The operator introduces the Thermo Fisher Scientific 2023 Fourth Quarter Conference Call and introduces the moderator, Rafael Tejada. Tejada introduces the CEO and CFO and provides information on where to access the webcast and press release. He also mentions the Safe Harbor Statement and the potential for forward-looking statements. He reminds listeners of the company's most recent annual and quarterly reports and disclaims any obligation to update forward-looking statements.

The speaker, Marc N. Casper, begins the call by cautioning listeners not to rely on forward-looking statements and providing a reconciliation of non-GAAP financial measures. He then summarizes the company's strong fourth quarter and full year financial results, highlighting revenue, adjusted operating income, and adjusted EPS. He also mentions the company's success in gaining market share with their products, services, and expertise.

In the fourth quarter, the company performed well despite a challenging economic environment, thanks to their efficient PPI business system and strategic investments. Revenue was slightly higher than expected, with strong performance in the pharma and biotech, academic and government, and industrial and applied markets. However, there was a decline in the diagnostics and healthcare market due to the impact of COVID-19. Overall, the company remains a trusted partner to its customers and is well-positioned for future growth.

In 2023, the company experienced good growth in their immunodiagnostics, microbiology, and transplant diagnostic businesses. They also had a successful year of high-impact innovation, launching new products that strengthened their industry leadership and helped customers advance their work. Highlights include the launch of the Thermo Scientific Orbitrap Astral Mass Spectrometer, the Thermo Scientific Metrios 6 S/TEM, and the Gibco CTS Detachable Dynabeads. These products have been well-received by the scientific community and are expected to continue gaining momentum in 2024. Additionally, the company launched the first FDA-cleared assays for the risk assessment and clinical management of preeclampsia, which has significantly raised the standard of care for pregnant women.

In the fourth quarter, Thermo Fisher Scientific continued their momentum of innovation with the launch of new products in electron microscopy and laboratory equipment. They also opened a customer center in Milan and a customer experience center in Seoul to showcase their products and strengthen their partnerships with customers. The company also made progress in their PPI business system, which empowers employees to find better ways to drive success and improve customer satisfaction. The team successfully navigated the dynamic environment of the past year by increasing commercial intensity, managing costs, and optimizing sourcing.

The company is utilizing generative AI to increase productivity and improve the customer experience in its PPI business system. They successfully executed a disciplined capital deployment strategy through M&A and returning capital to shareholders. The acquisition of The Binding Site has enhanced their specialty diagnostics offering and the integration has gone smoothly. The launch of the EXENT instrument solution has received strong interest from the medical community. They also acquired CorEvitas, which has been integrated into their clinical research business and is performing well. In the fourth quarter, they announced their intent to acquire Olink, a provider of advanced proteomic solutions that will complement their existing platforms.

The transaction is expected to be completed by mid-2024, and in 2023 the company returned capital to shareholders and focused on corporate social responsibility initiatives. These initiatives include transitioning to renewable energy, partnering with Project HOPE to improve health outcomes in Nigeria, and receiving recognition for industry leadership and inclusive culture. The company is proud of its accomplishments in the past year and looks forward to a bright future.

The company is providing guidance for 2024, with a projected revenue range of $42.1 billion to $43.3 billion and adjusted EPS range of $20.95 to $22 per share. The company's strong commercial execution and operational discipline, as well as its partnerships with customers, will continue to drive growth. The company has strong relationships with its customers and is well-positioned to support their scientific breakthroughs. The company's proven growth strategy, trusted partner status, and utilization of the PPI business system have helped it navigate a challenging economic environment. The company expects to deliver strong short-term performance and strengthen its long-term competitive position in 2024. The call then turns over to the CFO, Stephen Williamson.

In the fourth quarter of the year, the company executed well and exceeded their expectations, delivering 1% more core organic revenue growth and $0.05 more in adjusted EPS. They also had strong free cash flow and were able to navigate changing market conditions effectively. The company's growth strategy and business system allowed them to provide a differentiated experience for customers and achieve strong financial results. In terms of revenue, there was a 5% decrease in reported revenue, with a 4% decrease in core organic revenue. The company also saw significant revenue from pandemic-related products. The organic growth rates by region were affected by this revenue.

