Thermo Fisher Scientific Inc

Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2024 fourth quarter conference call. My name is Ezra and I will be your coordinator today. If you would like to ask a question, please press star followed by one on your telephone keypad. 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 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, Events, and Presentations. until February 13, 2025. A copy of the press release of our fourth quarter and full year 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 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 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 fourth quarter and full year 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.

Thank you, Raf. Good morning, everyone, and thanks for joining us today for our fourth quarter call. As you saw in our press release, we delivered an excellent finish to 2024 with strong revenue and earnings growth. Our fourth quarter results continue to highlight the strength of our operational and commercial executions. As I reflect on our performance for the full year, I'm very proud of our team as they continue to enable the success of our customers. This resulted in meaningful market share gains and strengthening our trusted partner status with our customers. We are incredibly well positioned for the future. I'll get into more detail later in my remarks, but first let me recap the financials, starting with the quarter. Our revenue in Q4 grew 5% year over year to $11.4 billion. our adjusted operating income grew 7% to $2.72 billion. We expanded our adjusted operating margins by 50 basis points to 23.9%. And we delivered strong adjusted EPS performance, growing adjusted EPS 8% to $6.10 per share in the quarter. Then in terms of our full year results, our revenue was $42.9 billion in 2024. Adjusted operating income was $9.71 billion and adjusted EPS was $21.86 per share. Turning to our performance by end market. In the fourth quarter, underlying market conditions played out as we expected and continued to improve. Our team's excellent execution resulted in revenue performance that was ahead of our expectations, and we delivered positive revenue growth across all of our end markets. Let me provide you with some additional context, starting with pharma and biotech. we grew in the mid single digits in Q4. This marks the fourth quarter in a row of sequential improvement for this customer segment. Performance in the quarter was led by our research and safety market channel, pharma services, and bioproduction businesses. For the full year, pharma and biotech declined in the low single digits, which included a mid single digit headwind from the runoff of vaccine and therapy related revenue. In academic and government, we grew in the high single digits during the quarter and in the low single digits for the full year. In the quarter, we delivered strong growth in chromatography and mass spectrometry and in our research and safety market channel. In industrial and applied, we grew in the high single digits during the quarter and low single digits for the full year. Growth in the quarter was highlighted by strong performance in our electron microscopy business and in our research and safety market channel. Finally, in diagnostics and healthcare, we grew in the low single digits during the quarter and declined low single digits for the full year. As a reminder, the reported growth in this end market was impacted by the runoff of COVID-19 testing-related revenue. During the quarter and the full year, the team delivered good core revenue growth, highlighted by our transplant diagnostics, immunodiagnostics, and our healthcare market channel. Thanks to our proven growth strategy and our team's excellent execution, We delivered a strong finish across all of our end markets, continuing to drive meaningful share gain. As a reminder, our strategy consists of three pillars. High impact innovation, our trusted partner status with customers, and our unparalleled commercial engine. As you know, our growth strategy really resonates with our customers. And throughout the year, we have continuously strengthened our company to be even more relevant for the future. Let me give you some highlights. Starting with the first pillar, we had another really terrific year of high impact innovation. Throughout 2024, we launched outstanding products across our businesses that strengthen our industry leadership by enabling our customers to advance their important work. In chromatography and mass spectrometry this year, it was highlighted by the launch of our thermoscientific stellar mass spectrometer, which complements our award-winning thermoscientific Orbitrap Astral, launched in 2023. by validating biomarker candidates of interest to advance clinical research. It's been great to see the significant impact these two mass spectrometers are having on advancing science. We also launched the thermoscientific dionics Inuvion ion chromatography system, which streamlines environmental testing in industrial and applied settings, helping our customers identify contaminants more efficiently. In electromicroscopy, we launched the thermoscientific ILLIAD Scanning Transmission Electron Microscope, which integrates a number of advanced analytical technologies into a seamless and user-friendly workflow to enable the development of advanced materials. In our biosciences business, we launched the Applied Biosystems MagMax Sequential DNA-RNA Kit, which maximizes the isolation of DNA and RNA from blood cancer samples, helping researchers identify unique insights into cancer-causing genetic alterations. And in bioproduction, we launched the first of its kind bio-based film for our single-use technologies. Developed with plant-based material rather than fossil fuel materials, this innovative film provides lower carbon solutions for the production of biologics. We continued this great innovation momentum in the fourth quarter. In chromatography and mass spectrometry, we launched the thermoscientific ICAP MX series ICP-MS, an inductively coupled plasma mass spectrometry platform designed to streamline trace elemental analysis for environmental, food, industrial, and research laboratories. And in life science solutions, we introduced new additions to the GIPCO CTS detachable DynaBees platform to further enhance the development and manufacturing of life-changing cell therapies. So another year of innovation that was spectacular, and we have an exciting pipeline for the future as well. In 2024, we also continue to strengthen our industry-leading commercial engine, and deepen our trusted partner status with customers to accelerate their innovation and