Good morning. My name is Lori, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Danaher Corporation's first quarter 2019 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key on your telephone keypad. I will now turn the call over to Mr. Matt Gugino, Vice President of Investor Relations. Mr. Gugino, you may begin your conference.
Thanks, Lori. Good morning, everyone, and thanks for joining us on the call. With us today are Tom Joyce, our President and Chief Executive Officer, Matt McGrew, our Executive Vice President and Chief Financial Officer, and Dan Comis, our Executive Vice President. I'd like to point out that our earnings release, the slide presentation supplementing today's call, and the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call are all available on the investor section of our website, danaher.com, under the heading Quarterly Earnings. The audio portion of this call will be archived on the investor section of our website later today under the heading Events and Presentations and will remain archived until our next quarterly call. A replay of this call will also be available until April 25, 2019.
During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. The supplemental materials describe certain additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company specific financial metrics relate to the continuing operations of the company in the first quarter of 2019, and all references to period-to-period increases or decreases in financial metrics are year-over-year. We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets. During the call, we'll make forward-looking statements within the meaning of the Federal Securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future.
These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings. Actual results might differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the dates they are made. We do not assume any obligation to update any forward-looking statements except as required by law. With that, I'd like to turn the call over to Tom.
Thanks, Matt, and good morning, everyone. We're off to a great start in 2019, delivering first quarter results ahead of our expectations. We achieved 5.5% core revenue growth and believe we expanded our market leading positions at a number of our operating companies through a combination of new product innovation and strong commercial execution. Our growth was broad-based with all four segments delivering better than expected results. We continue to see healthy conditions across our major end markets. Combined with solid adjusted EPS growth and free cash flow generation, our performance is a testament to the power of the Danaher Business System. Our team's focused execution has continued to accelerate our growth trajectory and drive long-term value creation. We're excited about what lies ahead for Danaher. Over the past few years, you've heard us talk a lot about building a better, stronger Danaher.
An important and transformational component in that pursuit is our pending acquisition of the GE Biopharma business, which we announced on February 25th. GE Biopharma is a leading global player in the attractive biologics production market and will bring complementary strengths to our life sciences platform across the bioprocessing workflow. We expect this acquisition will be accretive to Danaher on multiple levels and will further advance our evolution into a higher growth, innovation-driven company. We could not be more excited about this business, the team, and what they'll bring to Danaher. The transaction remains subject to regulatory approvals. We're making good progress towards closing, which continues to be on track for the fourth quarter of this year. Turning to our first quarter results. Sales grew 4% to $4.9 billion, driven by 5.5% core growth.
Acquisitions increased revenues by 2.5%, while the impact of foreign currency translation decreased revenues by 4%. Geographically, high growth markets grew high single digits, led by double-digit growth in China. Across the developed markets, we saw mid-single-digit growth in the U.S. and low single-digit growth in Western Europe. Gross margin for the first quarter was 55.7%, and operating profit margin was 14.8%. Core operating margin increased 40 basis points despite a meaningful foreign currency headwind from a stronger U.S. dollar year-over-year. Excluding this foreign currency impact, core operating margin would have been up 90 basis points. First quarter adjusted diluted net EPS was $1.07, representing 8% growth year-over-year. Now let's take a more detailed look at our first quarter results across the portfolio. In life sciences, reported revenue was up 10%, and core revenue grew 7%.
Reported operating profit margin was up 60 basis points to 19%, with core margins increasing by 100 basis points. Beckman Life Sciences core revenue was up double digits, making this the business's seventh consecutive quarter of high single-digit or better core revenue growth. Broad-based strength across most major regions and product lines was led by double-digit growth in flow cytometry and centrifugation. We believe the team's combination of high-quality innovation plus commercial execution continued to drive market share gains across the business. Leica Microsystems achieved high single-digit core revenue growth. Strength across North America and China was driven by demand in life science research as we continue to benefit from new product introductions. Most recently, Leica launched the THUNDER Imager Systems, a new class of widefield instruments designed specifically for high-speed, high-quality imaging of 3D biology.
Scientists use this imaging technology to study organisms, tissue sections, and advanced cell cultures for use in microbiology, neuroscience, and cancer research. Core revenue at SCIEX was up low single digits, with good performance in pharmaceutical, academic, and applied markets, partially offset by the impact of a tough comparison in our North American clinical business, which was up meaningfully last year. Pall's core revenue increased at a high single-digit rate with growth across all major geographies. Pall Industrial was up mid-single digits led by aerospace and process and industrial, and we continue to see solid order trends within both businesses. Double-digit core revenue growth in Pall Life Sciences was driven by our biotech business, particularly single-use technologies, where we're seeing robust demand for our iCELLis bioreactor system in gene therapy applications.
