Thermo Fisher Scientific Inc

Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2025 fourth quarter conference call. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two on your telephone keypad. I would now 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 April 22nd, 2026. A copy of the press release of our fourth quarter and full year 2025 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 within the meaning of applicable securities laws. 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 under the heading Risk Factors. These forward-looking statements are based on our current expectations and speak only as of the date they are made. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even in the event of new information, future developments, or otherwise. 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 2025 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 a strong year capped off by an excellent fourth quarter. Our results reflect outstanding execution from the team, the strength of our proven growth strategy, and excellent operational performance enabled by our PPI business system. Looking to the year ahead, we entered 2026 from a position of strength as the market leader serving attractive end markets. Our growth strategy is resonating with customers, and our PPI business system will enable us to continue to deliver excellent operational performance. To recap our 2025 financial performance starting with the quarter, revenue grew 7% year-over-year to $12.21 billion. Adjusted operating income grew 6% to $2.88 billion. Adjusted operating margin was 23.6%. And adjusted EPS grew 8% to $6.57 per share. Now turning to our full year results. Revenue grew 4% to $44.56 billion. Adjusted operating income grew 4% to $10.11 billion. Adjusted operating margin was 22.7%. and adjusted EPS grew 5% to $22.87 per share. As I reflect on the year, first, the environment evolved differently than everyone had envisioned entering 2025. We actively managed the company and our team responded with agility, effectively managing tariffs and the US policy dynamics to deliver a very strong year. As a trusted partner, we worked closely with our customers helping them navigate the landscape and enabling their success. Let me now turn to our performance by end market and provide some context on how the quarter and full year played out. Starting with pharma and biotech, we delivered high single digit growth in Q4 and mid single digits for the full year. Performance in the quarter was led by continued strong growth in our bioproduction business, as well as our research and safety market channel. As expected, our clinical research business continues to strengthen, delivering mid-single-digit growth in the quarter. For the full year, revenue growth was broad-based and was highlighted by strong performance in bioproduction, research and safety market channel, analytical instruments, and pharma services businesses. In academic and government, throughout the year, performances and market was impacted by the macro conditions in the U.S. and China. We declined in the low single digits during the quarter and for the full year. In industrial and applied, we declined in the low single digits during the quarter and grew in the low single digits for the full year. Growth during the year was highlighted by strong performance in our research and safety market channel, as well as our electron microscopy business. Finally, in diagnostics and healthcare, we delivered low single digit growth in Q4, reflecting good performance across our specialty diagnostics businesses. For the full year, growth in this end market was flat, with strong contributions from our transplant diagnostics and immunodiagnostics businesses. Thanks to our proven growth strategy and our team's excellent execution, we delivered a strong finish to the year across our end markets and continue to drive meaningful share gain. Let me now turn to our growth strategy. As a reminder, our growth strategy consists of three pillars. high-impact innovation, our trusted partner status with customers, and our unparalleled commercial engine. In 2025, we meaningfully advanced the position of the company, becoming even more relevant for our customers and enhancing our competitive position. Let me call out some key highlights for the year, starting with innovation. 2025 was another outstanding year of innovation as we launched a number of high-impact products across our businesses that strengthened our industry leadership and enable our customers to accelerate breakthroughs and enhance their productivity. In chromatography and mass spectrometry, we launched the thermoscientific Orbitrap Astral Zoom. Building on the success of the Astral Mass Spectrometer, Astral Zoom delivers even greater sensitivity, speed, and depth of coverage, enabling researchers to uncover new biological insights and advance precision medicine. Customer adoption and feedback have been extremely strong. as the platform represents a significant leap forward in mass spectrometry, enabling researchers around the world to accelerate discovery and advance the pace of scientific breakthroughs. In bioproduction, we expanded our single-use portfolio with the launch of the thermoscientific 5-liter DynaDrive single-use bioreactor, offering pharma and biotech customers increased workflow efficiencies and the ability to seamlessly scale up manufacturing of new therapies. In electromicroscopy, we delivered a series of high-impact innovations across life sciences and advanced materials. This included the thermoscientific Cryos-5 Cryotem, which is advancing structural biology by enabling faster, higher-resolution insights to support drug discovery and development. In the fourth quarter, we launched the thermoscientific Helios MX-1 plasma-focused ion beam, SEM, a fully automated semiconductor analysis system designed to accelerate time-to-data for yield ramp and FAB process control. In clinical next-gen sequencing, it's great to see the growing application of our ion-tolerant Oncomind DX target test as a companion diagnostic. During the quarter, this technology received another FDA approval, this time as a companion diagnostic for Bayer's new therapy targeted for certain patients with non-small cell lung cancer. In clinical diagnostics, we also achieved US 510K clearance for the Exent system, a first-of-its-kind automated platform that enables earlier and more confident diagnosis for patients with multiple myeloma and related disorders. So, another spectacular year of innovation, and we also have an exciting pipeline of launches in 2026 that positions us well for the future. Let me turn to our trusted partner status and industry-leading commercial engine, which we continue to strengthen in 2025. Our trusted partner status with customers has been built over many years by anticipating, understanding, and meeting their needs. Increasingly, customers are relying on us, not just for technologies and services, but for expertise and deep understanding of how to apply them to enable their success. We help our customers accelerate innovation, and improve their productivity. You've heard me talk about our Accelerator drug development solution throughout the year. It's a terrific example of one of our unique capabilities. As a reminder, Accelerator is our integrated CDMO and CRO offering that brings together the strengths of our pharma services and clinical research businesses to help