Thermo Fisher Scientific Inc

Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2021 third quarter conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would like to introduce our moderator for the call, Mr. Rafael Tejada, Vice President, Investor Relations. Mr. Tejada, you may begin the call.

Good morning, and thank you for joining us. On the call with me today is Mark Casper, our Chairman, President, and Chief Executive Officer, and Stephen Williamson, Senior Vice President and Chief Financial Officer. Please note this call is being webcast live and will be archived on the investor section of our website, thermofisher.com, under the heading News and Events until November 12, 2021. A copy of the press release of our third quarter 2021 earnings is available in the investor section of our website under the heading Financials. So, before we begin, let me briefly cover our safe harbor statement. Various remarks that we may make about the company's future expectations, plans, and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation and Form Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, which are on file with the SEC and available in the Investors section of our website under the heading Financials, SEC Filings. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. Also, during this call, we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release of our third quarter 2021 earnings and also in the investor section of our website under the heading financials. So with that, I'll now turn the call over to Mark.

Thanks, Raph. Good morning, everyone, and thanks for joining us today for our third quarter call. We delivered another outstanding quarter, achieving exceptional financial performance while continuing to effectively execute our growth strategy to make Thermo Fisher Scientific an even stronger partner for our customers. As I reflect on the year so far, three things stand out to me. Our proven growth strategy, powered by our PPI business system, is driving outstanding financial performance. Our base business is performing very well, and we are playing a leading role in our industry's response to COVID-19. And we continue to build on our trusted partner status with innovative new products and expanded capabilities to further enhance our unique customer value proposition. All of this gives me great confidence in a very bright future as we continue to create sustainable value for all of our stakeholders. I will get into more detail on these in my remarks later, but first let me recap the financials. Our revenue in Q3 increased to $9.33 billion, growing 9% year over year. Our adjusted operating income for the third quarter was $2.78 billion, and our adjusted operating margin was 29.8% for the quarter. Finally, we increased adjusted EPS by 2% to $5.76 per share, so another outstanding quarter. Turning to our end markets, in Q3, market conditions were strong, and our team executed well to deliver another fantastic quarter. Starting with pharma and biotech, we continue to have outstanding performance in this end market with growth of just over 20% driven once again by strong market dynamics, our unique customer value proposition, and our leading role in supporting our customers across a wide range of exciting therapeutic areas, including our significant role in supporting COVID-19 vaccines and therapies. Our trusted partner status earned over many years with these customers continues to drive robust growth. In this end market, we saw broad-based strength, including in our bioproduction, pharma services, biosciences, chromatography and mass spectrometry businesses, as well as in the research and safety market channel. In academic and government, we grew in the mid-single digits in the quarter, with very good growth in biosciences and the research and safety market channel. Turned into industrial and applied, we grew in the mid-teens. In Q3, we had particularly strong growth in our electron microscopy business and in the research and safety market channel. Finally, in diagnostics and healthcare, we declined 11%. Performance in our base business was strong, driven by immunodiagnostics, clinical diagnostics, and transplant diagnostics. The team also executed very well to support customers' COVID-19 testing needs, delivering $1.55 billion of revenue this quarter versus $1.8 billion in Q3 last year. Before I move on to our growth strategy, let me provide a few comments on our industry-leading role in the pandemic response. In the quarter, we generated $2.05 billion in COVID-19 response-related revenues. With the surge in the Delta variant, we saw strong testing demand around the world in Q3. We also played a very meaningful role in vaccines and therapies for COVID-19, generating just over $500 million in the quarter from these activities. The underlying demand for our product and service offerings used in the production and development of vaccines is very robust, and over time, we expect this demand to transition to non-COVID revenues. Our industry-leading response to the pandemic has enabled us to accelerate our growth strategy, strengthen customer relationships, and accelerate investments, which contributed to our ability to raise our long-term core organic growth guidance to 7% to 9% as we communicated at our recent investor day. Let me now give you an update on our growth strategy, which consists of three elements. continuously developing high-impact innovative new products, leveraging our scale in the high growth and emerging markets, and delivering a unique value proposition to our customers. Let me provide a few examples of how we're delivering on our growth strategy. Starting with innovation, we launched a number of new products across our businesses to further strengthen our industry leadership and enabling our customers to accelerate scientific breakthroughs and make the world a better place. In our genetic sciences business, we launched the Applied Biosystems QuantStudio AbsoluteQ digital PCR system. This is the first fully integrated digital PCR system featuring simplified workflows and designed to provide highly accurate results in only 90 minutes. This system will help advance our customers' innovation efforts in areas like oncology and cell and gene therapy. In chromatography and mass spectrometry, we launched three new thermoscientific TSQ-plus triple quadrupole mass spectrometers to address the growing need for faster throughput and