The iCELLis provides excellent cell growth conditions for adherent cells, which are used to produce gene therapies, and it is the most widely used cell adherent bioreactor on the market today. iCELLis was recently highlighted at the INTERPHEX Bioproduction trade show, along with a number of Pall's other market-leading bioprocessing innovations. Moving to diagnostics. Reported revenue grew 1%, with core revenue growth of 5%. Reported operating margin decreased to 15.2%, with both core and reported margins down 110 basis points. This decline is predominantly attributable to the impact of foreign exchange rate movements. At Beckman Diagnostics, core revenue was up mid-single digits as we saw continued improvement in North America and double-digit growth in China. By product line, immunoassay and automation led the way.
In hematology, we're seeing early signs of the positive impact from our new product introductions, including the DxH 520 and the DxH 900 analyzers for low to high volume settings. Beckman recently received 510(k) clearance from the U.S. FDA for the DxH 520 and for the Early Sepsis Indicator to be run on the DxH 900. These additions in hematology are key examples of how we're enhancing our competitive position and accelerating our growth trajectory at Beckman. Radiometer delivered high single-digit core revenue growth led by performance in China, and we believe the team continued to gain market share in North America. During the quarter, Radiometer expanded their installed base globally across both our blood gas and AQT product lines. We acquired Radiometer in early 2004, and the first quarter marked their 15th anniversary as part of Danaher.
During that time, the team has become a champion of DBS, helping to evolve the tools and processes that are shared across Danaher today. As a result of this strong DBS execution and leadership, Radiometer has achieved tremendous results, including more than 1,000 basis points of operating profit margin expansion. Over the last five years, the business has averaged high single-digit core revenue growth compared to low double-digit growth at the time of acquisition. As one of our longest tenured operating companies today, Radiometer provides a terrific example of the long-term power of DBS. Through a balanced approach implementing growth, lean, and leadership tools, Radiometer has established a market-leading position that it continues to enhance today. Leica Biosystems also had an excellent start to the year, with core revenue up high single digits led by advanced staining and core histology across the developed markets and in China.
At Cepheid, core growth was down slightly against a prior year comparison of over 40% growth, which was primarily driven by last year's severe flu season. The team continued to expand Cepheid's market-leading installed base, and is gaining momentum in North America with integrated delivery networks or IDNs. Cepheid's cartridge-based molecular test is a uniquely well-suited solution for IDNs and their patients, as it ensures consistent results across the network, whether the test is done in a large hospital lab or in a physician's office. Turning now to our dental segment. Reported revenue declined 2%, while core revenue grew 2.5%. Reported operating profit margin declined to 7.3%, with both core and reported margins down 30 basis points. This decline primarily reflects the impact of ongoing investment spend focused on new product development.
We saw growth across our specialty and traditional product lines, we remain encouraged by the stabilization we have seen in the North American end markets. High growth markets led the way geographically, with China up double digits. The dental team continues to pursue one of its key strategic priorities, that is accelerating growth through innovation. At two recent industry trade shows, IDS and Chicago Midwinter, we featured more than 20 new products and technologies from across the dental platform, really the culmination of strategic investments in R&D and sales and marketing over the last few years. At Nobel, Xeal and TiUltra are new implant surface technologies that enable better bone and tissue integration while improving aesthetic results.
The KaVo OP 3D is a scalable modular imaging system that provides clinicians with the flexibility to upgrade to the latest 3D imaging technology as they expand their capabilities and grow their practices. We're excited about this cadence of new product introductions and believe that this expanding portfolio of solutions will further distinguish our dental business going forward. We're also making good progress as we work to establish the platform as a separate, publicly traded company in the second half of this year. Moving to our Environmental & Applied Solutions segment. Reported revenue increased 3% and core revenue was up 5.5%. Reported operating margin increased 110 basis points to 23.2% with 140 basis points of core margin expansion due to outstanding execution across the segment. In product identification, core revenue increased at a low single-digit rate.
Videojet core revenue was up mid-single digits, led by results in the developed markets. Growth was broad-based across all major product lines, with good traction for more newly introduced products like the remotely connected CIJ 1580 industrial inkjet printer. Using DBS growth and innovation tools, Videojet has continuously expanded its product portfolio and getting higher impact product to market faster. This strong innovation execution differentiates Videojet's customer solutions and is a key driver of the team's consistent market outperformance. Core revenue in our packaging business, which includes Esko and X-Rite, was flat, recent order trends are improving, and we expect better performance as we move through the year. Finally, turning to water quality. Core revenue growth for the platform was up high single digits. Hach core revenue increased at a mid-single digit rate as end market demand remained healthy.
