Thermo Fisher Scientific Inc

Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2022 Third Quarter Conference Call. At the end of the prepared remarks, you will have the opportunity to ask a question by pressing Start, followed by the number 1 on your telephone keypads. 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 November 11, 2022. A copy of the press release of our third 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 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 2022 earnings and also in the investor section of our website under the heading financials. So with that, I'll now turn over the call to Mark.

Thanks, Raf. Good morning, everyone, and thanks for joining us today for our third quarter call. As you saw in our press release, we had another excellent quarter. We delivered outstanding financial performance. Our core business is performing incredibly well and demonstrating broad-based strength, and this is allowing us to raise our guidance once again for the full year. As I reflect on our performance during the quarter and on a year-to-date basis, I'm very proud of our team's great execution, effectively navigating dynamic times and continuing to drive market share gains. Our ongoing success is driven by our proven growth strategy and our PPI business system, and I'll talk about that more later. So let me recap the Q3 financials. Our revenue in the quarter was 10.68 billion dollars. Our adjusted operating income was $2.37 billion. And we delivered another quarter of strong adjusted EPS performance, achieving $5.08 per share. Turning to our end markets. As we saw in the second quarter, we had a continuation of strong performance in Q3. This was driven by good market conditions and outstanding execution from our global team, resulting in meaningful share gain. Let me now give you some additional color. Starting with pharma and biotech, we delivered outstanding performance with growth in the mid-teens. We saw excellent growth across the businesses serving these customers, highlighted by our bioproduction and pharma services businesses. Our differentiated customer value proposition is resonating with our customers and helping to further elevate our trusted partner status. In academic and government, we grew in the mid-single digits in the quarter. We saw strong growth in our biosciences and electron microscopy businesses. Turning to industrial and applied, we grew in the high teens for the quarter. We had broad-based strength across all of our analytical instrument businesses serving these customers. And finally, in diagnostics and healthcare, as expected, our revenue was approximately 30% lower than the prior year quarter. In this end market, we delivered good core business growth, led by our microbiology and transplant diagnostic businesses. So now let me turn to our growth strategy, which has enabled another quarter of excellent performance. The investments we've made over the past few years are fueling growth and generating strong returns. 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. Let me start with innovations. Our focus on high-impact innovation enables our customers to address some of the world's greatest challenges. We further strengthened our position in Q3, and I'd like to give you just a few highlights. During the quarter, we advanced our industry-leading thermoscientific Orbitrap portfolio, launching the Orbitrap Ascend tribut mass spectrometer during the International Mass Spectrometry Conference. This instrument provides faster, more sensitive sample analysis for proteomics and metabolomics research and insights into clinically relevant biomarkers implicated in cancer. In electron microscopy, we introduced the thermoscientific Arctis cryoplasma-focused IMB, an automated microscope that streamlines cryo-electron tomography. This instrument will help provide more insights into how proteins and other molecules operate within cells, enabling breakthroughs in treatments for infectious diseases, and neurodegenerative disorders. We also continue to advance our clinical next-gen sequencing portfolio to help our customers better understand, diagnose, and treat cancer. We recently launched the Oncomine DX Express Test and Oncomine Reporter DX software, a precision medicine offering which detects genomic abnormalities in tumor samples and helps match cancer patients with approved therapies and clinical trials. These products recently received CEIVD certification and are designed to run on our IonTorrent GeneXus next generation sequencing system, allowing doctors to use NGS technology to improve care by bringing the power of precision medicine closer to patients. Another key pillar of our growth strategy is our customer value proposition. It's all about leveraging the incredible capabilities we have across our company and delivering them in a way that enables our customers to achieve their own goals for innovation and productivity. And that makes it rational for them to do more business with us. The accelerated investments we've made over the past couple of years are driving growth. This is particularly true for our pharma and biotech customers, where we continue to build on our trusted partner status as we bring our new capacity and capabilities online to meet the strong demand for our products and services. Let me share a couple of examples. During the quarter, we opened a purification technologies facility in Chelmsford, Massachusetts. This site will manufacture resin beads used in the production of biologics. As you know, we have a rapidly growing purification business, which is highly valued by our customers. This new facility will ensure we can meet their increasing demands. We also continue to strengthen our global pharma services network and viral vector manufacturing capabilities in Plainville, Massachusetts. I joined the