Hello, everyone. This is Rachel Vatnsdal from the Life Science Tools and Diagnostics team here at J.P. Morgan. Thank you so much for joining me today, and this morning, I have got the Revvity team to give their presentation. As a reminder, this will be a 40-minute session. The first half, roughly, will be a presentation, followed by Q&A, so with that, I will pass it over to Prahlad. Prahlad?
Good morning, everyone. Thank you, Rachel. Before I begin, I wanted to invite your attention to our financial disclosures and encourage you to visit the Investor section of our website for additional financial disclosures, SEC filings, and latest earnings estimates. A couple of ground rules before we get started today. You know, the financial figures that you see were the ones that we had provided guidance as of November 4, at that 3Q earnings call, and subsequently at Investor Day that we held on November 21. Additionally, if you recall, at Investor Day, we had also announced that the Applied Genomics segment will be moving from the Diagnostics segment to the newly created Life Sciences Segment Solutions, which now incorporates Applied Genomics segment from Diagnostics: Life Sciences Reagents, Software, Services, and Instruments. So all the financial figures that you see today are under that operating and reporting structure.
I'm really excited to tell you our story of how we are working towards revolutionizing science and transforming human lives with groundbreaking innovation. For those of you who have followed our journey over the past seven years, you'll recall when we were PerkinElmer with about a third of our business in analytical food and applied markets, a third in life sciences, and about a third in diagnostics, which was primarily reproductive health, essentially maternal and fetal health and newborn screening. And over the past, a bit more than half a decade, you know, we've continued to acquire substantial domain and scientific expertise, both on the life sciences and diagnostics side. On the life sciences side, we've transitioned our portfolio and transformed it from focusing on small molecules to large molecules, cell and gene therapy, with several acquisitions, the biggest one amongst them obviously being BioLegend.
On the diagnostic side, we've evolved from being primarily a reproductive health player into other areas such as autoimmune, allergy, and emerging infectious diseases, again, with several acquisitions, the primary one amongst them being Euroimmun, of course. You know, post these acquisitions, the company sort of reached a confluence wherein it made strategic and business sense to divest the analytical food and applied markets business, and along with it, the PerkinElmer brand name. It gave us an opportunity to create a company which had enhanced scientific expertise, a high-revenue recurring mixed business, and leading market positions in the product segments that we play in, which gave birth to Revvity, which we strongly believe is in a category of one. What is Revvity? It is today an innovative life sciences and diagnostics company with about $2.8 billion in revenue, roughly equally divided between life sciences and diagnostics.
The majority of our revenue still comes from the Americas, and as I said earlier, nearly 80% of the revenue of the company is now on a recurring basis from consumables, services, and software, and we are supported by 11,000 colleagues around the world. The company is uniquely positioned now in specialized high-growth end markets of life sciences and diagnostics, serving a diverse customer base. In life sciences, we provide reagents, instruments, know-how, IP, software, and services, enabling drug discovery and development, still focusing on the preclinical side of R&D, with our end customers being pharma biotech and academia and government, and on the diagnostic side, the company's evolved from providing reagents, instruments, software, and services to now being a partner for pharma biotech in enabling the development of companion diagnostics for precision medicine.
Primarily, our end customers today on the diagnostic side continue to be reference and public health labs and hospitals and clinics. So to take a bit of a deeper dive into each of the businesses, beginning with Life Sciences, it's about a $1.4 billion business, with 85% of the revenue coming from the newly created Life Sciences Segment Solutions and 15% from our Signals software business. It has had a five-year historical average organic growth rate of high single digits. And as you can see, it's a very profitable business with a large TAM. And we expect the five-year market CAGR for this to be in the mid-single digits. This is where a lot of innovation around our reagents and instruments business goes. And it's also a segment where we continue to see adjacent opportunities for further growth, which I'll talk a bit about in the next slide.