Europe and China led the way. We continue to see solid order trends across both municipal and industrial applications globally. Hach has consistently grown above the market over the last several years, in part driven by best-in-class commercial execution. The team has aligned their go-to-market strategy to better meet customers' needs, and a great example of this is the expansion of Hach's e-commerce platform. The team's double-digit e-commerce revenue growth in the quarter is a testament to how our innovative commercial strategy is delivering even greater value to customers. At Trojan, core revenue increased by more than 20% as a result of a few large municipal projects in North America and in China. The team sustained a solid customer win rate and continues to benefit from recent new product introductions like TrojanUVSigna and TrojanUVFlex.
Lastly, ChemTreat delivered mid-single digit core revenue growth, with the team's sales execution driving strong performance in North America. By end market, chemical, metal processing, and oil and gas led the way. To wrap up, we're very pleased with our first quarter results and look forward to building on this momentum as we move through the year. Our team's commitment to continuous improvement helped us achieve our sixth consecutive quarter of 5.5% or better core revenue growth, high single-digit adjusted EPS growth, and solid operating margin expansion. We are initiating second quarter adjusted diluted net EPS guidance between $1.13 and $1.16, which assumes core growth of approximately 4% to 5%. We now expect full year 2019 adjusted diluted net EPS to be in the range of $4.72 to $4.80, which reflects the dilutive impact of our recent equity offerings, partially offset by our first quarter performance.
Looking ahead, 2019 will be a transformational year for Danaher. We will be welcoming the GE Biopharma business to our life sciences platform and are establishing our dental platform as a separate publicly traded company. These are incredibly important portfolio moves that we expect will maximize value for our shareholders, customers, and associates, and help all of us realize greater potential. With DBS as our foundation, we're well-positioned to continue building on our growth trajectory and are excited about the opportunities to come.
Thanks, Tom. That concludes our formal comments. Lori, we're now ready to take questions.
Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star, then the number 1 on your telephone keypad. If your question has been answered and you wish to remove yourself from the queue, press the pound key. Our first question comes from the line of Tycho Peterson of JPMorgan.
Hey, thanks.
Morning, Tycho.
Morning. I want to start with China. You guys continue to put up really good numbers there. We've had some interesting data points lately. One of your peers talked about destocking on the diagnostic side yesterday, there's been more noise on the crackdown on generics kind of impacting the pharma market. Can you maybe just looking ahead, talk a little bit about how your expectations for China have evolved? Are you seeing any headwinds from either of those dynamics?
Thanks, Tycho. Tycho, we actually feel really good about where we are in China right now. Double-digit growth across the businesses. This, by the way, was the ninth consecutive quarter, and I think what's most encouraging is the growth that we're seeing is broad-based. All four of our segments were up double digits in the first quarter. Whether you look at diagnostics or life sciences, the dental platform, certainly water quality, everybody, I think, doing a nice job by driving the four segments to double digits in the quarter. I think if we looked at anything where there might be a little bit of slowness, I think I'd probably point to PID, product ID, over the past couple of quarters, but not in the sense of a meaningful step down. Of course, PID is only about roughly 5% of our China revenues.
We feel very good about how we're positioned. These end markets, as you know well, are terrific end markets to be in China. Over the span of time, the last three to four years, we've been high single digit to low double digit, kind of across the board. Could we see a little bit of a softness in the second half? I think that would only be a function right now related to the comps that we have, particularly in water. I think Q middle of the year to back end of the year, our water business was up greater than 25%. I think that'll be a tough comp, but in terms of the fundamentals in China right now, by the way, Tycho, I was just there.
I was there two weeks ago, met with each one of our teams, spent some time with customers, time with our certainly DX customers in the hospital market, as well as in bioprocessing, and the tone was really quite good. I think we feel good about the markets. We feel good about our position in those markets. You asked about generics. We understand there's some policy moves afoot there. That can have an impact on pricing. At the same time, it may have an impact on access and volumes, and generally, we benefit from expanding access and volumes. That's not a dynamic that we're really in the crosshairs of. We would be a second or third derivative of how we might actually benefit from an expansion of generics in that market. Those would be our thoughts.