customers reduce development timelines, improve decision making, and enhance returns on their R&D investment. In 2025, we secured meaningful wins for our clinical research and pharma services businesses and continue to see outstanding customer adoption. During the year, we also expanded and deepened strategic partnerships that create value for our customers and our company. This included a technology alliance with the Chan Zuckerberg Institute for Advanced Biological Imaging to develop new technologies to better visualize human cells. We also announced a strategic collaboration with OpenAI aimed at increasing our use of artificial intelligence at the company. This will improve productivity across our operations and also allow us to embed AI capabilities in our products and services to accelerate scientific breakthroughs and advance the drug development process. In addition, we continue to expand our global footprint to better support customers. During the fourth quarter, this included the expansion of our bioprocess design centers in Asia, with the opening of a new site in India. So as you can see, it was another excellent year of advancing our growth strategy. Let me now turn to capital deployment. We continue to successfully execute our proven capital deployment strategy, which is a combination of strategic M&A and returning capital to shareholders. 2025 was a very active year as we advanced our strategy and added exciting new capabilities that further strengthen our long-term competitive position and create value for all of our stakeholders. During the year, we deployed approximately $16.5 billion, including committing $13 billion to M&A and returning $3.6 billion to shareholders through stock buybacks and dividends. In terms of M&A, we completed the acquisition of our filtration and separation business from Solventum. The addition of filtration is a natural extension of our bioproduction capabilities, where we have leadership in cell culture media and single-use technologies, along with a rapidly growing purification business. our pharma and biotech customers see real value in Thermo Fisher offering these filtration capabilities for their manufacturing processes. The integration is going smoothly and our new colleagues are thrilled to be part of Thermo Fisher Scientific. This year we also expanded our U.S. drug product manufacturing footprint through the acquisition of Sanofi's state-of-the-art sterile fill finish site in New Jersey. Both of these acquisitions enhance our ability to support our customers' growing production needs. During the fourth quarter, we also announced a definitive agreement to acquire Claria. The company is a market leader in digital endpoint data solutions, one of the fastest growing areas and an essential capability in drug development and clinical research. In 2025, the business generated approximately $1.25 billion in revenue. It's differentiated technology and deep medical expertise together enable unique capabilities in generating and delivering digital endpoint data for clinical trials. The business is an outstanding strategic fit, highly valued by our customers, and complementary to our clinical research capabilities. By adding Clario's high growth capabilities, over time, we will be able to deliver even deeper clinical insights for our customers and further accelerate the digital transformation of clinical research. This is an incredibly exciting opportunity to help our pharma and biotech customers improve the return on investment of the drug development process. Financially, the transaction has an attractive double-digit return profile, is expected to be accreted to organic revenue growth and to adjusted operating margin. We expect it to be accreted to adjusted EPS by approximately 45 cents in the first 12 months of ownership, and we expect to close the transaction by the middle of 2026. So overall, an active and high impact year of capital deployment. Let me now turn to our PPI business system. In 2025, PPI continued to be a critical enabler of our performance. Throughout the year, we leveraged PPI to actively manage our cost base, drive operational excellence, and deliver strong earnings growth. while continuing to invest to strengthen our long-term competitive position. PPI enabled us to operate with agility and discipline as we navigated the environment and delivered excellent results for our customers and shareholders. PPI is deeply embedded in our culture and empowers colleagues across the company to find a better way every day. That's why we're also increasingly using artificial intelligence into PPI which will further enhance its impact across the organization. The combination is helping us improve how we serve customers, streamline internal processes, and operate the company more effectively, strengthening execution today and positioning us well for the future. Before I wrap up on 2025, I want to briefly touch on the progress we made with our corporate social responsibility priorities. Part of our mission-driven culture is a focus on making a positive impact on society, by supporting our communities and being a good steward of our planet. You can read more about this on our website, but I'll share a couple of highlights. In terms of the environmental stewardship, we increased the use of renewable energy across our global operations and expanded the number of sites achieving zero waste certification, keeping us on track with our long-term sustainability commitments. We also continue to launch more sustainable products to help our customers achieve their own sustainability goals. In our communities, we remain focused on expanding access to STEM education and advancing global health equity. In addition, our engaged colleagues and community action councils made a huge impact around the world through their volunteer activities throughout the year. As I reflect on 2025, I'm very proud of what our team accomplished and deeply grateful to our colleagues for their unwavering passion for our mission, which fuels our success. So let me now turn to guidance. Stephen will outline the assumptions that factor into the guidance for the upcoming year, so let me quickly cover the highlights. In 2026, we will continue to actively manage the company, leveraging the PPI business system to enable excellent operational performance and very strong earnings growth. We are also well-positioned to continue our share gain momentum. We are initiating a 2026 revenue guidance range of $46.3 billion to $47.2 billion which represents 4% to 6% reported revenue growth over 2025 and assumes 3% to 4% organic growth for the year. We are initiating our earnings guidance with an adjusted EPS range of $24.22 to $24.80 per share, which represents 6% to 8% growth in adjusted earnings per share. So to summarize our key takeaways, we delivered a strong 2025 capped off by an excellent fourth quarter. We delivered another year of excellent operational performance and share gain, reflecting the active management of the company, the strength of our proven growth strategy, and the power of our PPI business system. We advanced our long-term competitive position throughout the year with high-impact innovation, strategic partnerships, and disciplined capital deployments. And we enter 2026 with strong momentum. Our growth strategy is resonating with customers and positions us for a very bright future. With that, I'll turn the call over to our CFO, Steven Williamson. Steven?