Revvity, Inc.

Hello, everyone, and welcome to Revity's third quarter 2024 earnings conference call. My name is Lydia, and I'll be your operator today. After the prepared remarks, there'll be an opportunity to ask questions. If you'd like to ask a question during Q&A, you can do so by pressing Start Followed by 1 on your telephone keypad. I'll now hand you over to Steve Willoughby, Head of Investor Relations, to begin. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Revity's third quarter 2024 earnings conference call. On the call with me today are Prahlad Singh, our President and Chief Executive Officer, and Max Grykowiak, our Senior Vice President and Chief Financial Officer. I'd like to remind you of the safe harbor statements 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 may not be limited to financial projections or other statements of the company's plans, objectives, expectations, or intentions. The company's actual results may differ significantly from those projected or suggested 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 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 measures we plan to use during this call to the most directly comparable gap measures is available as an attachment to our earnings press release. I'll now turn it over to our President and Chief Executive Officer, Prahlad Singh. Prahlad?

Thank you, Steve, and good morning, everyone. REVITY's strong execution was again on display during the third quarter. which enabled our total revenue, adjusted operating margin, and adjusted EPS to each come in better than we had anticipated. A strong execution led to our adjusted operating margins increasing by 80 basis points year over year to 28.3 in the quarter, which shows the positive impact our productivity initiatives are having on our cost base and incrementals. We also had another great quarter from a cash perspective as well. We generated $135 million of free cash flow in the quarter, resulting in 100% conversion to our adjusted net income so far this year. Given our strong cash performance, we remained aggressive with our share repurchase program and returned over 100% of our cash flow in the quarter to shareholders via buybacks and dividends. As we look ahead to the final quarter of the year, we expect our diagnostic businesses to continue to perform at a very strong level, and we are continuing to experience positive momentum in our life science reagents and software businesses. In addition, given that as of September we lapped the one-year anniversary of the most significant pharma industry pressures seen in many years, We remain optimistic that market trends are continuing to stabilize and that the worst of the headwinds are likely behind us. However, since we have yet to see a more material conversion of our funnel into orders, we are now factoring in a more subdued end-of-year spending environment for instrumentation from our pharma customers as compared to our previous expectations. This is in part due to the continued delays with instrument purchasing in China. A stimulus has still not yet begun to meaningfully flow, resulting in customers remaining on the sidelines while they wait to see if they will receive any of these funds. We expect this change to result in our fourth quarter total company organic growth to be in the range of 3% to 5%. This brings our full year organic growth outlook to now being in the range of 0% to 1%, modestly below our previous assumptions. While the rate of recovery is not progressing quite as quickly as we had anticipated, I'd note our updated outlook continues to remain several hundred basis points above the market. Additionally, I'm proud to share that our strong operational execution enables us to again raise our adjusted earnings per share guidance for the full year. While Max will provide more details in a bit, We are now looking for our adjusted earnings per share for the full year to be in a new range of $4.83 to $4.87. As I first shared last quarter, based on the feedback from our customers, including those I met with last month while I was in China, we continue to feel demand in our key pharma biotech markets is making measured progress towards more normalized levels. I expect that this path towards normalization will continue over the coming months and likely persist as we move into the next year. Given that we continue to remain very optimistic about our future performance and what it will mean for our company, we plan to remain active with our share repurchase activity for the rest of this year. Our board recently approved a new $1 billion share repurchase authorization over the next two years replacing what was left on our prior authorization. The new authorization and its larger size speak to both our strong cash flow performance and balance sheet stability, while also recognizing the significant potential we still have in front of us from an investor awareness and understanding perspective. During my recent visit to China, I was able to meet with our teams, customers, and key government partners, while also inaugurating our new Revity Innovation Center in Taichung. It was a motivating visit for me personally, as I was able to see how in just our first year, teams have significantly embraced Revity's collaborative culture. Their passion was overflowing as it pertains to our key focus areas as a company from both a commercial and scientific perspective. I can also share that despite geopolitical headlines, from our perspective, the environment in China remains positively dynamic. I came away from the trip feeling