REVVITY, INC. Q3 FY2024 earnings call

• Revitty's strong execution led to adjusted operating margins increasing by 80 basis points year-over-year to 28.3% in the quarter, and generated $135 million of free cash flow, with 100% conversion to adjusted net income year-to-date.
• Expect diagnostics businesses to continue strong performance, and positive momentum in life sciences, reagents, and software. Launched new products like Phenologic.AI and Revitty Transcribe AI. In China, inaugurated a new innovation center and saw positive dynamics despite geopolitical headlines.
• Focus on strategic partnerships with government collaborators, awarded a $9 million contract by BARDA for a novel diagnostics platform.

In the third quarter, the company's total adjusted revenue was $684 million. The life sciences segment generated adjusted revenue of $301 million, down 3% organically. The diagnostics segment generated $383 million of adjusted revenue, up 5% organically. Geographically, the Americas and Europe grew in the low single digits, Asia was flattish with China declining low single digits. The 2% growth in organic revenue was comprised of a 3% decline in life sciences and 5% growth in diagnostics.

• Full-year organic growth outlook revised to 0 to 1%, down from previous assumptions. Fourth quarter organic growth expected to be in the range of 3% to 5%.
• Adjusted earnings per share guidance raised to a new range of $4.83 to $4.87 for the full year 2024.
• Free cash flow expected to be approximately $550 million, up from prior outlook, with $150 million received from recent divestiture.

• Continued delays with instrument purchasing in China due to stimulus not flowing meaningfully, impacting pharma customer spending.
• Geopolitical uncertainties, including potential tariffs under a Trump administration, which could impact the business.

Q: Mike Ryskin from Bank of America asked about breaking down the changes in the outlook related to instruments in China, globally, pharma and biotech in China and globally.

A: Max Krakowiak said the change in organic growth assumptions was driven by instrumentation assumptions, with China being a bigger piece than anticipated as customers pause awaiting stimulus.

Q: Vijay Kumar from Evercore ISI asked about applied genomics and instrumentation in Q4 and share repurchasing.

A: Max Krakowiak said instrumentation on life sciences side expected to decline mid single digits in Q4, applied genomics roughly flat; Prahlad Singh said the board is optimistic and plans to remain active with share repurchasing.

Q: Dan Leonard from UBS asked about reproductive health growth in China and Year of the Snake vs Dragon.

A: Prahlad Singh said Year of the Dragon helped but improvements in births are subdued, expecting gradual improvement; Max Krakowiak said newborn business globally grew low double digits, China grew high single digits in the quarter.

Q: Andrew Cooper from Raymond James asked about TB launch update and M&A.

A: Prahlad Singh said TB launch pushed to first quarter 2025; Max Krakowiak said M&A pipeline targets and valuations unchanged, company remains active but sees value in own valuation.

Q: Luke Sergott from UBS asked about drug discovery side impacts and reagents.

A: Max Krakowiak said change in market vs anticipation was due to slower instrument normalization, reagents performed well with mid-single digit growth in the quarter.

Q: Dan Brennan from TD Cowen asked about China stimulus and election implications.

A: Prahlad Singh said company prepares for all scenarios, strategy of in China for China works during election cycles; Max Krakowiak said China diagnostics expected to grow mid single digits in Q4.

Q: Puneet Souda from Leerink Partners asked about reagents business and China instrumentation.

A: Prahlad Singh said reagents business has broad-based recovery; Prahlad Singh said confident in China instrumentation purchases with stimulus expected in 2025.

Q: Dan Arias from Stifel asked about China customer sentiment outside stimulus.

A: Prahlad Singh said sentiment strong in the sector, strategy of in China for China working; Max Krakowiak said China Q4 expected to grow mid single digits, driven by diagnostics.

Q: Matt Sykes from Goldman Sachs asked about transformation and operating leverage.

A: Prahlad Singh said strong operating margin growth in anemic market shows potential, reagents showing stabilization; Max Krakowiak said tax planning improved with revamped team, free cash flow conversion still room for improvement from working capital.

Q: Brandon Couillard from Wells Fargo asked about tax assumption and cash flow conversion.

A: Max Krakowiak said tax rate lowered to 19% due to structural tax planning, free cash flow conversion still room from working capital improvement but strong this year.

Q: Patrick Donnelly from Citi asked about margin tailwinds and headwinds.

A: Max Krakowiak said reserved 2025 commentary, but mentioned operating margin expansion potential with normalized market; Prahlad Singh said reagents have broad-based recovery across product lines.

Q: Jack Meehan from Nephron Research asked about newborn growth and Revitty Omics.

A: Max Krakowiak said newborn screening globally grew low double digits, Revitty Omics pipeline robust with improved performance this year but not driving strong overall reproductive health performance