Thermo Fisher Scientific Inc

Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2021 Fourth Quarter Conference Call. My name is Katie, and I'll be coordinating your call today. If you'd like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. 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 Steven 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 February 11, 2022. A copy of the press release of our fourth 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 statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform 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 investor section of our website under the heading Financials SEC Findings. 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 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 fourth quarter and full year 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.

Thank you, Raf. Good morning, everyone, and thanks for joining us today for our fourth quarter call and a wrap up of a truly exceptional year for Thermo Fisher Scientific. We delivered another quarter of very strong results. And as I reflect on the year, three things stand out to me. Our proven growth strategy powered by our PPI business system continues to drive outstanding financial performance. Customer demand is strong. Our core business is performing very well. We're gaining market share and we continue to play a leading role in the societal response to COVID-19. And finally, we continue to build on our trusted partner status with our customers. 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'll get into more detail in my remarks later. But first, let me recap the financials. Starting with the quarter, our revenue was $10.7 billion. Adjusted operating income was $3.16 billion. And our adjusted operating margin was 29.5%. Adjusted EPS was $6.54 per share. Turning to our results for the full year, we grew revenue by 22% to $39.21 billion in 2021. Adjusted operating income increased 27% to $12.14 billion. We expanded our adjusted operating margin by 130 basis points to 31%, and we delivered a 28% increase in adjusted EPS to $25.13 per share. Building on the tremendous success that we had in 2020, I'm incredibly proud of our team's stellar performance in 2021. It's really a testament to the strength of our global team and our proven growth strategy, resulting in another year of exceptional financial results and share gain. Let me now give you color on the results for the quarter and the year, starting with pharma and biotech. We had outstanding performance, delivering growth over 20% in the fourth quarter and over 25% for the full year. In addition to strong market dynamics, these results were driven by our unique customer value proposition and our leading role in supporting our customers across a wide range of exciting therapeutic areas, including our role in supporting COVID-19 vaccines and therapies. During the year, we saw broad-based strength across our businesses in this end market, including 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 declined in the low single digits during the quarter against strong demand in the year-ago period and grew in the low double digits for the full year. During the year, we saw very good growth across a range of our businesses, particularly biosciences, electron microscopy, and our research and safety market channel. Turning to industrial and applied, we grew in the low teens during the quarter and we grew in the high teens for the full year. During the year, we saw strong growth in our electron microscopy and chromatography and mass spectrometry businesses, as well as in the research and safety market channel. Finally, in diagnostics and healthcare, Q4 revenue was 30% lower than the prior year quarter, and revenue grew in the high single digits for the full year. Throughout the year, the team executed really well to support customers' testing needs, and in the base business, we had strong growth in our immunodiagnostics and transplant diagnostic businesses. Before I move to our growth strategy, let me provide a few comments on our role in the pandemic response. In the quarter, we generated $2.45 billion in COVID-19 response-related revenue. This was driven by the emergence of the Omicron variant, which led to strong testing demand, as well as our significant role in enabling vaccine and therapy production. Throughout 2021, we continue to operate with speed at scale to meet our customers' needs related to COVID-19 and generated total response revenue of over $9 billion, of which $2 billion was from vaccines and therapies. I'm very proud of the role that we continue to play around the world to enable our customers and governments to fight the pandemic. At the same time, we're executing our core business strategy incredibly well. Let me provide you an update on the progress we made in 2021, executing our proven growth strategy, which consists of three elements, as you know. developing high-impact innovative new products, leveraging our scale and the high growth in emerging markets, and delivering a unique value proposition to our customers. We made outstanding progress in 2021. Let me share a few of the highlights. Starting with the first pillar, it was a fantastic year of high-impact innovation. In 2021, we launched a number of new products across our businesses, strengthening our industry leadership and enabling our customers to advance their important work. In our bioproduction business, we launched the high-performer DynaDrive single-use bioreactor. Available in sizes up to 5,000 liters, this latest advancement in our DynaDrive single-use bioreactor technology brings the benefits of single-use technologies to unprecedented volumes and performance and ensures consistent scalability from pilot-scale studies through commercial production. In chromatography and mass spectrometry, we continue to innovate across life sciences research and biopharmaceutical development. During the year, we