Change: Generally speaking we expect this to be stable, we're prepared with our supply chain to supply China. The majority of our supply is either China for China are coming from non U S plants that we've been working on that for years.
Speaker Change: And so we'll continue to see what happens here on the policy front.
Speaker Change: But for now we see China.
Speaker Change: As stable.
Speaker Change: And as anticipated. So we don't expect that to change that full year guide.
Speaker Change: Today.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question will come from Luke <unk> with Barclays. Your line is open.
Speaker Change: This is Sam on for Louise Thanks for taking our questions could.
Speaker Change: Could you talk a little bit more about the pvp headwinds this quarter any pull forward there or did that come in line with the expectation of it being like a $50 million headwind.
Speaker Change: And is the cadence of EVP still intact from what you stated last quarter, which was kind of in the $50 million $50 million 30, then.
Speaker Change: 15% to $20 million framework.
Speaker Change: I think so yes, I wouldn't change off of that come off of that and Pvp was very much in line with what we thought here.
Speaker Change: In Q1, so I would not say we have seen any change to what we thought would be our or impact here from from BBVA.
Speaker Change: Got you and then just sticking to China.
Speaker Change: Could you talk about the magnitude of the China stimulus.
Speaker Change: A tailwind for you guys. This quarter and then kind of what the expectations are for the rest of the year, how do you see it right now.
Speaker Change: I would call the stimulus measured we saw that in the life science instruments, primarily that was with some government agencies more specifically in food testing and then we also see some of the tier two universities starting to get there.
Arms around that funding mechanism. So we also saw that as well, but I would call that measured a measured level of stimulus that is essentially making up for some of the demand.
Speaker Change: Contraction that we saw earlier.
Speaker Change: Thanks for that appreciate it.
Speaker Change: Thanks Luke.
Speaker Change: Thank you.
Speaker Change: Our next question will come from Dan Arias with Stifel. Your line is open.
Speaker Change: Hey, good morning, guys. Thank you, Matt the $760 to 775 EPS guide does that assume the full $150 million of cost savings is captured this year and then now.
Speaker Change: Now that you're out of the gate I think you said should we just assume that the remainder of that gets layered.
Speaker Change: Early evenly across the next three quarters or is it.
Speaker Change: Is there a skew from a timing perspective there.
Speaker Change: No I think the cadence is right.
Speaker Change: I think it will layer in fairly evenly might get a little bit more here in Q3, and Q4, but I'd love to but I would just put it for modeling I do it I'd do it evenly.
Speaker Change: I mean, maybe the way to think about the 150 that we've talked about.
Speaker Change: We've incorporated into the guide what we've achieved so far and so.
Speaker Change: Of the 150, we think we got about 50 in Q1 and that is incorporated in the guide the other sort of $100 million is what I might call cushion.
Speaker Change: To see like I kind of talked to and I think Doug asked the question earlier around.
Speaker Change: What.
Speaker Change: Walking through the math to something that might be potentially a higher number.
Speaker Change: Would put that as part of that cushion that exists.
Speaker Change: For what micro pump for the rest of the year.
Speaker Change: Okay is there any reason why you wouldn't capture that I mean, it seems pretty good to hear you talk about it seems pretty straightforward. So is it just really well factored in when we actually captured or is there something that needs to develop in order to feel confident about that happening.
Speaker Change: No I mean, I think we'll be able to capture it I think it was more the general view of how we sort of.
Speaker Change: Outlined how we're thinking about.
Speaker Change: The rest of the year in the current environment and wanting to sort of see how things play out.
Speaker Change: From a policy perspective before we.
Speaker Change: We get two constructive, but we feel like we're in a pretty good spot here if things do go out to be able to talk about higher numbers, if things do improve but.
Speaker Change: We're taking a little bit of a conservative approach given we are 20 days into.
Speaker Change: Our new <unk>.
Speaker Change: New environment.
Speaker Change: Yeah sure Okay. Thanks, so much.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: That does conclude the Q&A portion of today's call I would now like to turn it back over to John Bedford for any additional or closing remarks.
Speaker Change: Thanks, everyone for joining today will be around the rest of the day and week for follow up questions.
Speaker Change: Good day.
Speaker Change: Okay.
Speaker Change: Thank you ladies and gentlemen, this concludes today's program and we appreciate your participation you may disconnect at any time.
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