Good morning, everyone. Thanks for joining us at the Raymond James Institutional Investor Conference. I'm Andrew Cooper. I cover life science tools here for Raymond James. We're happy to be joined by Revvity this morning. We have CFO Max Krakowiak here to start us off with a brief presentation, and then I'll come back up for some additional conversation once he wraps that up. So with that, I'll hand it to Max.
Thank you, Andrew, and I appreciate you having us in here today, allowing us to talk about our company, Revvity. I think a couple of logistical items just before we jump in. First, I'd remind folks to visit our investor relations website for our safe harbor statements, and then secondly, for the presentation today, I will be discussing the company in our new reporting segment, which we did just start here in 2025. So what is Revvity? So for those of you that don't know, Revvity is a life science and diagnostics company that is focused on revolutionizing science and transforming human lives with groundbreaking innovation. Our portfolio has undergone massive transformation over the past seven years.
So we have now built out a Life Sciences business unit that has both small and large molecule capabilities across the preclinical workflows, as well as building out our Diagnostics franchise that comprises of immunodiagnostics and autoimmune, allergy and emerging infectious disease on top of reproductive health. Upon reaching scale in both Life Sciences and Diagnostics businesses through acquisitions, we had enough scale to be able to divest our legacy analytical business, which represented about a third of the company at that time, and it was slower growth and lower margin. And upon that divestiture, we also divested the legacy PerkinElmer brand name. And so a culmination of those led to the launch of Revvity in May of 2023, and a different company profile than what we've had historically.
I think when you look at us at Revvity now, we have roughly 11,000 employees, roughly $3 billion of revenue. Again, our business is comprised of about 50% Life Sciences and 50% Diagnostics, and we have a high recurring revenue mix of roughly 80%. When we talk about recurring revenues, that is the sales of our reagents, services, and software businesses, so if you take a further look into Life Sciences and Diagnostics businesses, again, our Life Sciences solution, roughly $1.4 billion. 85% of it is in Life Sciences solution, which we refer to as the sale of our instruments, reagents, and services, again, to mostly pharma biotech and academic and government customers, and then on the diagnostic side, we again focus in areas of immunodiagnostics and reproductive health.
And I think the key for us on the diagnostic side is being in specialized end markets as opposed to some of our commoditized me-too areas. We are very focused on, again, on specialized high growth end markets. And I think when you really look across our portfolio, we serve a diverse customer base with, again, just natural underlying higher market growth rates. So if you look at our Life Sciences business, over the past five years, we've grown at about a high single-digit organic growth, and we have operating margins that are already north of 30%. Within our Life Sciences solution, the biggest piece of that is our cornerstone reagents businesses. Again, these are highly specialized reagents that allow us to provide innovative solutions to our pharma biotech and academic customers focused in the preclinical workflows.
When you look at our Diagnostics business, again, this is roughly 50% of company revenue, 60% of it immunodiagnostics, which again is our autoimmune allergy and emerging infectious disease, and then you've got 40% in reproductive health with a big focus on newborn screening, which makes up the majority of our reproductive health business. This business has historically grown at mid-single digits and has operating margins in the upper 20s that have continued to expand meaningfully over the past two years and has continued runway to expand. Our portfolio puts us in a unique position that we are able to help our customers bridge the gap from discovery to cure as we offer innovative, high-value offerings throughout the entire spectrum.
For us, our differentiation is in our innovation and our customer service and how we are able to partner across both our, again, the preclinical and Diagnostics landscapes to really enable our customers to have a full value chain offering and providing the best care to the consumer. I think not only has our portfolio transformed, but our financial profile has transformed as a result as well. We now believe we have driving differentiated organic growth in the industry. That differentiated organic growth is 200 - 300 basis points above the market, which we consider to be mid-single digits. That accelerated growth versus market is driven by, one, playing an underlying faster growing and markets such as our immunodiagnostics and software businesses. Second, it's driven by the continued levels of innovation and customer service we have, particularly with our pharma biotech customers.
Then lastly, it's our ability to really drive accelerated growth in our reproductive health business well above the global birth rate trend, which has faced headwinds over the past several years. But despite that, we are able to grow above it due to our continued geographic and menu expansion offers. Not only have we improved our profile from an organic growth standpoint, but we've also improved from a margin perspective. If you go back in 2019, our company had roughly 19% operating margins. Today, we're already at 28% as Revvity. So a dramatic transformation and one that we believe we can take already upper-tier margins today and put them into the best in class at about mid-30s% over the long term.