To take a deeper dive into the key areas of focus for the life sciences business, starting with reagents, you know, we all have a lot of genes, proteins, and cells, and you need a lot of reagents to investigate them. And as such, we have about 75,000 reagents that we offer. On the instrument side, we have leading instruments platforms around in vivo imaging, high-content screening, and automated cell counting. Our Signals software business has around 4,200 customers with nearly a million-plus users. All top 10 pharma biotech companies use our software, and 46 out of the top 50 use the Signals software portfolio. The evolving piece of our business is around technology and licensing, where we are now building our capabilities in providing IP and know-how to our pharma biotech partners to accelerate drug discovery and development. And we've provided to date about 150 licenses.
Similarly, taking a look at the diagnostic side of the business, it's about $1.4 billion, similar to the life sciences, with about 60% in immunodiagnostics and about 40% in reproductive health. This business has had a five-year historical OG of mid-single digits and, again, is a very profitable business with a similar TAM to what you saw on the life sciences side, and we expect the five-year market CAGR to be in the mid-single digits. We've got market-leading positions in our diagnostics business because of the portfolio that we have, which is much more specialized, and this is where we continue to drive innovation and have opportunities for both geographic and menu expansion, whether it be on the autoimmune side or on the newborn screening side, so let's look at the portfolio a bit deeper on the diagnostic side of the business.
You know, beginning with autoimmune and allergy, we offer a wide range of assays and automation solutions for autoimmune and allergy testing, whether it's a Western blot, chemiluminescence, or ELISA. On the emerging infectious disease, we provide an extensive suite of assays to assess both acute and ongoing infections. And on the newborn screening side, we provide a full contiguous workflow from sample collection to results for several diseases, for several disorders, whether it's inborn errors of metabolism at birth or genetic disorders. And all of this is supported by a network of CLIA and CAP certified clinical laboratories across the globe, which support not just our diagnostics business, but also our pharma biotech partners in identifying patients for therapeutic development, assessing efficacy, and follow-up and monitoring.
So strategically, what are we trying to do here is continue to bridge the gap from discovery to cure, or, as I say, continue to reduce the chasm between life sciences and diagnostics, whether it is working with our pharma biotech partners in early discovery by providing them know-how, IP, reagents, instruments, software, and services, or evolving onto the diagnostic side by partnering with them in developing companion diagnostics for precision medicine. The intent really for us here is how do we provide and focus on specialized areas of innovation and not routine offerings through our unique capabilities. And what do I mean by that? It is essentially a unique approach that we are trying to implement here around three things. One is our approach to our customers and to the market. Two is the product portfolio that we bring to bear with it.
Three is the result of it, of how that positions us in being able to provide a differentiated financial profile. Let's look at each one of them. On our approach, as I said, the intent is moving from being a vendor to more of a partner, whether it's by providing know-how and IP or the capabilities that we bring to the fore, or it is around developing companion diagnostics. The intent is to build a partnership with our customers that allows us to drive additional upside versus the underlying market.
And what do I mean by non-routine offerings, whether it's around novel antibodies and reagents that we provide for our researchers to enable them to get precise and reliable results, or the Signals software platform, which is a comprehensive and scalable data management solution for researchers across their lab network, or on the automated newborn screening workflow from sample collection at the institution at birth to providing them results through our software platform. It's a full contiguous offering that we provide for our customers. And this is where opportunities for menu expansion, looking at rare diseases for which now therapeutics are being developed by pharma companies, comes to bear. Similarly, on the autoimmune and allergy side, you know, autoimmune testing is still in its infancy.
Our broad menu here of autoimmune tests supported by a differentiated solution, as I said, for whatever the modality being used for detection, whether it's ELISA, Western blot, or chemiluminescence, our intent continues to drive scientific insights that advance innovative solutions for our customers. What will all this result in? I mean, that's what it comes down to, is how does this drive faster growth and more profitability for the company? You know, assuming normal market in a normal market environment, which we expect to be in the mid-single digits, you know, our immunodiagnostics and software business is essentially a recurring business. It's got a strong recurring portfolio, and we expect that to grow 9% - 11%. A lot of our scientific innovation now goes into this side of the business.
