Thermo Fisher Scientific Inc

Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2024 Second Quarter Conference Call. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. 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, Events, and Presentations, until August 7th, 2024. A copy of the press release of our second quarter 2024 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 Security 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 the 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 is available in the press release of our second quarter 2024 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.

Raf, thank you. Good morning, everyone, and thanks for joining us today for our second quarter call. As you saw in our press release, we had great results for the quarter. We're making excellent progress to deliver differentiated results for the year. I'm proud of our team as they executed at a very high level to enable our customers to make the world healthier, cleaner, and safer. This continued success is a result of our proven growth strategy and our PPI business system. So first, let me recap the financials. Our revenue in the quarter was $10.54 billion. Our adjusted operating income was $2.35 billion. Adjusted operating margin increased in Q2 to 22.3%. And we delivered another quarter of strong adjusted EPS performance, achieving a 4% increase year-over-year to $5.37 per share. Our performance in the second quarter is allowing us to raise our guidance once again and continues our track record of delivering differentiated results. Turning to our performance by end market, in the second quarter, underlying market conditions played out as we'd expected. Our team's excellent execution drove share gain in the quarter, and we delivered a sequential improvement in growth in all four of our end markets. Let me provide you with some additional context. Starting with pharma and biotech, we declined in the low single digits for the quarter. The vaccine and therapy revenue runoff resulted in a four-point headwind for this customer segment. Performance in the second quarter was led by our biosciences, and clinical research businesses. In academic and government and in industrial and applied, we grew in the low single digits during the quarter. In both these end markets, we delivered strong growth in our electron microscopy business. Finally, in diagnostics and healthcare, we declined in the low single digits. As a reminder, the reported growth in this end market is impacted by the runoff of COVID-19 testing-related revenue. During the quarter, the team delivered good core revenue growth, highlighted by our transplant diagnostic and immunodiagnostics businesses, as well as our healthcare market channel. As I reflect on our performance during the quarter and on a year-to-day basis, I feel very good about the progress we've made at the halfway point of the year. Our end markets are playing out as we expected, and our team's execution has been excellent. I'll now turn to an update on our growth strategy. As a reminder, our strategy consists of three pillars, high impact innovation, our trusted partner status with customers, and our unparalleled commercial engine. Starting with the first pillar, it was a fantastic quarter of innovation as we launched a number of high impact new products across our businesses. I'll begin with the new technologies we launched at the American Society for Mass Spectrometry Conference, further strengthening our industry leading position and analytical instruments. At the conference, we introduced a thermoscientific stellar mass spectrometer, which extends our leadership in proteomics. The thermoscientific stellar is used to validate biomarker candidates. It offers unprecedented analytical capabilities for targeted quantitation, enabling the insights needed by researchers to advance their work. It's a perfect complement to our groundbreaking thermoscientific Orbitrap Astro used for protein discovery that we launched last year. It was incredibly exciting to hear the customer testimonials sharing the power of the Orbitrap Astro. To date, we've had more than 40 publications that incorporated the impact of this breakthrough, and we're really just getting started. Also at ASMS, we launched three new build-for-purpose editions of the thermoscientific Orbitrap Ascend TriBID mass spectrometer, tailored to specific applications for multi-omics, structural biology, and bio-pharma. These instruments continue to elevate our industry-leading thermoscientific Orbitrap portfolio by offering enhanced speed and sensitivity to detect and characterize the most difficult protein samples, including complex biologics. This quarter, we also launched products to help our customers meet their own sustainability In our bioproduction business, we introduced a first-of-its-kind bio-based film for our single-use technologies. These new bioprocess containers use plant-based material rather than fossil fuel materials to provide lower-carbon solutions for the manufacture of biologics. And in our laboratory products business, we launched a new line of Energy Star-certified thermoscientific TSX Universal Series ULT freezers. that deliver industry-leading performance and energy efficiency to help labs meet their sustainability goals. Turning to the highlights of our second and third pillars of our growth strategy, during the quarter, we continue to strengthen our industry-leading commercial engine and the trusted partner status we've learned with our customers. Our customers rely on