Yeah. Tycho-
And then-
Sorry, to your earlier question on the diagnostics, we clearly are not seeing that dynamic from a destocking perspective either.
Okay. That's helpful. On Beckman, you're continuing to put up great numbers there. Obviously, you've had a couple of competitive launches. One of your peers talked about, I think, winning 2/3 of competitive accounts in Europe at this point. Can you maybe just talk about your confidence in holding share? I know you're going to have a product refresh at some point, but just talk a little bit about chemistry and immunoassay and your ability to hold share there. Any metrics you can put on customer retention rates for the new hematology systems and your confidence in that driving growth.
Sure, Tycho. We continue to have an ever-improving cadence of new product introductions at Beckman. Hematology has been a big step forward in that it's been one of the areas where we've had a challenge over the years since we acquired the business. We think we've stabilized that and really are on the cusp of starting to improve our position there on a more material basis. If we look at what the flow of new products that are coming on the core clinical chemistry and immunoassay side, we feel very good about those products, particularly how they will enhance our competitiveness in low and mid-volume environments, and we'll see those really over the next year to two years. Those will also come with enhanced menus, as there's been a couple of menu gaps over time.
Those new products, those new architectures, will also bring along enhanced menus that'll improve our competitiveness. We feel very good about that. We've always led the way in larger volume environments, particularly with automation. We've even stepped up our automation game recently with the introduction of the DxA line of automation equipment. I think the combination of the products that have just come to the market more recently, the recent FDA approvals or clearances, and those that are coming over the next year to two years, I think, we feel very good about improving the trajectory of Beckman from a core growth perspective. You see that in the numbers this quarter, saw it in the numbers last quarter.
You look at the overall diagnostic platform, of which Beckman obviously is a big part, now putting up 6% core growth in the past, that 5%-6% range now with a little bit more consistency. We feel very good about that. Of course, that was against a very tough comp of a quarter ago. Relative to metrics that we track, we do track retention and win rates very carefully across our businesses, Beckman included. We don't publish those numbers, but I can tell you that we look at those numbers consistently every month, and we see a continuing improving trend, and have for some time now, in both retention and win rates.
Okay, that's great. One very quick one from the group before I hop off. I promised Tooza I would ask on GE Biopharma, how much actual free cash flow is this business generating?
They're generating about $1 billion or so.
Okay, perfect. Thanks.
Thanks, Tycho.
Your next question comes from the line of Derik De Bruin of Bank of America.
Hi, good morning.
Morning, Derik.
Hey. Just one quick question. Did you see any sort of impact at all in the U.S. from the government shutdown earlier in the year?
No. Well, we saw it in traffic here in Washington, out my window on Pennsylvania Avenue. Everybody loved being able to get to work a lot faster. In all seriousness, no, we can't point to anything in the shutdown that would be of any consequence at all. Of course, we have to say almost zero. It probably is almost zero revenue that actually is directly attached to federal government activity. At most, we are linked to funding that comes from the federal government to NIH, and then out from NIH into the broader life science market. In terms of any direct linkage to federal government spending, I would say none at all.
Can you elaborate a little bit more on the diagnostics operating margin? All your businesses had essentially the same FX hit. What is it about your diagnostic mix that took the core operating margin down in this quarter from FX? Whereas the other segments, you saw good expansion in EAS and good expansion in life sciences.
Well, there's a couple factors going on there. You have, first of all, the FX and tariffs together. When you take those kind of things, FX and tariffs alone would bring those otherwise negative OMX numbers up to probably flat or maybe even a hair above that. There's a little bit of a mixed component that was going on there. Obviously, Cepheid's operating leverage that we had last year coming off of greater than 40% core growth. Add to that Beckman DX, improving the mid-single digits at somewhat lower margins, obviously. You get the combination of those two factors, Cepheid against Beck DX, and then some targeted investment spend, no question. We continue to ramp up our new product spending at Beck DX as well as at Cepheid. I think it's really a combination of those things.
As we look forward, those, certainly the FX and tariff headwinds will continue a little bit in Q2, but as you look into the second half of the year, we'll see better OMX in the second half for sure.
Great. Thanks. I'll get back in queue.
Okay. Thanks, Derik.
Your next question comes from the line of Ross Muken of Evercore.
Morning, Ross.
Good morning, guys. Congrats on a great quarter.
Thank you.
Maybe on the biopharma side, it feels like across a number of parts of the business, that end market customer vertical remains quite robust. It seemed like Pall had quite good growth in the quarter on what's increasingly tough comps, so strong underlying. I guess, how are you thinking about that end market broadly? Then, in terms of Pall specifically, in terms of sustaining the elevated growth we've seen, you feel like you've got pretty good visibility on that remaining at these kind of high single-digit, low double-digit kind of levels on the biotech side?