With our life sciences solutions business, now our life sciences reagents business resides in this piece, and we expect that to grow in the 6%-8% range with the innovative reagent portfolio that goes in. Similarly, even on the instrument side, whether it's for in vivo imaging or cell counting, our focus really here is how do we bring in machine learning and AI to continue to upgrade the offering that we bring to our customers. And on the reproductive health side, despite the pressures from birth rate, this business has continued to do well. And the opportunity that we have from menu and geographic expansion allows us to outperform global birth rates that we are seeing in the market. So essentially, what you're hearing me is reaffirming our long-range financial profile of 6%-8% organic growth in a normal market environment.
You know, one of the things that came to the fore for us is post these acquisitions, there was a realization that we had brought these great cultures into the company. But what we really needed to do is put together a business model that allowed for smooth operation of this across the company, which essentially, a few quarters ago, gave birth to what we refer to as the Revvity business model. This is focused around four pillars. Number one is accountability. How do we assimilate all these great cultures and operating philosophies and provide our colleagues a platform that allows and enables a smooth execution of our strategy? Number two is agility. A, how do we provide the ability for internal innovation and technology and advancement to continue to flourish? Because that really is the growth engine. Number three is around digitization.
You know, with our continued investment in our enterprise architecture, we need to drive valuable insight to enable execution around our strategy. But none of this is possible unless and until we have a strong foundation for talent that provides them a platform to enable the execution of what we are putting forth. This really is what's going to drive innovation and a differentiated financial outcome along with strong customer satisfaction. So what does all this result into? Essentially, you look at our long-term outlook, and it provides a strong and differentiated financial profile. In a normal market environment, we expect to grow at least 200 basis points above market, with life sciences growing in the 7%-9% range and diagnostics following with 6%-8%. And essentially, that amount of growth will give us 75 basis points of operating margin expansion.
If the organic growth is lower, then obviously the margin expansion will be lower. But there is still a lot of opportunities for margin expansion, as I have shared earlier, and we feel we are still in the early innings of this. This, along with the strong cash flow conversion that you have seen from us over the last several quarters, is what will result in double-digit EPS growth. And essentially, also, it does not include future capital deployment opportunities that are incremental to the long-range outlook that you are seeing here.
A couple of financial considerations for 2025, which you have saw at Investor Day, but to reiterate, you know, from a market perspective, while we are starting to see a path to normalization, which is what we think that 2025 will be, it won't be an immediate snapback, but we and our peers in the industry are starting to see that path to normalization. From margin expansion opportunities, we expect that to be incumbent upon the level of organic growth we see. As you saw earlier, assuming 6%-8%, we expect 75%. If that's more in the 4%-6% organic growth, that'll be more like a 50% operating margin expansion. And around net interest expense and tax rate, the assumptions are $70 million and around 20%. Formal guidance for 2025, as you suspect, we will provide on January 31st at the earnings call.
So essentially, what we've done and what we've accomplished so far is created an innovative life sciences and diagnostics company that has got a transformed portfolio, which will provide a differentiated financial profile. Additionally, our focus around execution, we feel, will provide additional and meaningful capital deployment opportunities for the company. But essentially, it's not just about what we are doing here. For those of you who came to see us at Investor Day or have seen what we presented there, you know, the mission and vision of what we are doing around newborns, around autoimmune testing, and the impact that we are making on life, of how we are accelerating drug discovery on the life sciences side, that's really what drives us, and that's what unites us as a company. I thank you very much for your time today, and I look forward to the Q&A session.
Great.
Thank you, Prahlad. And then Max is joining us as well. So first, I just kind of want to kick it off, just given some of the highlights that you spoke about at the Investor Day. You know, could you just rehash for us? You talked a lot about in the presentation, what are some of the key messages, like the one or two messages that you want investors to take away? And then just specifically on the difference on market share or market growth versus your top-line growth numbers, can you just talk about the conviction that you guys have in that 200 basis points of share gains across the portfolio?