So when you combine the organic growth and our margin expansion opportunities, we believe over the long term that we have the opportunity to be consistently growing EPS at a double-digit clip prior to even getting into capital deployment from our already strong balance sheet positioning. Now, I think as you look at 2025 for us, we believe right now in our guidance that we can grow this year 3%-5% organically and expand operating margins 20-40 basis points. We do not believe that 2025, we are still not yet in a normal market environment from our pharma biotech customers. However, in our guidance assumptions, we are basically assuming the same market that we left with at the end of Q4. So we are not assuming any uptick in the market performance as we go throughout the year.
If it was to return more close to what we would consider a normalized market environment, that would provide upside to our guidance, so bringing it all together, we at Revvity have undergone massive transformation over the past seven years and have created a truly unique company. A company that is innovative in Life Sciences and Diagnostics space, playing in faster underlying market growth rates, providing a unique and innovative product portfolio, and being a true strategic partner to our customers in both the pharma biotech and Diagnostics environment, so with that, Andrew, I think we'll do some Q&A.
Perfect. If you want to come sit, you're welcome to take a load off. Maybe just to start somewhat high level, and you touched on it a little bit, but you posted low single-digit organic growth the last two years. It's been a lot more painful for some of the peers who've been in the negatives. You guided the three to five without end market improvement. Some of the peers are more like 3%, 4%. You ran us through some of the portfolio there, but what do you think really allows for that greater resiliency? Is it mix? Is it execution? Is there some other sort of secret sauce? Just help us think about that.
Yeah, I think there's a couple of different factors that have led to what we also believe is differentiated performance versus the peer group over the past couple of years and what has been a tough environment. I think one, I touched on it, we do play, I think, in some higher-end or faster growth end markets versus our peer group. One in particular being autoimmune in our immunodiagnostics business is a high single-digit growing market. The software market within preclinical research is a faster growing market and sort of a high single-digit clip. So part of it, I think, is a unique portfolio mix. I think the second piece is really the continued execution both commercially and also from an innovation standpoint, particularly as you look at our reagents portfolio, where I think we have real differentiation there.
And I'm sure we'll get into it a little bit further. And then lastly, I do really think that we've now put ourselves in market-leading positions, again, across every one of the end markets that we play in. And we're able to leverage sort of our scale and scientific expertise to really deliver innovative solutions to our customers.
Perfect. In late last year, you hosted Investor Day. in my words, you kind of gave everybody the scaffolding to really build what is the Revvity portfolio made of after a lot of change in the couple of years prior. As we sit here a few months later, you've had more conversations with investors. What part of that do you think people still underappreciate or don't understand?
I'm glad you picked up on the scaffolding. I mean, that was really part of the intent at Investor Day was to give a full sort of unveiling and full transparency of what we've now become as Revvity. And I think for us, look, I could speculate as to what might still be misunderstood. I think the reality is we've still only been Revvity now for two years. And there still is going to need to be, I think, consistent education on who we are as Revvity. I think the first two years have been a good start in really proving out that differentiation. And we're going to continue to stay focused on kind of what's in our control and execute what we should. I think the results are going to continue to play out where we as Revvity do have some real differentiation for years to come.
Great. And the Life Sciences side of the house, that's where we're going to start. Obviously, been noisy the past few years. I think the LRP assumed something like 5% e x in the non-software piece of Life Sciences. Can you break that down a little bit? You gave some of the recurring versus non-recurring, but maybe also in terms of discovery, preclinical, working a little bit downstream as well, given you started to do that.
Yeah. Look, again, maybe just a quick reminder too, most of our Life Sciences, or if not pretty much all of our Life Sciences business is really more focused on the preclinical side today. I think we're hoping to get a little bit further downstream. We can talk about some of that later today around GMP and some other areas. But I think for us, really, it is a preclinical positioning today. I would say we believe the reagent market growth in the long term is probably at a higher clip than the instrumentation. But I think the other thing I'll mention as well is, look, over the past couple of years, you've probably seen a little bit more of a shift to clinical and commercial expense from pharma and sort of pulling from preclinical. That is, we really believe something that can only be temporary.
Pharma biotech can't constrain their research too much over a long period of time. They need new drugs coming to market. And so when those funds do, I think, more appropriately balance back to the preclinical side, I really believe that we are better positioned than anyone to take advantage of it. And despite that sort of shifting dynamic of budget, we've still been able, I think, again, to prove differentiation in what has been a challenging sort of market environment over the past couple of years.