Sure. Let's start with the overall market. In general, the Life Sciences end markets remain very good. We put up 7% core growth across our Life Sciences businesses in Q1, so another really strong quarter. This is the fourth straight quarter of high single-digit growth across our Life Sciences businesses. We're making it happen organically through better innovation at each one of the businesses. More innovative new products launched on time, commercialized effectively, and some tremendous investments in taking our products to market in each one of the businesses. That's, by the way, without IDT being core. IDT goes core here in this quarter, and they're off to a terrific start, and really beating our initial expectations. I think the combination of our good execution in fundamentally solid end markets sets up really well for continued performance in Life Sciences.
We continue to see good performance across the biopharma end market. Our single-use technologies and the work that we're doing around continuous bioprocessing has garnered tremendous interest in the end market, and we're seeing sales continue to grow in those areas. Applied markets have been solid. Academic and research has been solid, and even the smaller portions of the industrially oriented Life Sciences market have been solid as well. Geographically, China, as you heard me mention already, continues strong. U.S., a good quarter. Europe, I would say, is stable, but that's a market that we're watching closely. It's held up so far, but there are always some concerns about what's going on in Europe at the moment, so we're watching that carefully.
In terms of Pall going a little deeper there, we have very good visibility to the product development pipelines of both large and small pharma customers and biotechs. We continue to work those early-stage opportunities well, I think that's what bodes very well for continuing this high single-digit growth across Pall and the double-digit growth across our biotech business around SUT, continuous bioprocessing, and really innovative products like the iCELLis bioreactor that I talked about in my prepared remarks. Overall, that end market's a good place to be right now.
Maybe just on dental, obviously we see in the margin a little bit more investment there, the growth, albeit an easier comp, kind of improved. I guess, how are you thinking in general about the trajectory there and what you've put into the business and the types of investments that are being made now ahead of the potential separation?
Sure. Well, we're very encouraged, actually, to see the better top-line performance that we've put up and the underlying market stabilization that underpins some of that. Our performance, we believe, beyond the market stabilization, has really been driven by the new product innovation that we've continued to invest in, as well as some of the investments around commercialization. Some of those investments are really specific to things like our clear aligner program and our intraoral scanner and a number of new products that I mentioned earlier around Nobel. We believe these are really important investments to be made strategically to set this business up for success. If we look at the quarter, we saw sellout continue to be pretty encouraging, and that's pretty broad-based.
Even more encouraging, I think, around the traditional consumables and equipment, which had struggled in the past and where we had adjusted inventories with the channel in the past. Now channel inventories are really in good shape. I think you combine those investments with an improved cost structure that we had worked so hard to establish, and you've heard me talk about this before, about how we've rationalized the cost structure around the overall footprint of the business over the last three to four years. I think we'll continue to see some incremental improvements in the growth rates, and particularly in the second half around core operating margins. I think second straight quarter of solid low single-digit core growth and a little better than our expectations. I think we're positioning the business well for later in the year.
Quick one, Matt. It looked like with the dilution from the equity deal, net of sort of the beat, the underlying operating guide actually came up, I don't know, maybe $0.05 or so. I guess if we think about the Q1 beat being fairly balanced top and margin line, is there anything notable in terms of that delta, in terms of any of the segments or if it's more an organic versus a LMX type tweak?
I think your frame of talking about, for the full year, the change being $0.09 of dilution from the equity offering, offset by that $0.04 beat. That $0.04 beat is very operational. It was pretty broad across most of our segments, came in better than we thought here. That $0.05 reduction is the way to think about it is that it's $0.09 of dilution offset by $0.04 operational beat here in the quarter. Results, if you take a step back, we're going to have EPS growth here for the full year, call it 6%-7% now. Effectively, we've got all of the dilution from the equity issuance behind us as we head into the second quarter.
Perfect. Thanks.
Thanks, Ross.
Your next question comes from the line of Doug Schenkel of Cowen.
Morning, Doug.
Hey. Good morning, guys. Thanks for taking the questions. Maybe just building off of Ross's last question. Q1 core growth was 5.5%, and you expect core growth of 4%-5% in the second quarter against a tougher year-over-year comparison. While Q3 has another tough comp, you get an extra selling day in Q4. I understand why you might not want to provide a formal update to top-line guidance, given we're only two weeks into the second quarter and only around three months into the year. That said, I haven't heard anything coming off of a strong Q1 that would suggest there's any change in positive trend or that there were any transitory issues that made Q1 uniquely strong. Mathematically, it does seem like you're on track to exceed your original full-year core revenue growth guidance of 4% by at least 50 basis points, if not a little bit more.
