Thermo Fisher Scientific Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Innovation: Launched several state-of-the-art solutions, including next-generation Thermo Scientific Orbitrap mass spectrometers, the Thermo Scientific Krios 5 cryo-transmission electron microscope, and expanded the DynaDrive single-use bioreactor portfolio for bioproduction.
• Trusted Partner Status: Collaborating with customers to navigate environments, such as expanding U.S. capacity for drug production and using AI in processes to accelerate clinical research timelines.
• Capital Deployment: Entered into a definitive agreement to acquire Solventum's Purification & Filtration business and expanded the strategic partnership with Sanofi to enable additional U.S. drug product manufacturing.
• PPI Business System: Used to manage supply chains, tariffs, and costs, driving productivity and cost reduction through shared services and functional centers of excellence.

Segment Performance

• Life Sciences Solutions: Q2 reported revenue increased 6% year-over-year, organic revenue growth was 4%. Adjusted operating income increased 6%, and adjusted operating margin was 36.8%, up 10 basis points versus the prior year quarter.
• Analytical Instruments: Reported revenue declined 3%, organic growth was 4% lower versus the year ago quarter. Adjusted operating income decreased 26%, and adjusted operating margin was 18.8%, down 580 basis points versus the year-ago quarter.
• Specialty Diagnostics: Reported revenue grew 2% year-over-year and organic revenue was flat compared to the year ago quarter. Adjusted operating income increased 3%, and adjusted operating margin was 27%, 30 basis points higher than Q2 2024.
• Laboratory Products and Biopharma Services: Reported revenue increased 4% and organic revenue grew 3% versus the prior year quarter. Adjusted operating income increased 11%, and adjusted operating margin was 13.8%, 90 basis points higher than Q2 2024.

Guidance

• Raised 2025 full-year revenue guidance to $43.6 billion to $44.2 billion, adjusted EPS to $22.22 to $22.84. Organic revenue growth is expected to be in the range of 1% to 3%, and adjusted operating margin is expected to be 22.5% to 22.7%.
• Assumes 3% to 6% organic revenue growth in 2026 and 2027, with mid- to high-single-digit adjusted operating income growth, leveraging the PPI Business System for margin expansion.

Risks

• Tariffs and Trade Policy: Uncertainty in tariffs and trade policies, especially impacting China and academic/government sectors.
• Funding Uncertainty: Muted demand for equipment and instruments due to uncertainty in academic, government, and funding environments.

Question and Answer

Q: Michael Ryskin asks about long-term growth outlook and margin expansion.

A: Marc and Stephen discuss industry drivers like unmet medical needs and the role of PPI in driving margin expansion.

Q: Dan Arias asks about Analytical Instruments business and reshoring.

A: Marc talks about innovation driving share gain in Analytical Instruments despite muted demand, and Stephen discusses the business's performance in the context of academic and tariff environments.

Q: Jack Meehan asks about reshoring and Analytical Instruments.

A: Marc discusses reshoring as a tailwind for drug production and Stephen talks about Analytical Instruments' performance influenced by academic, government, and tariff environments.

Q: Rachel Vatnsdal asks about end markets and funding.

A: Marc talks about academic funding visibility and market recovery expectations, while Stephen discusses the impact of funding dynamics on different segments.

Q: Tycho Peterson asks about Pharma Services growth.

A: Marc discusses clinical research momentum and long-term outlook for Pharma Services, highlighting authorization growth and return to growth.

Q: Dan Brennan asks about long-term growth and share gains.

A: Marc talks about pharma R&D as a driver and segment strengths contributing to share gains in the long term.