Thermo Fisher Scientific Inc

Good morning, ladies and gentlemen. Welcome to the Dharma Fisher Scientific 2022 Second Quarter Conference Call. My name is Jaquita. I will be your operator for today's call. Our lines will be muted on a presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would like to introduce our moderator for the call, Mr. Rafael Tejada, Vice President of 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 August 12th, 2022. A copy of the press release of our second quarter 2022 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 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 report on Form 10-Q, which are on file with SEC and available in the investor 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 It's available in the press release of our second quarter 2022 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, Raph. Good morning, everyone, and thanks for joining us today for our second quarter call. As you saw in our press release, we had another excellent quarter. We delivered outstanding financial performance. Our core business is performing very well, that strength is broad-based across all our businesses. As I reflect on the quarter, I'm very proud of the team's great execution and the resulting share gain we saw across our business. Our ongoing success is propelled by our proven growth strategy and our PPI business system, which is a differentiator for us and enables operational excellence within the company. You'll see this in our second quarter results and increased outlook for the year. So let me first recap the financials. Our revenue in the quarter grew 18% year-over-year to $10.97 billion. Our adjusted operating income was $2.61 billion. Our adjusted operating margin in the second quarter was 23.7%, and we delivered another quarter of strong adjusted EPS performance, achieving $5.51 per share. Let me now give you some color on our performance by end market. Starting with pharma and biotech, we had excellent performance in this end market, delivering growth in the mid-teens. We saw excellent growth across all businesses serving these customers, highlighted by our bioproduction and pharma services businesses. We're continuing to benefit from our trusted partner status that we've earned over many years with our pharma and biotech customers. In academic and government, we grew within mid-single digits in the quarter. We saw strong growth in biosciences and chromatography and mass spectrometry. Turning to industrial and applied, we grew in the low double digits for the quarter. We saw very strong growth in electron microscopy, chromatography and mass spectrometry, and our research and safety market channel. Finally, in diagnostics and healthcare, revenue was 20% lower than the prior year quarter. In this end market, the core business saw strong growth led by immunodiagnostics and microbiology. During the quarter, the team continued to execute well to support customers' COVID-19 testing needs. Overall, excellent performance across our end markets. And as I reflect on this quarter's performance, we continue to deliver very differentiated core business growth. This was driven by three factors. The market conditions were good. Our team managed lockdowns in China extremely well. And we had outstanding execution from our global team, resulting in meaningful share gain. Let me now provide an update on the progress we made in executing our proven growth strategy. The investments we've made and are continuing to make across the company are fueling growth and generating strong returns. Our growth strategy has enabled another quarter of excellent performance. As a reminder, our strategy consists of three pillars, 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. I'll start with innovation. We launched a number of new products across our businesses to further strengthen our industry leadership and enable our customers to accelerate scientific breakthroughs. I'll highlight a few of these. We had an outstanding American Society for Mass Spectrometry conference, where we showcased new instruments, consumables, and software to advance our customers' work. These included the thermoscientific accelerome automated sample prep platform, which simplifies workflows for proteomic researchers by eliminating a range of previously manual steps. We also launched a cloud-based thermoscientific RDS software platform, which integrates functionality and data across multiple chromatography and mass spectrometry instruments to simplify application-specific workflows, helping scientists share information with each other in labs around the world and speeding the development of new diagnostics and therapies. In addition, we launched the thermoscientific direct mass technology mode for our industry-leading two exactive orbitrap mass spectrometers. This technology allows for the characterization of complex and large biotherapeutics, which were previously challenging to interpret. In our biosciences business, we launched the GIMCO CTS TrueCut Cas9 protein that supports genome editing for applications such as CAR-T cell therapy research. Emerging therapies like CAR-T are providing new hope in treating cancer. And in specialty diagnostics, we launched the FODIA 2500 Plus series in the U.S., a high-throughput instrument for allergy and autoimmune diagnostics to help further improve lab efficiency. These new products and many others will make a significant difference for our customers and drive future growth for our