opening of this facility, and it was a terrific event. We had significant attendance from our customers, and we were able to showcase the various ways in which our team can support their cell and gene therapy programs. The facility also utilizes and showcases our industry-leading single-use bioprocessing technologies and analytical instruments, which demonstrates to our pharma and biotech customers the uniqueness of our capabilities and how they can be best utilized in bringing new medicines to market. So these are just a couple of examples that demonstrate how we're continuing to build our trusted partner status and further strengthen our unique customer value proposition. Our pharma biotech customers are capitalizing on this, which also includes PPD, our clinical research business. I'll cover that later in my remarks. Before turning to an update on capital deployment, I thought I'd briefly reflect on the impact of our growth strategy in 2022. As you know, the actions we've taken over the last few years have allowed us to meaningfully accelerate our organic growth and position us to continue our long-term industry-leading performance. The product launches this year have been truly outstanding, and the pipeline, it looks fantastic. The new capabilities that we have invested in have meaningfully strengthened our unique customer value proposition, and our customers are continuing to expand their relationship with us. All of this is enabling us to deliver industry-leading core growth. Let me give you a brief update on capital deployment. We continue to successfully execute our disciplined capital deployment strategy. which is a combination of strategic M&A and returning capital to our shareholders. The acquisition of PPD is a great example of how our capital deployment strategy is creating customer and shareholder value. The business is performing incredibly well, delivering high-teens core revenue growth in the quarter. The combination of a great business and a smooth integration is driving excellent financial performance. In addition, our customers are excited by the capabilities we have to support their clinical trial needs, and that is translating into meaningful revenue synergies for an even brighter future. All of this is enabling us to drive short and long-term returns on the acquisition that are well ahead of the deal model. Let me spend a moment on our PPI business system, which helps us continually improve the customer experience, quality, productivity in our company overall. The goal of PPI is to find a better way every day. This is an essential element of our company culture. In dynamic times, we really see the strength of our PPI business system. As you know, it was applied with incredible impact to allow us to lead the response to the pandemic. And today, it's applied to solve supply chain challenges, increase efficiency, and helps our teams find better ways to offset inflation. It also enhances our ability to unlock the value creation in our acquisitions. Our experienced management team, along with the benefit of our scale and our PPI business system, uniquely positioned the company to successfully navigate through whatever macroeconomic conditions come our way. So overall, it was another fantastic quarter, thanks to great execution by our teams, the strength of our proven growth strategy, and the power of our PPI business system. Turning to our progress on our environmental, social, and governance priorities, during the quarter, we continue to make great progress on our goal to reduce our carbon footprint, announcing an agreement with NL North America to purchase wind-powered renewable electricity equal to half of our U.S. electricity needs. This agreement will significantly advance our ambitious emissions reduction strategy. I'm also very pleased that we have achieved our 2020 commitment to hire 500 graduates from the historically black colleges and universities supporting our commitment to diversity and inclusion, and increasing our positive social impact. So another strong quarter in progressing our ESG priorities. 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 raising our full year guidance. We're increasing our revenue guidance by $650 million to $43.8 billion. which would result in 12% reported revenue growth over 2021. And we're raising our 2022 adjusted EPS guidance by 8 cents to $23.01 per share. The higher outlook primarily reflects the strength of our core business and a modest impact of additional COVID-19 testing. These are more than offsetting the increased foreign exchange headwinds and demonstrate how well we're operating with speed at scale to enable our customer success. In addition, our guidance reflects the decision to help our colleagues with a temporary impact of inflation and we'll be making a one-time payment of approximately one week's additional salary to non-executive colleagues. So to summarize our key takeaways from the third quarter, our outstanding results in Q3 and year to date reflect our team's excellent execution. the benefits of our proven growth strategy, and the positive impact of our PPI business system. Our business is performing very well, and markets continue to be strong. We're gaining market share. We're seeing the benefits of our accelerated investments in innovative new products and enhanced capabilities and capacity. In addition, our clinical research business is delivering excellent results, and customers are valuing the benefit of our expanded offering. And our experienced manager team, the benefits of our scale Our PPI business system uniquely positioned us to continue to navigate the dynamic times we're living in. All of this has enabled us to raise our outlook for 2022 again and further solidify our incredibly bright future. With that, I'll now hand the call over to our CFO, Stephen Williamson. Stephen?