The operator welcomes listeners to the Q2 2024 Revvity Earnings Conference Call and introduces the company's President, CEO, and Senior VP and CFO. The safe harbor statements and forward-looking statements are mentioned, along with a disclaimer about relying on statements made during the call. Non-GAAP financial measures will be discussed and a reconciliation to GAAP measures is available. The President and CEO then begins their remarks.

Revvity's performance in the second quarter exceeded financial expectations, despite market uncertainty in the pharma biotech industry. The company's unique strengths and capabilities allowed them to overcome challenges and maintain strong financial performance. While there was a decline in organic revenue, other areas of the business, such as signal software and diagnostics, showed excellent performance. Tight management of spending led to high operating margins and adjusted EPS above expectations. The company also showed progress in managing operations and generating cash.

The company has had strong free cash flow conversion for the third consecutive quarter and has received additional inflows from a divestiture. They plan to use their healthy balance sheet to aggressively repurchase shares and believe this will create long-term value for shareholders. The company has also demonstrated strong execution in their key focus areas and continues to lead with innovation for customers, including launching a new offering in their latent TB testing business.

The company expects their new automated T-SPOT assay to improve their competitiveness in the IGRA latent TB testing market, especially in the US. The recent adoption of a resolution recommending newborn screening in all countries may lead to increased funding for the company's products. The company is also utilizing AI technology to streamline operations and improve customer collections. This has significantly reduced the time and effort needed to resolve invoice issues compared to the previous manual process.

BioLegend plans to expand the use of AI in their company and products, using it to support the design and sourcing of new materials for their offerings and validate data in scientific research. They will share more details at their upcoming Investor Day in November and have recently received recognition for their efforts in sustainability.

The company had a successful second quarter, with improved ratings and strong performance in various areas. They have raised their earnings expectations and are optimistic about the future potential of their business. Despite challenging market conditions, their unique product helped them overcome headwinds. They plan to use their strong performance and cash generation to invest in share repurchasing and deleveraging, which will create value for shareholders and provide flexibility for future capital deployment.

In the second quarter, the company generated $692 million in total adjusted revenues, with a 1% decline in organic revenue and a 1% headwind from FX. The company exceeded expectations with 28.7% adjusted operating margins and $1.22 adjusted EPS. They also generated $160 million in free cash flow, resulting in 107% conversion of adjusted net income. The company received an additional inflow of $150 million from PerkinElmer and expects more payments throughout the year. This strong performance was attributed to cost control, synergies, and restructuring actions.

In the second quarter, PerkinElmer received positive payments related to discontinued operations, while also actively repurchasing shares and increasing funding for key projects. Their net debt to adjusted EBITDA leverage ratio was 2.4 times. In terms of business trends, there was a 1% decline in organic revenue, with a 6% decline in the life sciences segment and 3% growth in diagnostics. Sales to pharma biotech and academic/government customers declined, while instrument revenue was down low-teens and reagents declined high-single digits due to difficult technology licensing comps and pharma headcount reduction.

The company does not expect an increase in reagent sales in the second half of the year, but they anticipate easier comparisons in the third quarter. Their signal software business is performing well, with strong traction and growth. In their Diagnostics segment, immunodiagnostics and reproductive health businesses saw growth, while the applied genomics business declined. The company is optimistic for improved performance in the newborn business in China in the coming quarter.

The company is cautiously optimistic about their business, expecting a flat third quarter before returning to positive growth for the rest of the year. Revenue in China has declined due to customers holding off on purchasing decisions, but the company expects stimulus programs to eventually have a positive impact. However, they do not anticipate a significant increase until next year. Overall, the company is pleased with their performance and expects to maintain their positive organic growth outlook for the year. They predict a 2% growth for the year based on their current outlook.

The company is anticipating a negative impact from FX and projects a revenue range of $2.77 billion to $2.79 billion for the year. Adjusted earnings per share guidance has been raised to $4.70 to $4.80. The company plans to increase share repurchases and expects adjusted operating margins to be in the range of 28% to 28.5%. Net interest and other expenses are expected to be around $50 million and the tax rate is expected to be slightly over 20% for the full year.