Sure. There are a few questions in there, Rachel, so I'll try and address them.
You know, number one, our intent of doing Investor Day is, look, we've gone through a solid transformation on our portfolio over the past several years, and we really needed to take the opportunity to educate our investors around what Revvity is now post this transformation. So that was intent number one. Intent number two was really to go deeper into the business segments around life sciences and diagnostics and explain what it entails, what are the growth opportunities, why we feel we have a differentiated portfolio. Number three, obviously, was to invite everybody to see the BioLegend campus and the impact that it makes on what we are trying to do. And the fourth, and I think that's the most important one, which is what I ended is, why are we doing it? What is the mission? What drives us?
You know, when we say that 75 - 80 newborns are saved every day because of what we do, that really unites our company, and that's really the passion. To your second part of your question around why do we feel that we have a differentiated profile, it comes down to, again, our focus is around providing a specialty product portfolio that is focused around innovation. Our focus is not around providing your routine offerings or commoditized offerings to the customer. And this is where the transition that we have made with the portfolio in moving from being a vendor to a partner is what we feel will continue to provide us the differentiated uplift.
Great. And then just in terms of the underlying market assumptions, you've talked about in 2025, this path to normalization of underlying market trends.
Appreciate you're not going to give guidance until earnings, so I won't ask you on that. But just how should we think about the pace of when that could recover? Is it going to be more of an immediate recovery? Is it going to be more of a slow ramp? And then just alongside that, how do we think about some of that market trends as well across the different businesses? Is it going to be different on diagnostics versus life sciences in the recovery?
Yeah, it's a good question. I think the specifics, as you pointed out, we'll give you on January 31st. But I think I can shed some light on some of the pieces that you mentioned.
You know, if you recall, one of the things that I have said is, look, given the business that we have, we will have an early insight into the path to recovery. And I think if you look at our reagent performance over the past couple of quarters, we are starting to see that path to recovery. So I don't think it'll be an immediate snapback that suddenly everything will go back to what normal is. But we start getting early insights into what that path to recovery is. And I think it'll take 2025, which some of our peers in the industry have said will be gradual. And we think that it is more of a path to normalization.
Okay, that's helpful. Maybe going off of that then, just talk about the margin profile.
How should we think about Revvity's incremental margins once that market does snap back and once we do see some of the volumes come? And how does that really look relative to some of your peers in the sector as well?
I'm going to give my jaw a rest and let go.
Yeah, let's let Max exit this one.
You know, I think on the margin side of things, this again remains one of the areas we're most excited as Revvity and probably one of the more underappreciated aspects of our story. You know, if you look at our margin expectations, we're calling for about 75 basis points of margin expansion in a normalized environment. And when you look at that 75 basis points, the breakdown is about 25 basis points on the gross margin and 50 basis points on your operating expense leverage.
And I think when you look at the operating expense leverage, it's really keeping R&D growing in line with sales and really picking up the incremental leverage on your SG&A. I think this is one of the things that differentiates us as Revvity is that as we continue to grow, it's not going to require an immediate or an extreme amount of SG&A investment to continue that growth. And I think for us, as you see the incrementals, it's probably in the low 40s for us as an overall company. And again, I think if you look over the next five to seven years, it's going to be an area of true differentiation for us versus our peers as we're already in sort of the upper end of margin percentage right now as an overall company.
I think we have a higher ceiling in terms of overall op margin capabilities.
Perfect. That's helpful. One more thing I wanted to dig into in terms of Investor Day updates was just the new reporting structure. You resegmented some of the businesses. So can you just walk us through what is the rationale on the new reporting structure? What should investors kind of hope to look at in terms of updated KPIs across these businesses? And then anything you hope to accomplish across these portfolios as a result of the resegmentation?