increased sensitivity across a range of applications in biopharma and applied settings, including clinical research for large and small molecules, toxicology, food safety, and environmental analysis. We also launched the thermoscientific Vanquish Neo UHPLC system and the thermoscientific PEPMAP Neo UHPLC columns, designed for use in proteomics, precision medicine, and translational research. Turning to the second pillar of our growth strategy, we continue to leverage our scale to create an outstanding experience for customers in high growth and emerging markets. This has contributed to the excellent performance we are delivering across Asia Pacific, where we delivered growth in the low double digits during the quarter. We continue to build on our presence and capabilities in the region. During the quarter, we opened a bioprocess design center in South Korea. This facility features laboratory and educational space and more than 100 instruments that support pharmaceutical research and manufacturing processes. This center will help our pharma and biotech customers advance their important work. Our performance across the region demonstrates that we're creating a differentiated experience for our customers and the significant investments we've made in these markets are fueling growth. The third pillar of our growth strategy is our customer value proposition, and we continue to increase our capabilities and capacity to be an even better partner for our customers and help them achieve their goals faster and more efficiently. As I mentioned last quarter, we're executing on over $2.5 billion in CapEx this year. Let me give you a brief update on our progress. Building on our pharma services capabilities in Q3, we brought additional capacity online to support vaccine and therapy production. And as part of the previously announced strategic partnership with CSL Limited, we assumed operating responsibility for a new state-of-the-art biologic site in Langnau, Switzerland. The site will feature highly flexible bioproduction technologies, including single-use and stainless steel, to provide a pathway from development to large-scale production as customers' needs evolve. To support growing demand in the biopharmaceutical industry, we announced plans to open a new bioproduction facility in Nashville, Tennessee to manufacture single-use technologies. The facility will be one of our largest SUT sites in the world. In addition to support disease research and diagnostic testing, we announced our commitment to co-invest with the U.S. government in building a state-of-the-art facility to manufacture pipette tips. The new facility will be located in North Carolina and designed in line with Thermo Fisher Scientific's carbon neutrality goals. These investments in our value proposition demonstrate our commitment to our customers who rely on us as an essential partner in their work. Now let me give you a brief update on capital deployment. We continue to successfully execute our discipline strategy for capital deployment, which is a combination of strategic M&A and returning capital to our shareholders. In terms of M&A, we are super excited for our acquisition of PPD. The business is performing well. The regulatory process is on track and we expect to close by year end. As a reminder, PPD will establish Thermo Fisher as a leader in the attractive and high growth clinical research services industry and add highly complimentary services for our fastest growing end market. Integration planning is going very well, financing is largely complete, and we're looking forward to welcoming our PPD colleagues to Thermal Fisher later this year. Before turning to our guidance, let me update you on our progress we're making on our ESG initiatives. As the world leader in serving science, we know we have a responsibility to use our industry leadership position to make the world a better place. And to that end, we continue to advance our sustainability and social impact initiatives. During the quarter, we committed to expand our use of ACT product labeling to include our entire cold storage portfolio by the end of the year. ACT labeling clearly details the environmental impact of the product, empowering our customers to make sustainable choices, and ultimately helping them achieve their own goals for environmental stewardship. Our 90,000 colleagues are also passionate about the difference they can make. And our local site-based community action councils support a number of charitable and STEM education activities throughout the year. We have amplified our support of these efforts by investing an additional $15 million in our Foundation for Science. And we continue to support the historically black colleges and universities to deliver accurate COVID-19 testing to students and staff, helping to ensure campus safety and the ability to confidently deliver in-person learning. With that, I'd like to review our guidance at a high level, and then Stephen will take you through the details. As you saw in our press release, we are raising both our revenue and earnings guidance for the full year. This increase is a result of our strong Q3 operational performance in our base business and the continued strength of our COVID-19 response revenues. we're raising our revenue guidance by $1.2 billion to $37.1 billion, which would result in 15% revenue growth over 2020. In terms of adjusted EPS, we're raising our guidance by $1.30 to $23.37 per share, which represents 20% growth year-over-year. The 2022 guidance raise reflects the increased outlook for the core business and adds to the very strong outlook that we share with you at our investor day. We're raising our 2022 full year revenue guidance by $200 million to $40.5 billion and increasing our 2022 adjusted EPS guidance by 20 cents to $21.36. So to summarize our key takeaways from Q3, We executed it very well to continue our growth momentum and deliver excellent revenue and earnings performance. Our business is performing very well, and we continue to play a leading role in the pandemic response. We continue to expand our trusted partner status with innovative new products and expand the capabilities to further enhance our customer value proposition. And our exceptional performance through the third quarter enabled us to raise our outlook for the year and sets us up for an even brighter future. With that, I'll now hand the call over to our CFO, Steven Williamson. Steven?