The operator, Todd, welcomes everyone to the Danaher Corporation's First Quarter 2024 Earnings Results Conference Call. He introduces the speakers, Rainer Blair and Matt McGrew, and mentions that all lines are on mute. John Bedford, Vice President of Investor Relations, begins the call and points out that all necessary materials are available on the company's website. He also mentions that the audio portion of the call will be archived and a replay will be available. During the presentation, they will discuss the factors that impacted year-over-year performance. All references to financial metrics are from continuing operations and are for the first quarter of 2024.

The company will discuss products and devices with pending regulatory approvals and make forward-looking statements during the call. They acknowledge potential risks and uncertainties and do not plan to update their statements unless required by law. The company had a strong start to the year and maintains their full-year outlook. They credit their success to their portfolio and the Danaher Business System.

The team's dedication to DBS has allowed for impactful innovations and process improvements, as seen in the recent CEO Kaizen event. The first quarter of 2024 saw a decline in core revenues, particularly in high growth markets like China. However, the company's gross profit margin and adjusted operating profit margin remained strong, and they generated $1.4 billion in free cash flow.

The company's Biotechnology segment saw a 17% decline in core revenue, with Bioprocessing down high-teens and Discovery and Medical down approximately 20%. However, there was a modestly better than expected start to the year, with orders increasing mid-single digits and a book-to-bill ratio of 0.95. North American and European customers are working through excess inventory and improvements in the funding environment are a positive indicator for the long-term health of the Bioprocessing market. In China, demand remains weak due to capital conservation. The company expects a low-single digit decline in Bioprocessing revenue for the full year 2024, with a gradual improvement to high-single digit growth by the end of the year. Despite current challenges, the biologics market is projected to continue growing at a high-single digit rate, with more therapies entering the market.

Despite setbacks, the number of FDA approvals for biologic and genomic medicines continues to grow, reinforcing the company's belief in the potential for long-term core revenue growth. The company is making investments in innovation to help customers reduce time and cost in biologic drug production, such as the recently released Xcellerex magnetic mixing system. In the Life Science segment, core revenue decreased by 3%, with declines in pharma and biotech activity in developed markets and stronger performance in academic and applied markets. In China, demand was lower due to difficult comparisons and weaker underlying activity levels.

In the genomics consumables business, there was low-single digit core revenue growth due to double-digit growth in plasmids and protein, offset by declines in next-generation sequencing and gene writing and editing solutions. The Life Sciences businesses are well positioned for the long term due to investments in innovation and strategic acquisitions. In the Diagnostics segment, core revenue increased by 7.5%, with mid-single digit growth in clinical diagnostics businesses. This is attributed to leveraging the Danaher Business System, new product introductions, and improved win and retention rates. The Aperio GT450 DX digital pathology slide scanner received FDA 510(k) clearance, bringing digital pathology one step closer to becoming the standard of care for clinicians.

Leica's clearance for proprietary innovation is driving long-term core growth, with Cepheid's respiratory revenue exceeding expectations in the first quarter. They expect continued growth in respiratory revenue for the full year and have seen an increase in their installed base and menu adoption. Cepheid's expanded FDA clearance for the expert Xpress MVP test allows for easier access to critical testing in care settings, reducing the need for multiple office visits and narrowing the treatment gap.

The speaker discusses the success of bringing accurate and easy-to-use molecular testing closer to patients, which has led to improved treatment outcomes and long-term growth at Cepheid. They then provide expectations for the second quarter and full year 2024, including a decline in core revenue and an adjusted operating profit margin. The speaker emphasizes their commitment to innovation and executing with DBS, which has resulted in improvements in their businesses and the ability to deliver breakthrough solutions to customers. They express optimism for the future of Danaher, highlighting their transformation in portfolio and organic growth investments, which have positioned them as a focused leader in the life science and diagnostics industry. The speaker believes this unique combination of talent, portfolio strength, and financial profile will create sustainable, long-term shareholder value. They then open the call for questions from participants.

The bioprocessing business had a positive start to the year, with orders growing mid-single digits and book-to-bill increasing to 0.95. The recurring business was better than equipment growth, and larger customers in North America and Western Europe are returning to pre-pandemic ordering patterns. However, the emerging biotech funding environment is not yet translating into orders. China's demand and activity levels remain weak. Overall, the first quarter was encouraging, but there is no change in the company's outlook for the full year.