Yeah, strategically, Rachel, if you look at the way the Applied Genomics business is constituted, right, nearly 50%-60% of the customers tend to be more pharma biotech, which is a customer segment that the life sciences segment really essentially serves. So it made business sense to put that under the life sciences segment solution.
The second component is most of the instrumentation that we develop are on the life sciences side, and again, Applied Genomics, a majority of it is around instrumentation, so putting them together under the same operating and reporting structure gives an opportunity to create more synergies, you know, whether it's around platforms, architectures, software, power cords, you know, take your pick. It gives you an opportunity to have those businesses under one umbrella and really leverage productivity and efficiency out of that. Not talking about the fact that you already have the same end customer, so it just made perfect business and strategic sense to do that.
Great. That's helpful, then maybe shifting over to some of the more recent trends that we've seen, just the U.S. election, I think this has been a hot topic for investors.
So I wanted to just kind of do a catch-all question related to everything like tariffs, NIH funding, also some of the recent appointments that we've seen like RFK Jr. as well. So first up, just on the tariffs piece, can you walk us through what's your exposure to some of these manufacturing areas within China, Mexico, Canada, some of the ones that have been highlighted, also your exposure to NIH? And then more on the RFK appointment side of things. Have you guys seen any change so far in your pharma biotech customers and some of their customer behavior as a result of some of these cabinet appointments?
You know, a good question. I'll try and address each one of them in pockets. You know, starting with manufacturing, we don't manufacture anything in Canada or Mexico.
Everything that we manufacture in China, as you know, is in China for China. So there is not a lot coming out of there. On the NIH side, I think our exposure to NIH funding is 1%. So it is very minimal from a perspective of what we do, and even what we provide to academia, government are essentially reagents. So those are like $300,000-$500,000 ticket items. The second question was around the political aspect of it, right? Well, we haven't, you know, just the uncertainty of it is the fact that we just need to wait to see the confirmations go through and see how much of this really happens. So I think, you know, just like all our peers, we all are in a wait-and-watch aspect of it and continue to plan as to what we would do, put contingencies in place.
But given the portfolio again that we have, most of what we do is around newborn screening, autoimmune testing, and in the life sciences side, it's reagents, software, and services. So the intent really of the portfolio is to make it resilient so that it is resistant to all economic vagaries that happen into a life cycle of a portfolio. Anything I'm missing?
No. Perfect. Maybe sticking on some of the more recent trends and topics, just the pre-announcement that we got yesterday. So you guys noted 6% organic growth. I was just wondering if you could break down some of the trends that you saw in 4Q. Was there any highlights across either diagnostics or life sciences? And then I think one area that you guys were getting a lot of questions on was the assumptions related to instruments.
So just budget flush dynamics, was there any catch-up CapEx spend? So can you walk us through any color you can provide on the 4Q trends?
Yeah, sure. So just as a reminder too, I guess coming into the fourth quarter, we had guided for 3%-5% organic growth. Finished the quarter at 6%. You know, I think that beat was really driven by a little bit better performance in both life sciences and diagnostics. But I would say the two biggest components that came in better than expectation really in the life sciences reagents business and in our software business. I would say those were the two biggest drivers in terms of the additional tailwinds that we felt.
You know, as you look at it from an instrumentation side, if you remember coming into the quarter, we had called for still a sequential improvement from the third to fourth quarter, but on a much lower level than what we would consider normal seasonality for our instrumentation. That seems to have played out more or less as anticipated. So there wasn't, you know, some, you know, budget flush or anything of that nature. Instruments kind of came more or less in line with our expectation for the period. I would say the one thing that just in the fourth quarter did, I would say, change more materially was just FX, which now was a couple hundred basis points headwind from our previous assumptions in the fourth quarter. But I think we were able to, you know, offset a good portion of that due to the better organic growth performance.