Is there anything I'm missing here?
No. I think like you said, we were very encouraged by Q1. The underlying market does remain good. That being said, like we've talked about before, as you mentioned, we're three months in. We typically like to get through the second quarter here. We'll come back to folks in July, talk to the second half and the full year, and we'll update everybody there. We've done that the last couple of years, and that's worked out well. Clearly, we feel good about where we're at, but we're going to do that again and re-update everybody in July here.
Okay. That's helpful. The second topic is SCIEX. I was hoping to get a bit more color on performance in the quarter. I believe you indicated growth moderated to low single-digit levels, if I heard that correctly. One way or the other, it'd be helpful to get a bit more color on product mix, geographic trends, and recognizing you're a bit under-indexed to biopharma within this business relative to peers. It still would be good to hear how demand in that end market shaped up in the quarter. Looking ahead, I think you noted that you were up against a tough clinical comp within this business. SCIEX grew at least high single digits every quarter last year. I'm just wondering if you're expecting continued moderation in SCIEX growth over the balance of the year, or if you expect this to pick up.
Thanks, Doug. I think you've got most of the facts. We did have a tough comp overall. We were high single digits, in fact, in the first quarter a year ago. At this point, we're sort of coming off our fourth straight quarter, as I think you know, of high single-digit core growth. It was, as I mentioned, largely driven by pretty meaningful declines in the clinical market, which is skewed towards North America. That was up meaningfully in the first quarter of 2018. We can kind of do the direct comp to that particular, our end markets. The other end markets are generally pretty solid. The pharma market, really pretty good. If we look geographically, that market is pretty solid on a global basis. The applied markets are good. That's kind of a food testing-oriented market.
There's sort of a nascent market around cannabis testing that we expect to grow over time. The academic market's pretty good. I think aside from that challenging comp around clinical, we feel pretty good about where we sit relative to those end markets. We have a broader footprint today with Phenomenex and separations consumables. That business was up mid-single digits. Our service business, which has always been an important part of both growth and margin expansion at SCIEX, continues to be good as well, generally tracking high single digit to low single digit. We feel good about how that business is positioned despite that tough comp, and I think we'll see some improvement over time.
Yeah, Doug, like Tom just said, we're kind of expecting here mid-single digit for the second quarter and the balance of the year here from an outlook perspective.
Okay. Thank you.
Thanks, Doug.
Your next question comes from the line of Dan Leonard of Deutsche Bank.
Dan?
Dan.
Hello. I will stick with a question on the tools business. First off, you mentioned strength in flow cytometry and centrifugation in Beckman tools. Can you flag for me, what are the applications driving that strength? And I'm specifically wondering if there's any play here on some of the cell therapy that you're seeing strength in other parts of your platform.
Sure, Dan. In terms of flow cytometry, the real strength of that business is around leukemia and lymphomas. I think the combination of our historical technologies with the more breakthrough technologies that have been associated with our acquisition, just a few years ago, of Cytognos, that has now led to the innovations embedded in our CytoFLEX product line. The combination of those strong application areas with more novel technologies have really helped to drive the flow cytometry business pretty consistently. It's been a key growth driver for Beck LS for a number of quarters. Centrifugation is a much more broadly defined set of applications. We play in a number of different segments from an end market perspective and with an architecture that's generally oriented towards higher volumes, certainly above the tabletop kinds of volumes. I wouldn't attribute centrifugation purely to any particular end market.
I think the team's done a nice job with innovation around centrifugation. They've done a nice job in terms of positioning their commercial organization more effectively in terms of being able to take those products to market more broadly across that fragmented end market. I think those are the underlying sources of growth at Beck LS.
That's helpful, just a quick follow-up. Can you offer us the Cepheid growth rate in the quarter excluding the flu comp? Is it safe to assume that that business gets back to double-digit growth in Q2 and beyond?
Yeah. If you think about Cepheid excluding kind of flu and the high growth markets, HBDC stuff, it was up double digits.
Okay, thank you.
Thanks, Dan.
Our next question comes from the line of Erin Wright of Credit Suisse.
Morning, Erin.