enhance their productivity. Throughout the year, we expanded our capabilities to meet our customers' current and future needs. This included expanding our pharma services and clinical research capabilities in the U.S. and Europe. To be an even stronger partner for our pharma and biotech customers, in the fourth quarter, we introduced our accelerator drug development solutions. This truly unique offering leverages our combined CDMO and CRO capabilities to enable our customers to move their critical drug development programs forward with speed, quality, and efficiency, helping to improve their return on their R&D investments. This is a huge value add for our customers and not something they can do alone or with our competitors. Customer feedback has been incredibly positive. We're winning new business, and we're excited about the future impact of our accelerated drug development capabilities. We also made significant advancements in partnerships and collaborations with our customers throughout the year. This included our partnership with the National Cancer Institute on the MyloMatch Precision Medicine Umbrella Trial, which we announced in July. And then the FDA approval for our IonTorrent Oncomine DX Target Test. That's another example of our customer partnerships. This is a next-generation sequencing-based assay to be used as a companion diagnostic for surveyors' first treatment for patients living with glioma, a type of brain cancer. Finally, during the fourth quarter, we entered into a partnership with the University of Arkansas for Medical Sciences to establish the Thermo Fisher Scientific Center of Excellence for Proteomics there. These partnerships demonstrate how closely we are working with our customers to enable their success and drive meaningful impact for patients. So as you can see, it was another excellent year of advancing our growth strategy. As always, our PPI business system continued to enable outstanding execution throughout the year. PPI engages and empowers all of our colleagues to find a better way every day. PPI is helping us to drive share game and improve quality, productivity, and customer allegiance. We're also benefiting from the application of generative AI into our PPI business system. Our colleagues around the world are actively deploying GenAI finding new ways to improve the customer experience, streamline internal processes, and enhance our products and services. So not only do PPI contribute to our excellent financial results, it's also helping our team to find new ways to enable our customer success, ensuring a very bright future for our company. Turning to capital deployment, we continue to successfully execute our disciplined capital deployment strategy to create tremendous value. We do this through a combination of strategic M&A and substantial return of capital to our shareholders. In 2024, we returned $4.6 billion of capital to our shareholders through stock buybacks and dividends, including repurchasing $1 billion of shares in the fourth quarter. In terms of M&A during the year, we completed our acquisition of Olink, a leading provider of advanced solutions for proteomics research. Olink is now our proteomics science business, The integration is progressing smoothly, and just after quarter end, our O-Link technology was selected by the UK Biobank Pharma Proteomics Project to support the world's largest human proteomics study of its kind, the latest validation of the value of our capabilities. When I think about our disciplined approach to M&A and our unparalleled track record, it's all about long-term value creation for our shareholders. We just celebrated the two year anniversary of the acquisition of the binding site. Now our protein diagnostics business. This business performed incredibly well again in 2024, delivering low teens growth, launching new products and driving a great return on investment. This is a recent example of the impact of our proven capital deployment strategy in action. Let me now give you a brief update on our corporate social responsibility initiatives. As a mission driven company, We help to make the world a better place by enabling the important work of our customers. We also have a positive impact by supporting our communities and being a good steward of our planet. And I'm proud of the actions we took in 2024 in this regard. We made meaningful progress on our net zero roadmap by reducing our emissions, increasing the number of our zero waste certified sites, and launching new greener products and shipping solutions. We also formed new collaborations to improve health outcomes across the globe, and we were named one of the world's most innovative companies by Fast Company for our significant contributions in diagnostics that help to advance health equity. Additionally, we continue to advance our STEM education programs, reaching more than 180,000 students globally. This helps to ensure we have students engaged in the sciences, as ultimately, they'll become our future customers. As I reflect on the year, I'm very proud of what our team accomplished. We have more than 120,000 passionate colleagues who are dedicated to enabling our customer success and advancing science. Together, we continue to build a bright future for our company, and I'm very excited about the year ahead. So let me now turn to guidance. Stephen will outline the assumptions that factor into the guidance, but let me quickly cover the highlights. In 2025, we will once again deliver strong share gain, and our PPI business system will enable outstanding execution and we will deliver very strong earnings growth. We're initiating a 2025 revenue guidance in the range of $43.5 billion to $44 billion, which assumes 3% to 4% organic growth, and an adjusted EPS guidance range of $23.10 to $23.50, which represents 6% to 8% growth in adjusted earnings per share. We're in a great position as we enter 2025. I'm incredibly excited by the opportunities we have with our customers and to create value for all of our stakeholders and build an even brighter future for our company. So to summarize our key takeaways for 2024, our proven growth strategy continues to drive significant share gain. We continue to elevate our trusted partner status and deepen the relationships with many customers. And this in combination with the power of our PPI business system enabled us to deliver an excellent finish to 2024 with differentiated performance for the quarter and the full year. As we enter 2025 with strong momentum, we are well positioned to deliver excellent financial performance and further strengthen our long-term competitive position. With that, I'll now hand the call over to our CFO, Stephen Williamson. Stephen?