PerkinElmer, Inc.

Hello and welcome to the Perkin Elmer fourth quarter 2022 earnings conference call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star 1 on the telephone keypad. If you'd like to withdraw your question, you may press star 2. I'll now hand over to your host, Steve Willoughby, SVP of Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to Perkin Elmer's fourth quarter 2022 earnings conference call. On the call with me today are Prahlad Singh, our President and Chief Executive Officer, and Max Grzykowiak, our Senior Vice President and Chief Financial Officer. Before we begin, I'd like to remind everyone of the safe harbor statements that we have outlined in our press release issued earlier this morning, and also those in our SEC filings. Statements or comments made on this call may be forward-looking statements, which may include but are not necessarily limited to financial projections or other statements of the company's plans, objectives, expectations, or intentions. These matters involve certain risks and uncertainties. The company's actual results may differ significantly from those projected or suggested by any forward-looking statements due to a variety of factors which are discussed in detail in our SEC filings. Any forward-looking statements made today represent our views as of today. We disclaim any obligation to update these forward-looking statements in the future, even if our estimates change. So you should not rely on any of today's forward-looking statements as representing our views as of any date after today. During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measures we plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release. To the extent we use non-GAAP measures during the call that are not reconciled to GAAP, we will provide reconciliations promptly. I'll now turn it over to our President and Chief Executive Officer, Prahlad Singh. Prahlad?

Thank you, Steve, and good morning, everyone. Before I begin, I want to express my deep sorrow for our colleagues, along with their friends and families in Turkey and Syria following the recent earthquake. What you are having to go through is something no one ever thinks can happen. And I want you to know that Perkins-Elmo will be supporting you in any way we can. Needless to say, the start of the year has been an eventful one. And from a business perspective, we have hit the ground running after finishing 2022 on a strong note that played out right in line with our expectations from the start of the quarter. We continued to successfully navigate an evolving macro environment, particularly in China, while staying tremendously focused on executing our upcoming divestiture of our analytical and enterprise solutions business, which we expect to complete before the end of March. Amid these undertakings, we again exceeded our total adjusted revenue and adjusted EPS targets for the quarter. The continued high level of execution throughout a period of transition for the company is a testament to the team we've built, the processes we've implemented, and the quality of the businesses that comprise our new company. I couldn't be more excited for our future and the impact I expect us to have by helping our customers develop and deliver novel scientific breakthroughs that will have a profound impact on improving global health in the future. I would be remiss not to also thank all our colleagues who have spent a significant amount of time and effort preparing for the upcoming split of the company, including those roughly 6,000 employees who will be part of the divestiture. I look forward to watching what the analytical and enterprise solutions business can accomplish in the years to come, and thank you for all your efforts and impact which have made getting to this point a reality. As it pertains to the future of our life science and diagnostics business, which is going to be renamed and rebranded in the months following the close of the divestiture, A significant amount of work has already taken place to prepare for this transition. I'm eager to share with you and our employees more about the direction of the new company in the near future. As I have highlighted to you over the last several quarters, the level of focus and material innovation that is now occurring within the company has meaningfully increased. This was again on display over the last few months as our new high-throughput, random-access, chemiluminescent diagnostic testing platform, the Accentis, received its CE mark and began initial commercial installations. While the test menu for this platform will continue to ramp over the next several years, it marked a multiyear effort of significant development to bring this next-generation platform to market. We will look to also bring this new system to the U.S. market in the coming year. With the low and medium throughput platforms that were added with the acquisition of IDS in 2021, the initial launch of the Accentus now provides a complete portfolio of chemiluminescent analyzer platforms, spanning all throughputs to support a full spectrum of customers. We were also excited to see in early January that the GAMT disorder was added to the RUS panel for newborn screening in the United States. This deficiency can result in severe intellectual disabilities if it goes undetected and untreated within the first few years of a child's life, and we continue to collaborate with KOLs to support their research and pilot programs on this. With our ionist platform for SMA and SCID screening receiving FDA authorization last quarter, the recent additions of GAMT and MPS II are examples of the continuous innovation from our reproductive health business, allowing it to continue to grow despite well-known birth rate pressures over the last several years. In our life sciences business, We continue to bring innovation to the cell and gene therapy industry with the launch of adeno-associated virus, or AAV, detection kits which leverage our proprietary Alpha-Lisa technology and help researchers quickly and easily characterize viral vector particles being introduced. Additionally, we signed a collaboration agreement in December with a leading global biotechnology company to identify novel AAV vectors aimed at crossing the blood-brain barrier. Working in conjunction with Professor Grimm's lab at the University Clinic Heidelberg, our in-house team of viral vector experts in Munich, Germany, are tasked with developing a novel generation of gene delivery vectors for treating a growing population affected with neurodegenerative diseases. The scope, high unmet clinical need, and social challenge underpinning this collaboration is an illustrative example of just how much we have transformed our life science portfolio over the past few years. We are not only increasingly aligned with rapidly evolving and attractive fields like cell and gene therapy, but we've positioned ourselves to be uniquely focused to help accelerate these advancing fields forward. In addition to continuing to invest in our R&D, we are also significantly focusing on internally developing our people. In the fourth quarter, we launched three new employee resource groups centered on supporting our Hispanic employees, our veterans, and our employees with disabilities. We also started several employee networking groups to help employees with similar interests get to know one another and communicate across the company. These are both great examples of the change in culture that has been occurring at the company recently, which I expect to even further accelerate as we enter the next exciting phase of our corporate journey. While Max will share more details with you in a bit, it was encouraging to see our life science and diagnostics business finish off the year on a strong note, resulting in 9% non-COVID organic growth for the full year. This was despite an approximate 300 basis point headwind from the lockdowns in China, negatively impacting our immunodiagnostics business, which we have assumed in our most recent guidance. At this point, we have continued to see an impact from the change in COVID policy in China and assume that we will not see our immunodiagnostics business there return to normal until the second half of 2023, which will have a bit of an impact on our overall expected growth for the year, particularly in the first half. As it relates to COVID, we have been a significant player in the response to the pandemic with both lab-based PCR, and the several government lab contracts we've participated in. With testing mandates now ending in most areas around the world, it has recently resulted in a swift and dramatic decline in the demand for lab-based PCR tests and supplemental lab capacity. While Max will provide more detail, We have decided to completely remove all COVID revenue from our guidance for the year and let what we expect to be minimal related revenue provide modest upside to our official guidance, a significant change from our prior expectations. Despite these two impacts, we are looking for 2023 to be another very strong year overall and one that will set the new company off on a great foundation to build upon in the years to come. As we execute on our transformation and the future accretive capital deployment opportunities it provides, we will unlock the full scientific, operational, and financial potential of our life science and diagnostics business, resulting in a best-in-class culture, market-leading innovation, and top tier shareholder returns. Our business is in an excellent position today with tremendous additional opportunity right in front of us that we are going to capitalize on. With that, I'll now turn the call over to Max.