optimistic about the future of our business in the region and with increased confidence that the measures the government has recently enacted should translate into improved market conditions for our industry as we head into the next year. During the quarter, We also continued our focus on innovation with the successful launch of several new products that utilize cutting edge technologies and help address emerging areas of medical investment. For instance, we recently introduced Phenologic AI, a new AI driven offering for our high content screening instruments. This solution builds on our existing signals image artist software platform taking image analysis to the next level. It uses pre-trained AI models to enable the analysis of bright field images, allowing for fast and robust identification of cellular structures, resulting in enhanced live cell data with the ability to increase functional data per screening sample. With this solution now launched, we will also be more able to rapidly deploy additional AI algorithms for our instrument platforms in the future. It was also exciting to see several different teams from across the company come together to quickly develop, launch, and begin to commercialize another new AI-based offering in our diagnostics business. The new Revity Transcribe AI service, which was introduced at a key newborn screening conference a few weeks ago, provides clinical labs a new way to highly automate what is currently a time-consuming task of transcribing handwritten patient information from individual samples. This novel product, which leverages both AI and optical character recognition, increases workflow speed by approximately 40%, even when including the time required for data verification. This is just another small example of how we can quickly capitalize on opportunities as a team to better serve our customers and enable us to maintain our industry-leading market positions. Also in our diagnostics business, a few weeks ago, our Euroimmune team launched a new genotyping solution in Europe to help better assess a patient's risk for possible side effects of new therapies coming to market to treat Alzheimer's disease. We expect the market opportunity for this APOE gene-focused assay to increase significantly as anti-amyloid therapies become more widely available in Europe in the future. Building off our response to the pandemic, a big focus for us has been working to better strategically partner with key government collaborators. This focus was recently highlighted in an important announcement from the US government agency BARDA, who late last month awarded us a contract of over $9 million to be used towards furthering the development of a novel diagnostics platform. While it will likely be several more years before this platform is ready for commercialization, receiving a contract of this size from such an important U.S. federal government agency is a testament to both our strong relationships and the level of novel science that is taking place within the company. We are excited to share more with you about our future innovations and the company overall at our upcoming investor day on November 21st. which will be hosted at our San Diego campus. We have a great day planned for you to better understand what makes Revity so unique, why we have such a high degree of confidence in financial performance differentiation, and how we are capitalizing on the opportunities in front of us through strong collaboration across the business, resulting in our ability to bring meaningful new offerings to the market. I hope you can join us in person out in California later this month. In addition to visiting Asara Investor Day, I also hope you can come meet with us in the future at our brand new corporate headquarters in the Boston area, just down the road from our old offices. We celebrated the grand opening of the modern and high-tech space just three weeks ago. It perfectly embodies our commitment to embracing technology and collaboration and was designed to inspire and energize our teams while also being financially accretive to our bottom line. I look forward to welcoming more of you to experience this state of the art facility in person. We have been making great progress as a company since becoming Revity, but I also think it is paramount that what we do and the way we do it contributes positively to both our employees and the societies in which we live. These contributions were highlighted in a recently published 2024 impact report. I'm proud to share that our scope one and two emissions were down 7% in 2023, while our facility in Colorado recently won a pollution reduction award from the EPA. Also highlighted in the report was how we continue to have a strong and diverse leadership team with robust governance programs in a high degree of overall employee satisfaction. What we do at Revity is positively impacting the world every day, but our focus on how we accomplish this work is also very important. So it's great to see these efforts on display in this key annual publication. Overall, we had a good third quarter across the board. Our markets are making measured progress on the path to normalization, with some categories further along that path than others. and we continue to diligently execute on those items that are more fully within our control at an extremely high level. I look forward to connecting with many of you either in person or virtually at our upcoming Investor Day in a few weeks, where I'm excited to share more with you about Revity. With that, I will now turn the call over to Max.