The company is expecting a diluted share count of 123.5 million shares and anticipates relatively neutral impact from share repurchases on adjusted EPS. Organic growth is expected to improve in the third quarter, with a projected headwind from FX. Operating expenses are expected to remain flat, resulting in adjusted operating margins of around 28%. Net interest and other income is expected to increase by 50% in the third quarter. The company had a strong second quarter despite market challenges and is able to forecast positive organic growth. Adjusted operating margin, free cash flow, and adjusted EPS guidance for the year have been raised. The company is now taking questions from analysts.

In the paragraph, Prahlad Singh and Max discuss the performance of the company in the second quarter and their expectations for the future. Prahlad mentions that there were some difficulties in the reagent side of the business due to site consolidations and closures, but they have mostly passed and they are expecting stability in the next quarter. They also mention that the worst of the cuts in the pharma biotech industry is likely behind them. Max talks about the improved margins and how some of it is due to restructuring and some may be due to mix.

The speaker, Max Krakowiak, discusses the company's margin performance for the first half of the year and how it has led to an increase in margin expectations for the full year. He attributes this to progress on integrations and synergies from recent acquisitions and restructuring actions. He also mentions the company's long-term plan for 75 basis points of OMX per year and expects to see about 25 of that at the upcoming Analyst Day or in January. In terms of China diagnostics, Krakowiak notes that immunodiagnostics was flat in the quarter and expects it to continue in the second half of the year. He mentions changes in the go-to-market strategy earlier in the year and how they have played out.

In the second half of the year, China IDX is expected to see positive mid-single digit growth. The company has shifted to an indirect commercial model for an older product line, which has impacted revenue but improved profitability as anticipated. The newborn screening business is expected to improve based on prenatal screening numbers. There are concerns about the recovery in the biopharma segment due to pharma layoffs and preclinical employees not returning to labs soon. The company is confident in the recovery, particularly in early stage discovery and academic sectors.

Prahlad Singh and Max Krakowiak discuss the improvement seen in the development and later stages of their peers' programs, but express uncertainty about the early discovery programs. They attribute the volatility to the time it takes to transition programs to different locations. Singh emphasizes the importance of investing in early discovery for innovation, while Krakowiak mentions a sequential improvement in pre-revenue biotech funding in the second quarter. They also mention that the $330 million for buybacks will be spent entirely this year.

The company has $330 million left in its share repurchase program and plans to be aggressive with buying back its stock due to its current valuation and potential for M&A opportunities. The second half organic revenue is expected to be high singles, with a 30% decline in China for life science instrumentation due to stimulus-related delays. Most of the company's life sciences instrumentation items are considered bigger ticket items with an average selling price of over $500,000.

The company's guidance for the second half of the year assumes a mid-single digit decrease in instrumentation sales. The second quarter is expected to have positive low-single digit organic growth, leading to high single to low double-digit growth in the fourth quarter. This increase is due to normal seasonality, software renewals, and a boost from China diagnostics. The company's cost actions last year resulted in $100 million in savings, and it is expected to continue to benefit margins in fiscal years 2024 and 2025.

The speaker addresses the performance of the company's operating margin and attributes it to cost actions taken at the end of the previous year and the return of variable compensation. They also mention continued execution of operational initiatives and confidence in reaching their margin goals. When asked about the applied genomics business, they note that it has been a significant headwind for the company in the past few quarters, but there is nothing unique about it that would delay its recovery compared to other businesses.

The company saw growth in their pharma biotech and clinical sides during the COVID period. They expect a similar market environment and normal seasonality in the fourth quarter. The product line grew close to 50% two years in a row and they hope to see it bottoming out. In terms of pricing, they achieved around 100 basis points of price in the second quarter and expect a similar assumption for the second half of the year. The company continues to get price on the life sciences side, although pricing is more challenged than in a normal year. The reagents business, which is a significant part of their business, is expected to see growth from both BioLegend and legacy products in the third and fourth quarters.