Great. Thanks. Hi, good morning. On the dental side, do you think we're at an inflection point here? Have you seen stabilization continuing quarter to date? Can you break down the trends that you're seeing across both North America and rest of the world, what's driving more growth? If you could just give us an update on the timeline of the spin, when we should hear more about your outlook for RemainCo business, et cetera. Thanks.
Sure. Thanks, Erin. Erin, I don't know that I would call this an inflection point. I think we've seen now over at least the last two, maybe even three quarters, a progressing level of stabilization. We would measure that stabilization in terms of some things that caused some disruption in the past. A series of adjustments in the channel relative to exclusive relationships between manufacturers and distributors, some disruption among some channel sales forces, some inventory build that needed to be rectified. All of those things, that was really over a couple-year period, I think evolved to a point where we now have a much more stable end market. We're seeing that both in terms of the alignment between our sell in and sell out, through the channel. We look at it in terms of inventories.
We look at it by category to see how the traditional consumables and equipment are trending, versus the more specialized products. In general, I would say the overall trend in the market today could certainly be called a far more stable than it was a year or two ago. In terms of the broader trends that are happening in the market, I would say a continued move towards, what would be broadly described as digital dentistry. The importance of imaging systems, and that's an area where our KaVo Kerr business is a real leader, in imaging technologies and the linkage of those imaging technologies through software to treatment planning and treatment execution, with important novel innovations happening in the specialty areas.
Our implant business around Nobel continues to be a leader in those areas where digital dentistry really matters, where imaging leads to treatment planning, leads to novel implant systems and procedures that end up with greater levels of patient satisfaction. I think that's a broad-based trend, not just in North America, but really on a global basis. I think the other thing that's certainly noteworthy is the emerging middle class, and the importance of dentistry in high growth markets, China being one that we've talked a lot about being double-digits. We're gonna see good growth across our dental platform in a number of markets where an emerging middle class is putting greater demands on the practice of dentistry. Finally, around your question around the timeline of the spin.
We remain focused on the timeline as we laid it out, which is to effect that spin late this year. The intention is to launch an IPO of that business, that would largely be a business that would probably put 19.9% of that equity into the market, and we would retain the balance of that for a period of time. There's been no change to those plans.
Okay, great. This is a bigger picture, kind of broader question. Just there's been a lot of volatility in the market primarily this week alone, just on reimbursement, regulatory kind of concepts here in the U.S. Regardless of the actual likelihood of anything actually being implemented, how do you think about some of the opportunities, risk factors across your business when it comes to some of these concepts related to reimbursement pressures, drug pricing scrutiny, more recently, PAMA, for instance, what are you seeing there? Is there anything that you're more meaningfully concerned about from a reimbursement perspective that could impact your business or your customer base? Thanks.
Thanks, Erin. To cut right to a simple answer to your question about are we incrementally concerned about something around the dynamics that you just mentioned, the answer would be no. Yes, there are lots of things being bandied about around healthcare and reimbursement today, and the Affordable Care Act. Those at the moment are not having any material impact on us whatsoever or immaterial impact. PAMA, we've seen occasional impacts of that, but then again, price pressures are standard operating procedure in the diagnostic market. I think, Erin, probably if you step back from our business for a moment, and you think about what we do in diagnostics, providing diagnostic capabilities to hospitals in the central laboratory, in anatomical pathology, in acute care, in the emergency room, in molecular diagnostics, for acutely ill patients around infectious disease diagnostics today represents about 2% of cost of healthcare, broadly defined.
Yet it informs well north of 60% of the decisions that are ultimately made in healthcare today. We play a vital role in the overall market, but are a relatively small portion of the overall cost structure. While the factors that you mentioned are very important for us to attend to and keep in mind and be aware of any potential impact, today, there hasn't been any meaningful change in any of those in the recent quarter.
Okay, great. Thank you.
Thank you.
Your next question comes from the line of Brandon Couillard of Jefferies.
Hi, Brandon.
Hey, good morning.
Morning.
Tom, just to follow up on the dental business, any chance you could tease out the performance of the traditional portfolio versus the specialty lines in the first quarter? Specifically curious how the U.S. consumables business did in the period.
Sure, Brandon. I think pretty solid, as I mentioned, second straight quarter of low single-digit growth across the platform. We feel pretty good about all that. The orthodontics business was up mid-single-digits, we see really good performance across those businesses. Nobel was up low single-digits, but on a tougher Q1 comp, still mid-single-digits on a two-year stack basis, generally in line with what we've seen the last couple of years. I think in both of these cases, around specialty consumables, we're making significant investments in new product innovation, obviously around clear aligners and then the digital support through intraoral scanners that will really make a difference in our orthodontics business over time. We have new Damon line products that have been introduced into the market as well.