us to help accelerate their innovation, increase their productivity, and advance their important work. I spend a lot of time connecting with customers to understand their near and long-term priorities so that we can enable their success. As a result of these unique relationships, we continue to advance our capabilities to be an even stronger partner for our customers. Let me give you a couple of examples from the second quarter. We expanded our leading clinical trial supply services with a new ultra-cold facility in Blijswijk in the Netherlands to offer pharma and biotech customers tailored end-to-end support throughout the clinical supply chain for high-value therapies, including cell and gene therapies, biologics, antibodies, and vaccines. We also opened a state-of-the-art innovation lab at our site in Center Valley, Pennsylvania, to showcase our innovative solutions for global clinical trial supply, including new packaging solutions, real-time tracking and tracing, and enhanced clinical trial setup and planning. In addition, we advanced partnerships and collaborations with our customers during the quarter. Let me give you a couple of examples in the Asia-Pacific region. To support Indonesia's growing investments in healthcare, scientific research, and renewable energy, we further expanded our presence and capabilities in the country. We are collaborating with the National Battery Research Institute to advance battery technology and energy storage, as well as with the Mendaya Hospital Group to help advance stem cell research and cell therapy development. In Singapore, we announced a collaboration with the National University Hospital and Marexis, a local RNA technology company, to develop and clinically validate advanced next-generation sequencing genomic testing, solutions specifically made to address the needs of the Southeast Asian population. So another strong quarter of executing our growth strategy. Let me now turn to our PPI business system, which enabled excellent execution during the quarter. PPI engages and empowers all of our colleagues to find a better way every day. During the quarter, I had the opportunity to see the PPI efforts to further improve manufacturing of our lab equipment products, and I came away incredibly impressed with the progress to drive operational efficiency in this business. It's also great to see how PPI has been adopted in our clinical research business, where it is driving meaningful improvements in our efficiency and customer allegiance. Ultimately, you see the positive impact of our PPI business system and our Q2 results reflected in strong profitability and cash flow that we delivered in the quarter. We also advanced our corporate social responsibility priorities during the quarter. As a mission-driven company, we helped to make the world a better place by enabling the important work of our customers. We also created a positive impact by supporting our communities and being a good steward of our planet. We continue to make progress on our environmental sustainability roadmap in Q2. As part of our commitment to safeguarding the world's natural resources, we have set targets for 2025, which include zero waste certification for 30 manufacturing and warehouse sites. During the quarter, three more of our sites achieved zero waste certification, and we're on track to achieve our goals. You can learn much more about our progress in our 2023 Corporate Social Responsibility Report, which was published during the quarter. The report provides a transparent account of our journey as we fulfill our commitments to society and all of our stakeholders. Let me now give you an 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. Shortly after the quarter ended, we completed our acquisition of O-Link, and it was great to welcome our new colleagues to the company earlier this month. As you know, Olink is a leading provider of next-generation proteomic solutions. The addition of Olink's proven and transformative technology is highly complementary to our industry-leading mass spectrometers. Olink further advances our leadership as it is a great addition to our differentiated protein research ecosystem. Our world-class commercial engine will enable us to bring this technology to scientists around the world. By increasing the use of next-gen proteomics and providing industry-leading data quality at scale, we're in a great position to further enhance the understanding of human biology and meaningfully accelerate scientific breakthroughs. So as I reflect on the quarter, I'm proud of what our team accomplished and grateful to their contributions for our success. Let me now turn to our guidance. Given our strong performance in the second quarter, we're raising our 2024 guidance. We now expect revenue to be in the range of $42.4 billion to $43.3 billion, and adjusted EPS to be in the range of $21.29 to $22.07 per share. Stephen will take you through the details in his remarks. So to summarize our key takeaways from Q2, we delivered another quarter of strong results driven by our proven growth strategy and PPI business system. We continue to enable our customer success And this reinforces our trusted partner status and industry leadership. Our strong results in Q2 allowed us to raise our guidance again for the year. We're well positioned to deliver differentiated performance in 2024, as we continue to create value for all of our stakeholders and build an even brighter future for our company. With that, I'll now hand the call over to our CFO, Steven Williamson. Steven.