In Q4, North America and Europe saw declines in sales while Asia Pacific had a slight increase, with China seeing a decline. For the full year, all regions saw declines in sales. The company had $2.55 billion in adjusted operating income in Q4, with a 23.4% margin, driven by strong productivity and price realization. For the full year, adjusted operating income decreased 11% with a 22.9% margin. Gross margin and SG&A also improved in Q4 and for the full year. R&D expenses remained high as the company continues to invest in innovation. Net interest expense decreased in Q4 but increased for the full year.

Adjusted other income and expense was a net expense of $19 million in the quarter, primarily due to changes in non-operating FX. The adjusted tax rate for the quarter and full year was 10%, lower than the previous year due to tax planning activities. Average diluted shares were 5 million lower year-over-year due to share repurchases. Cash flow from operations was $8.4 billion for the full year, with $7 billion in free cash flow after investing in net capital expenditures. $136 million was returned to shareholders through dividends in Q4 and $523 million for the full year. The company invested $3.7 billion in completed acquisitions and committed $3.1 billion to the acquisition of Olink. The company ended the quarter with $8.1 billion in cash and $34.9 billion in total debt. The adjusted ROIC was 12%. The performance of the four business segments varied due to the scale and margin profile of pandemic-related revenue, which was higher in the previous year.

In 2023, the company saw a decline in revenue and organic revenue in the Life Sciences Solutions segment due to the decrease in pandemic-related revenue and lower activity in the bioproduction business. However, adjusted operating margin increased due to strong productivity. In the Analytical Instruments segment, there was a significant increase in revenue and organic growth, led by the electron microscopy business. Adjusted operating margin also increased due to strong productivity and volume pull-through. In Specialty Diagnostics, there was a decline in both reported and organic revenue in Q4.

In the fourth quarter, the company saw strong growth in its core businesses, led by transplant diagnostics, microbiology, and immunodiagnostics. However, this was offset by lower pandemic-related revenue compared to the previous year. For the full year, reported revenue declined 8% and organic revenue was down 13%. In the Specialty Diagnostics segment, adjusted operating income increased by 27% and adjusted operating margin was 23.9%, driven by productivity and business mix. In the Laboratory Products and Biopharma Services segment, reported revenue decreased by 4% and organic revenue was 5% lower, due to the runoff of vaccines and therapies revenue and phasing of revenue in the Pharma Services business. Adjusted operating income for this segment declined by 4%, but for the full year, it was 17% higher than the previous year. The company has also provided guidance for 2024, with a revenue range of $42.1 billion to $43.3 billion and adjusted EPS range of $20.95 to $22, assuming core organic revenue growth between minus 1% to positive 1%.

The company's view on market conditions for 2024 remains unchanged, with a projected decline in the market and a focus on growth and taking market share. The estimated impact of the pandemic on revenue is $1.3 to $1.4 billion, with M&A expected to contribute $175 million. Foreign exchange is expected to have a neutral effect on revenue and adjusted EPS. The company aims to maintain a margin of 22.3% to 22.8%, with a focus on cost management and long-term investments. Net interest expense is projected to be $430 million, and adjusted other income and expense is expected to be close to zero.

In 2024, the company expects an adjusted income tax rate of 10.5% and plans to factor in $20 million of profit elimination related to minority interests. They anticipate $1.3-1.5 billion in net capital expenditures and $6.5-7 billion in free cash flow. The company plans to buy back $3 billion in shares and return $600 million to shareholders through dividends. They also expect to close the acquisition of Olink by midyear. The company expects quarterly organic revenue growth and margin improvement throughout the year, with Q1 being just under 21%. The CEO is confident in the company's performance in 2023 and looks forward to updating shareholders on their progress.