Yeah, exactly. So my next question was just around the margins and the EPS numbers. So as you mentioned, you guys had really guided to a 1% tailwind for FX, that flipped to a 1% headwind that you saw in the quarter. You still were able to meet or exceed your EPS expectations for 4Q. So any color you guys can provide on how much of a headwind was FX this quarter? How did margins play out relative to expectations there?
Yeah, I would say from a margin standpoint, things more or less came in as anticipated. I think, again, you'll see the FX headwinds being offset by the organic growth with margins coming roughly in line. And then you look at EPS, you know, I think, again, mostly either going to come in line or be slightly better.
That's going to be mostly driven, I think, by some, any beat would be driven by more below-the-line dynamics, either on interest and other tax rate.
Perfect. That's helpful. We've made it like halfway through Q&A without talking about China. Wanted to shift to there. China represents roughly 17% of Revvity's revenues. Can you walk us through how do you guys think about the long-term importance of this region? Can you comment on any of your assumptions related to that long-term growth in China? And then how should we think about this being accretive to company average?
Maybe I'll start with the portfolio and the strategy around China, and then you can give color around the specifics, Max. I mean, and again, I'll continue to say this till the cows come home.
You have to look at the portfolio that one brings to bear in a particular market, and we've talked about the fact, and you've seen that from, you know, from others. Our focus is really on providing a specialized portfolio in the market. On the reproductive health side, you know, with newborn screening, we have moved all our production, development, sourcing in China for China a few years ago, so this is not a new phenomenon, whether there'll be a local competitor in the marketplace or the impact of that. From a perspective of whether it's the VBP, Sunshine Act, all of these, you know, we've talked about that. The competitors we've talked about, we feel very good with the portfolio that we have brought to bear. On the autoimmune and allergy side, our focus is to bring specialized assays into the marketplace.
So really, whatever we need to manufacture, we manufacture in China. The rest, we bring in from Germany. So the intent really is to have a portfolio into the marketplace that is competitive, and it is in a niche or a specialized market, so you don't have the impact of VBP in the today or in the coming future. Now, three, five years down the lane, down the road, will there be impact? Of course. But we've also talked about the assumptions that we've made around what the impact of China will be on our portfolio.
No, I think China, again, is a, if you don't peel back the onion and really go through it, it can lead to, I think, some misinformation.
I mean, if you look at China for us, we grew there in 2023, and I think in 2024, we'll be flat to maybe slightly down low single digits. And I think if you look at the 2024 performance, it's all just driven by instrumentation. Instrumentation for us will be down roughly mid-teens in China for 2024. But outside of that, every other one of our business lines is growing in China.
Okay, that's helpful. I wanted to dig specifically into the diagnostics portfolio within China. I think this is an area that's been much more resilient relative to some of the peers' China portfolios, but also more resilient than the life sciences business, given some of the underlying drivers there. That said, the topic of VBP, but also competition, have come up a lot in investors' conversations within that diagnostics portfolio.
Can you walk us through what you are seeing more broadly from a competitive standpoint and from pricing in the region? And remind us, what is embedded for that China diagnostics portfolio long term?
Do you want to talk about the pricing assumption that we have talked about?
Yeah, so maybe I can just start with the broader framework on the LRP as well. China immunodiagnostics for us, we anticipate growing in the mid-single digits, which is below our overall immunodiagnostics assumption of high single to low double digits. And I think when you look at that China assumption, our growing assumption is that pricing will be a several hundred basis point headwind per year. And that volume is something in the high single digits to low double digits from an autoimmune testing standpoint. I think that's more or less what we've seen played out throughout 2024.
And that's what our expectation is for the next handful of years.
And from a competition perspective, again, you know, competition in China or in any market is, trust me, not a new phenomenon. They've existed all along, and so they do now. So it's not that, you know, suddenly a new competitor that starts with a Y or a A or a B has suddenly showed up. They've been there, and they do make products, and they do sell, and they do compete. And it's a natural phenomenon in any normal market. And then we feel very good about the portfolio that we've brought to bear.