company. Turning to our high growth in emerging markets, we're really thrilled with our team's progress. You may remember that we called out China as a potential Q2 headwind because of the COVID-19 lockdowns in the country. Obviously, the lockdowns were very severe, but I'm so proud of the way the team responded. They powered through demonstrating the relevance of our offering amid the crisis and delivered over 20% growth. That was the result of a very strong core business, the benefit of deep relationships we have with our customers, and our support for local COVID-19 testing. So overall, it was a great quarter and one that clearly demonstrates how our growth strategy continues to deliver outstanding results. The third pillar of our growth strategy is our unique customer value proposition. Our capabilities enable our customers' ability to achieve their own goals for innovation and productivity. To be the best partner for our customers, we continue to enhance our capacity and capabilities. Let me share a couple of examples. At our flagship facility for cell culture media in Grand Island, New York, We just completed a capacity expansion to support customers' research, drug development, and production applications. And in our lab chemicals business in Giel, Belgium, where we have our primary continental European distribution center for lab chemicals, we just completed a major expansion of the facility to support the strong growth that we've been delivering. I've had the opportunity to visit both sites a number of times, and it's really exciting to see the ongoing strength in customer demand that's driving the need for this investment. These are just a few reflections on the way we're supporting our customers by further strengthening our capabilities and value proposition. Now, turning to capital deployment, I'd like to share some of the other steps we've taken to further strengthen our customer value proposition and build our future. We continue to successfully execute our disciplined capital deployment strategy, which is a combination of strategic M&A and returning capital to our shareholders. We're very pleased with the performance of the PPD acquisition. The business is performing very well, delivering strong core revenue and earnings growth. In May, at our investor day, we increased the revenue synergy outlook by $100 million to $250 million in year three, and the cost synergies in that year by $25 million to $100 million. And the synergy opportunities continue to be incredibly exciting. I just had the chance to meet with the Clinical Research Commercial Organization, and I'm so impressed with the team. and the opportunity that they see for enabling the success of our customers going forward. The combination of capabilities is really resonating with customers, and we're seeing strong momentum in the business. All of this is leading to business performance well ahead of the deal model. The acquisition of PPD is another example of how our capital deployment strategy is creating customer and shareholder value. Turning now to an update on our ESG initiatives, We released our latest corporate social responsibility report. This report details our progress and disclosures for all of our key ESG initiatives and is a great example of how we're continually working to enhance our reporting and disclosure using internationally recognized reporting standards. It's great to see the progress detailed in the report and also reflecting the progress we've made through our commitment to ESG over many years. For this quarter, I'll highlight the progress we continue to make on our goal to reduce our carbon footprint. As part of our efforts, we continue to transition to renewable energy, installing on-site rooftop solar power at key locations to reduce our consumption of electricity produced with fossil fuels. We're also working with our suppliers on their climate performance goals, which will ultimately have an impact across our value chain. As a leader in ESG, our commitment to progress is ingrained in everything we do, And we look forward to updating you on our progress as we go forward. Now, I'd like to review our updated 2022 guidance at a high level. And then Steven will take you through the details. We're meaningfully raising our full year guidance. We're increasing our revenue guidance by $700 million to $43.15 billion, which would result in 10% reported revenue growth over 2021. And we're raising our 2022 adjusted EPS guidance by $0.28 to $22.93 per share. This higher outlook primarily reflects the strength of our core business and additional contribution of COVID-19 testing revenue, which are more than offsetting the increased foreign exchange headwinds, demonstrating how well we operate with speed and scale to enable our customer success and navigate dynamic macro environments. So to summarize our key takeaways from the second quarter, our outstanding results in Q2 highlight the benefits of our proven growth strategy, our PPI business system, and our extraordinary team. Our business is performing very well, and we're gaining market share. The PPD acquisition is generating strong returns. We're really well positioned to continue to differentiate ourselves for all of our stakeholders. and the team is doing an excellent job navigating the dynamic times we're living in. All of this has enabled to raise our outlook for 2022 and further solidify our incredibly bright future. With that, I'll now hand the call over to our CFO, Steven Williamson.