You said you share where you're going to touch on it. Jumping to the reagent side, to BioLegend, maybe just walk us through a little bit of that competitive landscape there and your differentiation in the space, why you win, and what can you do better in that arena to continue driving above market growth?
Yeah, I would say first from a competitive standpoint, there's probably four or five kind of key players in the reagent side. I would say we're probably one of the more newer entrants, to put it in quotations. We've, I think, done a nice job over the past couple of years in taking some share. And I think really the reason why we've been able to take share and establish ourselves is one, we really have differentiated customer service. Most of our sales reps don't like to be called sales reps. They actually have a PhD. They consider themselves more scientists that are just there to help solve problems. I think the second area is we do have, I think, differentiated delivery to our customers.
Most of our reagents, more than 95% of them, are shipped and delivered within 24 hours of the order booking, which is a unique differentiator for us, and I'd say thirdly, we're the best value offering in the market in terms of incredibly high quality at the lowest price.
And then maybe just remind folks kind of that GMP journey that you're starting on, where you are and how you think about that ramping up from the early days.
Yeah, so I think there's really probably two big strategic focuses for us right now on the reagent side. One is GMP, as you mentioned, the other one being e-commerce and continuing to build out that channel. I think as you look at GMP in particular, as I mentioned, we had historically been focused on mostly preclinical. A lot of our customers were coming to us and asking and saying, "Hey, we want to keep buying your reagents, but it'd be really helpful to us if you just sold us GMP right off the bat." And so from that perspective, we had gone and built out sort of a GMP lab that had finished in the second quarter of 2024, so we're ready to start taking orders. There is a little bit of a ramp there.
I think if you look at another peer in the space, it took them about four to five years to kind of really ramp up and get to scale from a GMP perspective. We have embedded about 100 basis points of contribution from GMP in our LRP for reagents, and so I think that's an area that we're really excited about, but one that will take us a little bit of time to just get going commercially.
I'll just comment from Investor Day. it's funny. The GMP piece, I think, was, it's a room, right? It's a lab. Not as impressive. The delivery, the automation on that side was certainly neat to see. So it's funny how both of those things jump out. Maybe shifting gears a little bit, though. The instrument side of things, more pressured. I think on the earnings call, you said that was the part that wasn't yet kind of on that path to normalcy. Has that changed at all in the couple of weeks since then? And what needs to happen to really get back to that normal trajectory in instruments?
Yeah, I'll probably just refer to more or less what we said on the latest earnings call here in terms of the trends. But I think it has continued to be choppy, particularly on the CapEx side or the instrumentation side. I think our assumption for 2025 is it'll kind of continue to be relatively muted. Obviously, if things improve quicker, that would be upside to our current assumptions. But I think what really needs to happen is you need to see that swing back into preclinical funds. I think the first step we're seeing is that the restructurings on the pharma biotech side have really subsided. So we're seeing more consistent level of lab activity. But to really start seeing, I think, an influx of capital expenditures, they're going to need to see more of their funds start moving back in preclinically. And we haven't necessarily seen that yet.
Okay, makes sense. And one area you have said you expect to get back to growth. So a little bit of that switch is China, which has been a pain point for pretty much everybody in the space. But how much of that in 2025 in the China instrument portfolio is end market stabilization there versus the benefit of stimulus kicking in and kind of something that is not necessarily not as durable, but a little bit more kind of artificial in the market versus real end market demand?
Yeah. I'd say a couple of things off that. First, I would say our guidance doesn't assume any real material contribution from stimulus. I think we've got some modest assumptions in there for Q1 just based on what we have discrete order visibility to today. If stimulus were to really roll out to the full extent we think it could, that would be upside to our current assumptions. But I think things are just taking a little while to work their way through the system and want to be prudent for our assumptions in 2025. I think more broadly, just stepping back, I do believe the China Life Sciences market is an area they will continue to invest in. It's always an area that's had some level of stimulus funding. I think this one has gotten a lot more swirled than some of the other programs have historically.
But that's always sort of been there as a factor of it. I do think over the long term, it's going to be an exciting growth market for us.
Okay. And shifting back to the U.S., I can't let you go without asking you at least some macro question, right? So new administration attempts at NIH indirect funding caps, new leadership at HHS. How do you guys sort of ring-fence the risk there knowing you don't have it necessarily or an improvement necessarily assumed in the guide? But how should we think about what numbers can look like if we do get some improvement? Is it to the LRP? Is it above on easier comps? Just help us think about what that could look like if everything goes better than we expect.