At Nobel, these new surface technologies are exciting new technologies that are going to make a difference over time. I think today those businesses are tracking reasonably well, but we're really encouraged by the new product innovations that are coming out in both of them. North American traditional consumables and equipment remain good. Low double single-digit growth with a reasonably stable market. The imaging business, the trends are good. We're seeing mid-single-digit growth around imaging. When we look at sell out, the sellout looks pretty solid. We're continuing to manage sell-in to make sure that channel inventories are in line, so we don't have that kind of disruption in the future. I think, overall, we feel pretty good about where the dental platform sits today.
If there may be a follow-up from Matt. EAS segment continues to see pretty solid pricing up a point and a half in the period. Can you talk about the sustainability of that and where that's coming from? Secondly, when do you think pricing might improve somewhat in the dental business, given what's been, I guess, about five quarters of weakness on dental pricing?
I was going to say dental's kind of been in that range for the last four or five quarters. I'm not sure that we've got anything intentional that is driving that in dental. That seems to kind of be the runway of where they operate here today. I'm not sure there's kind of an inflection or a change that's necessarily being planned for dental. As far as EAS goes, they do a very nice job in pricing. I think both those businesses have been around a little bit longer than some of our other businesses, and we've talked about kind of some of the things that they're able to do in passing through some of the price that they get. I'm not sure there's anything from a trend perspective there that would change either.
I think we've seen price there in that range for the last four or five quarters. I'm not sure there's a whole lot that was new here in the quarter from a price perspective.
Very good. Thank you.
Thanks, Brandon.
We have time for one more question. Your final question will come from the line of Daniel Brennan of UBS.
Hi, Daniel.
Great. Yeah, I'm here. Thanks for the question. I wanted to ask first, starting on GE, if you could share maybe some of the early customer feedback that you're receiving. I'm interested to learn if some of the customers look at the combined Danaher GE offering, possibly providing some share gains to be a possible broader solutions provider.
Sure, Daniel. Thanks. Our team has spent extensive time with customers. We obviously share quite a number of customers. We also have the opportunity, in situations where we don't share customers, to potentially bring a broader portfolio of solutions to that end market. As I mentioned earlier in my comments, I was actually in China last week or two weeks ago, and actually met with one of the key customers in the end market, and I think they represent sort of broadly a view across that market of real enthusiasm.
GE does a tremendous job in the China market, as does our Pall business, and I think the opportunities that those end customers see today are for really innovative solutions, where we can bring a broader perspective to the overall bioproduction workflow and work collaboratively with them, to ensure that we meet not only their needs of today, but the needs that they'll have as their capacity expands over time and as they evolve their processes more towards single-use technologies and more towards continuous bioprocessing capabilities. They see the combination of the broad set of tools that we bring at Danaher, not just associated with Pall, but across the broader portfolio, and then inclusive of GE as being something really exciting.
Great. Thanks, Tom. Maybe just one final follow-up just on China. Obviously, the growth has been tremendous there, but with the tariff noise and the economy grinding lower, that's always a question mark, like how sustainable that is. Maybe could you just characterize amongst your four different businesses and all the different secular initiatives China has ongoing, where do you see the biggest runway still for growth, dependent upon where China is with some of their kind of secular build-outs, if you will? Thank you.
Sure. Thanks, Daniel. It's almost hard to choose because when we think about the investments that are being made in China, in diagnostics, in life sciences, and in and around the environment, along with the dynamics I just mentioned a couple of minutes ago around an evolving middle class and the needs for advanced dentistry, there are important secular drivers in really, I would say, all four of those markets that I just mentioned. I think we feel that our leadership position in each one of those markets has served us well in the past.
We continue to enhance those leadership positions with innovative products, some of which are designed in China and many of which are made in China for the Chinese market, combined with continued investments in feet on the street, and end market-facing associates who are continually looking for new and novel solutions to drive innovation for customers. Those are just great end markets to be in. I'm not sure I'd necessarily differentiate a great deal between the diagnostics, life sciences, the environmental, and the dental end markets, because I think they all represent important secular drivers that we have benefited from in the past and will benefit from in the future.
Terrific. Thank you.
Thank you.
Thank you. I'll now return the call to Matt Gugino for any additional or closing remarks.
Thanks, Laurie, and thanks, everyone, for joining us. We're around all day for questions.
Thank you for participating in the Danaher Corporation's first quarter 2019 earnings results conference call. You may now disconnect.