Perfect. Maybe shifting to Revvity's life sciences business in China. That's been more muted, given the challenging macro backdrop here. So can you walk us through what are you guys seeing in terms of latest trends in the region?
Also on the stimulus dynamic, are you seeing any benefit on your instrumentation portfolio? And how should we think about the recovery there, both on reagents and instrumentation in China?
I can give some numerical comment to it, and if we're lucky to provide some more context as well. But I think if you look at our life sciences business in China, as I mentioned, this year, instruments will be down, you know, mid-teens. I think you're seeing the pausing of purchases from customers as they sort of await to see what happens and then how stimulus plays out. But if you look at our reagents business, it's grown in the past two years in China. And I think it's been a steady performer and really a testament to the portfolio we've built in the commercial channel that we have in China and partnerships with our customers.
And so that continues to be an area of excitement and focus for us as an overall organization. And right now, you just have some temporary headwinds from an instrumentation standpoint.
Maybe stepping back more broadly on just pharma and biotech trends. Obviously, that end market has remained pressured. During your 3Q call, you guys noted that the worst is behind us. And so in terms of the R&D cuts that we've been seeing across the sector, so can you discuss the conversations that you've been having with your pharma and biotech customers that lead you to believe that the worst is behind us? And then what's your latest view on biotech funding as well? Do you expect that that to come back? And if so, kind of the timing on expectations there?
Yeah, maybe I'll start with the trends that we've seen.
You know, Rachel, as you recall, you know, we've pointed out that we will have an early insight as to when we start seeing the turning of the tide. That's through our reagent portfolio. We've seen that now two quarters in a row, and you know, and especially in the Americas, where the reagents business is starting to grow back and get back into positive territory. That's a clear sign that we are getting back to a path to normalization. Again, I said we don't expect that to snap back. We continue to see pressure on CapEx funding from pharma biotech, where they are being careful around how they spend the dollars. I think that that's one that will be the last one to come back.
That's helpful. Maybe sticking on the reagents portfolio, just a minute, spending time on pricing within BioLegend.
So can you remind us, what are you guys expecting in terms of pricing assumptions for 2025, but also the long term in terms of that pricing dynamic for BioLegend?
Yeah, I think we've talked about pricing overall as a company will be more muted, I think, than what we saw over the past two or three years where we saw greater than 100 basis points of pricing. Reagents are the one area of our portfolio that has the most pricing power. But even when you look underneath that, there's different pieces of the equation. I think when you look at BioLegend, BioLegend is the value-based priced offering in the market. And I think that's something that we're going to continue to leverage on that strategy.
Our focus is gaining as much share as we possibly can, as opposed to trying to fight for every penny from a pricing perspective. They've already got incredibly healthy margins way above company average. Again, our focus is going to be on gaining share as opposed to trying to maximize price.
Maybe a question quickly on capital allocation. You guys mentioned during your analyst day that you have roughly $4 billion of capacity. Can you outline for us your capital allocation strategy, just given the absolute cash flow that you guys are seeing? How should you plan on, or how should we expect you to plan on balancing M&A versus things like buybacks?
Yeah, I mean, look, we have been an acquisitive company over the past decade, and we will continue to be acquisitive.
But, you know, it's, we need to just be sensible and smart in how we allocate capital. So there is, I guess the only shift that you will see is primarily from moving to being a focus only around M&A. We have a more balanced approach now around buybacks and M&A. And, you know, and when we see the right target and the right opportunity, of course, we'll jump on it.
I think the biggest philosophical change is if you go back five or six years, like we had to do M&A to really reshape our portfolio and transform what we wanted to be as a company. I think now we're in a position of still wanting to be acquisitive, but having a much more, I would say, target, not target, but selective approach and criteria to fit our new company portfolio.
We have a much more enhanced financial profile, and we want to make sure that we protect that and ensure that we're able to hit our long-range financial goals.
For sure.
Maybe just in the last minute or so, Prahlad, what would you say is the most underappreciated aspect of the Revvity story? I think.