The company has consistently avoided breaking out individual business units or sub-brands, but BioLegend has been performing well and makes up more than 50% of the reagents portfolio. The company expects the market environment to remain the same in the second half of the year. They attribute any market softness to site closures and consolidations, not competition. The company has a pipeline of potential M&A candidates, but they are not planning any sizable deals in the near future due to elevated valuations. They plan to focus on deploying capital through share buybacks.

Max Krakowiak, a representative of a company, is answering a question about growth by segment for the third quarter and the full year. He states that they are anticipating flat growth for life sciences and low to mid-single digit growth for diagnostics in the third quarter. For the full year, life sciences is expected to be flat to slightly down, while diagnostics will be in the low to mid-single digit range. When asked about how this will set them up for 2025, Prahlad Singh, another representative, states that they believe the worst is behind them and they are seeing encouraging signs from customers, particularly in the U.S. However, they cannot provide a deeper insight into 2025 until their Analyst Day in late November. Another analyst, Luke Sergott, follows up on the applied genomics headwinds, which Krakowiak states are improving but still present.

The Applied Genomics sub-segment of the company is expected to see an acceleration in growth due to the return of confidence in the market and the recovery of the RNA and DNA extraction kits. The liquid handling portion of the business is still facing challenges, but is expected to return to growth in the second half of the year. The licensing or technology license in the Life Sci segment is not specified.

Prahlad Singh and Luke Sergott discuss the licensing opportunities at Beam Therapeutics, including the pin-point base editing technology licensed to AstraZeneca in the second quarter of last year. Max Krakowiak mentions seasonality in the fourth quarter, attributing it to a combination of factors such as budget flush and customers returning due to pressure in the pharma and biotech industry and in China. He believes this will drive a ramp in the company's total and instrument business in the fourth quarter.

The company is expecting a strong fourth quarter due to customer conversations and the high volume of instrument sales during this time. China is an important market for the company, with strong growth in immunodiagnostics and expected growth in reproductive health due to the year of the dragon. The company expects the stimulus funding to continue driving growth in China and does not anticipate a slowdown. The company had high single-digit growth in China last year and expects to continue this trend.

Prahlad Singh, CEO of BioLegend, discussed the company's performance in China and stated that they feel good about the market and see it as a strategic market for them. He also mentioned that their recent acquisition, BioLegend, tends to focus on the preclinical and discovery stages of the pipeline. When asked about the funding influx in the biopharma market, Singh stated that they have started seeing signs of it but it may take a quarter or two to materialize. In response to a question about instruments, Singh mentioned that their instruments in China have been affected by the country's stimulus air pocket, but did not specify the exact exposure of their instrument portfolio to China versus the rest of the world.

The company's instrumentation in China accounts for 3% of total revenues and was challenging in the second quarter, but there are expectations for improvement in the second half with stimulus. Outside of China, there have been sequential improvements in instrumentation since the first quarter. The company has seen stability in activity levels over the last 45 to 60 days, with sporadicness related to site closures and headcount reductions. There is no continued trend in this regard.

The company is optimistic about their in vivo imaging portfolio and expects to see a turnaround in the U.S. market. They have $330 million left in their buyback program and plan to ask the board for authorization for more. However, they believe that current market valuations for potential acquisitions are too high and it makes more sense to buy back stock instead. They will continue to look for the right M&A candidate.

During an earnings call, the company's CEO and CFO discussed the impact of recent acquisitions and the integration process. They also addressed questions about the company's performance in the pharmaceutical sector and confirmed that plans for future growth in this area had already been established. The CFO clarified that the expected headwind in China was not specifically related to the value-based pricing program, but rather to general pricing challenges in the industry. The call concluded with the company's representatives expressing their eagerness to connect with stakeholders in the coming weeks.

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