extended the impact of our industry-leading Orbitrap platform to bring high-resolution analysis to a range of applications, including toxicology and metabolomics. And during the fourth quarter, we launched the thermoscientific Orbitrap Explorys MX mass detector, providing high-throughput analysis to improve the development and production of biopharmaceuticals. In electromicroscopy, we introduced the thermoscientific Helios 5EXL wafer dual beam scanning electron microscope to support the development of increasingly smaller and more complex semiconductors. And in genetic sciences, our new applied biosystems Quant Studio 7 ProDx real-time PCR system launched during Q4 enables clinical testing laboratories to accelerate molecular diagnostics. The second pillar of our growth strategy is leveraging our scale and the high growth and emerging markets to create a differentiated experience for our customers. We continue to strengthen our capabilities serving these markets, and I'll highlight a few examples. To increase our capacity for single-use technology, we opened new manufacturing sites in China and Singapore to serve both local and global demand from BioPharma customers. In South Korea, we continue to enhance our local capabilities with customer-focused innovation centers for both the semiconductor industry and our biopharma customers. These additional capabilities positions us really well to support our customers' needs. The third pillar of our growth strategy is our unique customer value proposition. We've continued to significantly accelerate organic investments in our capabilities and added capacity to be an even better partner for our customers. In 2021, we invested $2.5 billion in capital to meet short and long-term customer demand. Highlights included expansion of our sterile fill finish network, bioproduction, enzymes, nucleotides, plasmids, and lab products capacity. As always, our PPI business system and our mission-driven culture were major factors in our success during the year. They enabled the rapid execution of our capital investments and helped us find a better way every day so we can continue to bring innovative new solutions to our customers, work more efficiently and effectively, and operate with speed of scale to create even greater value for all of our stakeholders. Turning to capital deployment, we were very active again this year, which further strengthened our customer value proposition. We continue to successfully execute our disciplined capital deployment strategy, which is a combination of strategic M&A and returning capital to our shareholders. In 2021, we were very active, investing $24 billion in M&A and completing 10 transactions to further strengthen our customer value proposition. This was highlighted by the addition of PPD, which we closed in December. We're super excited to have our PPD colleagues as part of the company and share their expertise as we work together to enhance innovation and productivity for our pharma and biotech customers. PPD is performing at a very high level. The business delivered great results in 2021 and is entering 2022 with outstanding momentum significantly ahead of our original expectations at the time of the deal announcement. The customer feedback has been extremely positive and we're excited by the pipeline of opportunities that we're building. We're executing our proven integration methodology, which is a key element of our PPI business system to create value for all of our stakeholders. We're well positioned to deliver year three cost synergies of $75 million and $50 million in operating income from revenue synergies. And we're on track to deliver $40 million in cost synergies in 2022. At the end of the year, we completed the acquisition of PepperTech, a leading provider of recombinant proteins, which is an excellent complement to our industry-leading biosciences business. In 2021, we also returned $2.4 billion of capital to our shareholders through stock buybacks and dividends. Turning to a brief update on the progress of our ESG priorities, I'm very proud that over the past year we significantly advanced our environmental, social, and governance initiatives. Our mission to enable our customers to make the world healthier, cleaner, and safer has never been more relevant. Highlights this year include our commitment to achieve carbon neutrality by 2050, This builds on our earlier goal to reduce greenhouse gas emissions by 30% across our operations by 2030. Enhancing the reporting and transparency to our expanded corporate social responsibility report and alignment of multiple ESG reporting frameworks and we're actively engaging in our Community our foundation for science reach more than 100,000 students globally to our stem education programs. Our goal is to make a very positive impact in the communities in which we live and work. With that, I'd like to now review our 2022 guidance at a high level, and then Steven will take you through the details. We're significantly raising both our revenue and earnings guidance. This increase is a result of both the strong performance of our core business and an increase in the assumption for COVID-19 testing-related revenue. We're raising our 2022 full-year revenue guidance by $1.5 billion to $42 billion, which would result in 7% revenue growth over 2021. And we're increasing our 2022 adjusted EPS guidance by $1.07 to $22.43 per share. So to summarize our key takeaways from 2021, We executed very well to continue our growth momentum and deliver outstanding financial performance our business and performing very well and we're gaining market share. or exceptional performance in 2021 and momentum and during 2022 enables us to raise our outlook for 2022. And we're incredibly well positioned for the future, our proven growth strategy positions us to deliver long term core organic revenue growth of seven to 9% with that. I'll now hand the call over to our CFO, Steven Williamson. Steven.