The company expects a decrease in revenue in the first half of the year but anticipates high-single digit or better growth by the end of the year. Cancellations were minimal during the quarter, providing a positive sign. The CEO believes they have a strong bioprocessing franchise and are continuously improving. There are no significant shifts in competitive dynamics in the industry. The company is confident in their competitive position and expects it to improve in the near future.

During a Q&A session, the speaker asks about the company's bioprocess sector and why they did not raise their guidance for the year despite a strong first quarter. The company's representative explains that while they had a good start to the year, they are still waiting for order momentum to continue and for equipment demand to improve. They also mention the importance of stable funding for biotech and how it has not yet translated into orders. The representative believes they are properly positioned with their current guidance. The speaker then asks about the company's margins, which were higher than expected due to a combination of volume and mix from Cepheid and Bioprocess.

The company expects to see a decline in operating margins in the second quarter due to lower respiratory volumes at Cepheid. This decline is significant because respiratory is a high volume and high margin business. Going forward, the company anticipates Q1 and Q4 to be the highest volume and margin quarters due to the respiratory season, which was a much smaller business pre-pandemic.

The speaker discusses the recent performance of the Life Sciences division and mentions that margins were down slightly due to lower volume and the acquisition of Abcam. They also mention that the transition into Danaher is underway and a new President and CFO have been put in place.

The company is working through some growth and cost challenges and believes that in the long term, it will be a high-single digit grower in a strong market. The team has seen slow starts before and expects to address costs quickly. The bioprocessing segment saw a better start in January and customer activity levels were at 0.95x, which could impact exit rates for fiscal '24.

The speaker is unsure if there was a significant change in the company's performance in a specific month. The exit rate is expected to be in the high-single digits and there is no change to the initial revenue guidance. The speaker also discusses the impact of new loan programs and stimulus in China, but states that there is no change to their perspective of a high-single digit decline for the year. The decline in IDT in the quarter is attributed to various factors, including share loss and end market.

The Life Science segment of the company performed better than expected in the first quarter, with instruments declining slightly and reagents and consumables performing well. This is consistent with trends seen in the previous year, with stable demand from pharma and biotech customers and stronger demand from academic and applied markets. There is also increased funnel activity for later in the year, but this has not yet translated to orders.

The speaker discusses the current state of the life science tools market, noting that there has been increased activity but it has not yet reflected in the order book due to long cycle times. They also mention the challenging comparisons to last year's peak in China's stimulus plan and lower demand in the lower end market. The speaker also mentions that they are closely following discussions about potential future stimulus but it is too early to factor it into their outlook. They expect a normalization trend in the second quarter but improvement in the second half. The speaker also mentions that Danaher has a strong M&A capacity but higher interest rates make the bar higher and they will not compromise on their earnings expectations and return on invested capital targets.

During the conference call, Rainer Blair, the CEO of the company, thanked a questioner and then answered a question about the improvement in biotech funding. He stated that while there has been a slight improvement, it has not yet had a significant impact on the business and it will take several quarters to see any noticeable changes. The company's guidance for the future has not been affected by this improvement. When asked about the progress of different markets within China, Blair mentioned that the Biotechnology segment was down 40% and the Life Sciences segment was down high-teens, in line with previous quarters. He also mentioned that there has been an improvement in the funnel for Life Sciences, but this has not yet affected the market in China.

The company's Diagnostics sector is experiencing low-single digit growth and biotech funding is expected to favor developed markets over China. The impact of the BIOSECURE Act on bioprocessing is uncertain, but some pharma and biotech companies are already exploring alternative supply chains. It is difficult to predict the long-term implications of the act, including potential shifts in growth and manufacturing locations.

The speaker discusses the potential risks to their business due to customers shifting their manufacturing and clinical trials to other locations. They assure that their global business and capabilities allow them to deliver solutions anywhere in the world with full support. The timing and impact of this shift on their business remains to be seen, but they are prepared to handle any necessary technology transfers. The speaker also mentions the weaker performance of equipment in the first quarter, but does not provide specific guidance for the rest of the year. They do mention a goal of high-single digit or above growth in bioprocessing by the end of the year, but do not specify the recovery cycle or geography trends that will contribute to this growth.

In the first quarter, Danaher saw a 5% growth in their bioprocessing business, which represents 85% of their revenue. This was the main driver of the increase in orders and book-to-bill ratio. The company expects the bioprocessing business to decline in the low-single digits for the full year, with 85% of the business being recurring revenue and 15% being equipment. The company's executives thanked everyone for joining the call and stated that they will be available for follow-ups throughout the week.

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