The speaker discusses the company's performance and growth in the past year, with a focus on above-market growth and share gain. They mention specific areas of success, such as Analytical Instruments and clinical research, and express confidence in continued growth in the coming year. They also mention their expectations for the market and their goal of maintaining high standards for performance.

The speaker, Marc N. Casper, discusses the expected performance of the company in the second half of the year and mentions the potential impact of improved market conditions. He also addresses the topic of destocking in the industry, specifically in bioproduction, and emphasizes the long-term strength of this market.

The company's bioprocessing products make up around 10% of their revenue and have a strong global presence. While there was a slight increase in orders in the fourth quarter, the market is still slow and the company expects it to gradually improve throughout the year. They have established trust with customers and are well positioned in various areas of their business. The CEO's interactions with customers in the biotech community have shown a more positive outlook.

The speaker is optimistic about the M&A activity and investor excitement at the end of the year, which is the most positive they have seen in the last five quarters. They believe this bodes well for the future. The speaker also mentions the strong growth in the Analytical Instruments business and the normal lead times and shipping times for the past six months. They are excited for the upcoming year and the future of the business.

During a recent earnings call, analyst Derik De Bruin asked CEO Marc N. Casper about the change in guidance for 2024 from 1% core growth to plus or minus 1%. Stephen Williamson, a company executive, provided context for the change, explaining that the outlook for the market has not significantly changed and the guidance includes the latest view on foreign exchange rates and operational factors. The only notable change is a shift in a sterile fill finish capacity from COVID vaccine support to GLP-1 support, which has impacted reported core growth. The company also decided to provide a range for guidance instead of a point estimate.

The company's investors can expect a revenue range of $1 billion to $1.05 billion and adjusted EPS of $1.05 for the year. This range captures the most likely scenarios for the company. The margins for the lab products and biopharma services segments are expected to remain stable and in line with previous guidance. The company's margins for the full year were in line with expectations and there are no significant changes expected for the upcoming year.

Doug Schenkel from Wolfe Research asks a question about Thermo Fisher's long-range outlook and investments in the near term. Marc N. Casper responds by saying that they have raised their outlook and want to give investors a long-term view of the market and their position in it.

The company has a history of gaining market share and plans to continue growing faster than the market, which is expected to grow at a rate of 4-6%. The company is confident in the long-term growth of the industry and believes it will continue to outpace the market by 3 points, for a total growth rate of 7-9%. Even in a scenario where the industry experiences slower growth, the company believes it will still perform well due to the markets it serves.

The speaker expresses confidence in the company's future and explains that they are expecting strong margin flow-through as volumes grow. They also mention that they have reset their incentive compensation and are investing in innovation and growth. They expect to see good accretive growth in the future due to investments made in 2024.

The speaker discusses the company's performance in the past year and their outlook for the future. They mention the success of their clinical research business and the positive impact it had on supporting COVID-19 trials. They also highlight the strong growth of the business, excluding the COVID-19-related activities. The speaker expresses confidence in their annual guidance, which takes into account factors such as China, the CRO business, and analytical technology.

The company experienced a roll-off in vaccine revenue and a strong performance compared to the previous year. As a result, growth is expected to be more moderate this year, but the long-term outlook is positive due to the strong business and synergies. In terms of China, market conditions were challenging in the first quarter, but the company is optimistic about the long-term potential and expects improvement at some point. The operating margin in the first quarter was slightly under 21%, with the impact of incentive compensation being a contributing factor.

The speaker discusses the company's performance in China and its long-term growth potential. They mention recent developments in relations between the US and China and the potential impact on the company's operations. They also highlight the company's long-standing presence in China and its contributions to both Chinese society and the American job market.

The speaker discusses the success of Thermo Fisher in China and the potential impact of legislation on their business. He also mentions the thawing relations between the US and China and the company's strong momentum for the year ahead. The call concludes with a thank you to participants and a promise to update them on the company's progress.

This summary was generated with AI and may contain some inaccuracies.