Yeah, I think from, I guess, maybe answer your first part of your question just on NIH and the academic and government funding environment in the U.S. Obviously, there's been some news. It continues to be choppy. We'll see how things sort of settle out here once the dust settles. But I think if you look at our portfolio, probably less than 1% of our revenue is directly tied to NIH funding. If you look at our total academic and government exposure in the U.S., it's roughly 5% of our total company revenue. But more than 80% of that is reagents and consumables, which for us and where we're expecting the impact, it would be, I would say, more insulated versus on the instrumentation side. I think you could see potentially more meaningful headwinds based on the current guidance.
Again, we'll see how the dust settles here. And I think if you put that in context of the 2025 guidance, I think we mentioned on the call, we've taken a pretty prudent assumption in our guidance. We're not really assuming any real change in the underlying market dynamics. And so I think we've built in some areas where things can toggle a little bit. And maybe academic and government might be one of those areas if these cuts turn out to be real. But I think, again, we really wanted to put something out there for 2025 that would allow us to maybe sort of weather some of these dynamics.
Great. And shifting to one piece of business that I think at least on the piece that's transitioned to SaaS is certainly Steady Eddie from that perspective. The software side, you've got a lot rolling out. You've got large molecule. You've got moving into clinical.
Logistics.
Logistics. Yeah. Logistics. So maybe just out of that group of kind of three plus new software tools coming out, what's most exciting to you? What's resonating in the market? How do you think about those rollouts?
Yeah. I mean, I think if you just look at our software business more holistically too in our approach to innovation, our software solution is essentially the ERP for scientists, right? It's where they draw their compound. It's where they design their experiments, see the analytics on top of their experiments and what the outcomes were. And so it's incredibly sticky. So with that, we're in, I would say, the majority of your tier one pharma companies. We are sort of their ERP of choice. And that allows us to have a very close connection to where they want to go from an innovation standpoint.
I think the three products you mentioned, moving a little further downstream, taking the same offerings we have today, which are small molecule focused and making them capable on the large molecule side, and then really the logistics component, they are all direct feedback from the customers. And I think all of them have an opportunity to really keep accelerating our performance in software. So I don't think I'd necessarily call out one versus another. It's really the culmination of us being at sort of the cutting edge of what our customers need and being able to go to market quickly with their solutions.
Great, and maybe shift gears a little bit now, Diagnostics. Just walk us through some of the puts and takes in 2024 and kind of how you think about 2025 at a high level.
Yeah, I would say so. 2024 was a strong year for us from a diagnostic standpoint. It was already actually at the low end of the LRP range. We've kind of got a similar setup for 2025 and being roughly 6% growth. I think when you look at the two businesses, immunodiagnostics continues to perform well. It grew high single digits in 2024. We've got a high single digits assumption in 2025. And then reproductive health as well. Grew mid-single digits in 2024. We've got a little bit of a more tempered expectation in 2025 and roughly low single digits. But both businesses continue to perform, I think, extremely well. I think we're extremely excited about the innovation and the new assays that we're bringing to market.
I think we're continuing to be excited about our geographic expansion, whether that's in the U.S. on the immunodiagnostic side or sort of in the emerging markets with reproductive health. I think we continue to have a lot of irons in the fires and exciting growth opportunities on the diagnostic side.
One of the things that came up on the road with you guys late last year that kind of always sticks in my mind now is on the China question we get about VBP and is there pain on price there, that you've already baked in a lot of that kind of material price cut in immunodiagnostics in China. So maybe just talk us through the lay of the land there, how you're growing volumes essentially double digits while you have that price headwind hitting you, and why it's not that stroke of the pen risk on VBP that I feel like we see for a lot of other players.
Yeah, I think to answer that, I think it's probably important too to maybe put a little context around what is actually our immunodiagnostics business and what market it really plays in. For us, the biggest market for us in immunodiagnostics is autoimmune. And autoimmune is still a relatively younger area of Diagnostics. It's one that does require a high volume of testing sometimes to find, quote unquote, the needle in the haystack. You've got a symptom. You don't know the exact cause. You've got to do a lot of testing to try and pinpoint it. And so when you put that context into perspective, that's really what's driving the volume growth, right? There continues to be a need for new assays, newer menus, right, to really diagnose the symptoms that a patient is facing. So that volume growth is there.
From a pricing perspective, yeah, there's budgetary pricing pressures right now in China. I think the reason why you don't see our business in scope for VBP or some of these more dramatic one-time price actions is one, it's a smaller piece of the hospital's budget, right? Again, it's a specialized area of Diagnostics. It's not the general area of testing. And I think the second is there's not a lot of local competition really for our immunodiagnostics offering. These are menus that need to be extremely broad, and they need to be extremely specific and sensitive to really find that needle in the haystack.
Perfect. I was going to ask a reproductive health question, but just looking at time, let's maybe jump to margins.
Yeah.
You were able to drive operating margin expansion, I think, around 30 bps last year on pretty muted organic revenue growth, and despite some headwinds from incentive comp and things like that. So maybe just walk us through how you're able to achieve that level of expansion without more of the top line and what that tells us in context of the margin expansion this year and out into the LRP.
Yeah, I think, look, we were also pleased, I think, with the 30 basis points in a relatively muted organic growth year. I think that really comes down to the execution we had on our integration and acquisition synergies. I think if you look at kind of where we are on the spectrum of those integration and synergies, we're still probably only middle innings. So we do have some more runway to go. I think when you look at the 2025 guidance, I think we have an operating margin expansion, 20-40 basis points. It's in line with sort of what we have organically from a 3%-5% perspective. So we're going to continue to execute on some cost synergies. But then we're also going to reinvest back in the business and continue to fuel our growth over the long term.
Great. And in terms of capital allocation, we've seen pretty big acceleration in share repurchases, especially the last couple of quarters, the back half of 2024. So should we expect that to continue? And more broadly, how should we think about the capital allocation priorities or your philosophy moving forward?
Yeah, I think you've seen a balance versus our historical practices over the past couple of years. I think going forward, I know we mentioned it Investor Day, i think you'll continue to see that balance play out. But that's not to say that acquisitions won't remain important for us. I mean, over the long term, we will remain an acquisitive company. I think it's just a matter of finding the right fit. Again, we really like the financial profile we've created. It's got to make sense strategically. And I think that's really the switch you're seeing in our strategy, as you go back seven years ago, we had to do M&A to change the portfolio. Now it's more, it's got to be the right fit for us to do it.
I think that's a philosophy change and gives us the opportunity to maybe more balance our capital allocation.
Perfect. And thinking about that balance sheet and kind of that last comment there, what do you view as that capacity? How do you think about leverage over time? You're a little bit north of 2x or 2.5x EBITDA. Where would you take that for the right deal? And kind of what are you comfortable with from a leverage perspective?
I think first and foremost, we are definitely committed to remaining investment grade. For us, that means we probably can live a little bit higher in sort of the low threes to mid- threes. At some times, they'll let you flex above that like we did for the BioLegend acquisition, but then you've got to bring it down over the next 12-18 months. So I would say we're willing to flex up. But again, it's got to be the right deal. And we are very committed to remaining investment grade.
Perfect. And I think one of the things that came out from Investor Day as well was the talk around strategic partnerships and opportunities there. So which of those are you maybe most excited about potentially coming to fruition? How do you think about those partnerships and kind of what do they represent as part of the LRP as well?
Yeah, I maybe just answer that last piece. It's not really included in the LRP. I mentioned it briefly in one of my slides, really, about that ability to bridge what we're doing preclinically all the way over to the diagnostic side, and I think those are really the partnerships that get us excited, so for instance, if we're working on a therapeutic with our pharma biotech customers on the preclinical side, and they already know they're going to need a companion diagnostics and sort of the creation of an assay in a new area for us that really almost builds out a new vertical for us in our specialty Diagnostics businesses, those are the ones that get us really excited, right? We're really kind of sort of organically building something in parallel with our pharma biotech customers that's a new vertical for us.
That's a newer sort of development from the perspective of as you brought these pieces together. It feels like that's been more of a focus over the last kind of at least publicly to us over the last handful of quarters. Is that fair?
Yeah, absolutely. And I think we just continue to see positive momentum with the customers. And I think we're really excited about what that ultimately could end up being.
Great. Well, maybe I'll just pass it to you if there's anything you want to make sure you highlight or kind of emphasize in terms of the story. And otherwise, we can take it down to the breakout.
I think we're good to take it to the breakout. I appreciate you having us.
Awesome. Thanks for joining us. Thank you.