Great. Thanks everyone for joining this morning. My name is Matt Sykes, I'm a life science tools and diagnostics analyst at Goldman Sachs. I have the pleasure of welcoming Max Krakowiak, the CFO of Revvity. Thank you very much, Max, for being here.
Absolutely, good morning.
Maybe it would be great for you to start out, kind of set the stage first, and talk about the most recent results, trends you're seeing in your business, and also there was a slight, you know, name change and everything. Maybe talk a little bit about about that.
Sure. I think if we go back to, you know, the commentary we had on the first quarter call, you know, Q1 came in, I would say, probably at the upper end of our expectations. For the full year outlook, we did, you know, tweak our range for the year. We moved our organic growth target from 9% for the full year to a 7%-9% range. We opened up EPS from a solid $5.05, and we moved it to a range of $4.85-$5.05. I think what really caused us to create the range was really what we're seeing from a market environment perspective, particularly in the pharma biotech space.
I'm sure we'll talk more about that here in some further questions, but that was really the main driver of the change. You know, I think as you mentioned, your second question around Revvity and the brand launch, you know, this has been a, I would say, massive undertaking, really, for the past 12, 18 months. It all started with the announcement of the divestiture of our AES business. This has taken, I would say, an extreme amount of time for myself, from the rest of the leadership across the company. I think we're excited about where we are as a company now. You know, the big, heavy lifting is mostly done with us completing the divestiture, launching the new brand name.
You know, there's some trail on activities we have to do, but it should be a much smaller scope, and I think we're just really excited about being able to now focus more so on the business that we have remaining.
How are customers reacting to the rebranding? I mean, it's obviously a transition for everybody. Certainly, you've put a lot of hard work into doing that, but what are customers saying, and how are they kind of reacting to that?
Yeah, I think customers are probably equally as excited, truthfully. You know, I think we here, those take a lot of pride in what we've done from a brand launch perspective, and I think the customers feel that as well. I think they're excited about what the new company represents and the value that it can bring to them as a partner.
Got it. Maybe let's talk a little bit about sort of the financial profile transformation the company's undergone. I mean, if you kind of look at the last couple of years, you've divested an instrument business that was about $1.3 billion revenue, sort of mid-teens margins. Based on how we've modeled out, we think the acquired companies over the past couple of years can probably get to about $1 billion in sales over the next five years. That's sort of a 30-ish% margin. That's a pretty significant transformation in terms of the financial profile of the company. Maybe talk a little bit about where you see, you know, Revvity today in terms of financial profile and where you can kind of take it to in terms of growth and margins.
For sure. By no means are we confirming 28 numbers for the recent acquisition.
Got it.
Those, I would say.
Those are mine. Those are mine.
Yeah, those are.
Mine mistakes only.
Yeah. I would say those are directionally correct. You know, I think when you look at the transformation of the company, I think financial is one aspect, and I'll talk a little bit more about that. There's also been a huge transformation in terms of our technology capabilities and then also culturally. I'll touch upon those as well. You know, I think from a financial perspective, I think maybe the easiest way to look at it is actually kind of where we were pre-pandemic, right? When we had a life sciences, a diagnostics, and the AES business. If you look at that time, we were roughly, you know, $2.8 billion in sales. Our operating margins were low 20s. We had, I would say, more of a challenge, free cash flow conversion, sort of in the upper 70s.
Reoccurring revenue was only about 60% of our revenue base, and EPS growth was normally, you know, high single digits on a given year. If you look to where we are today in terms of our midterm outlook, our organic growth is targeted, essentially doubled from a mid-single digits to 10%. Our operating margin has expanded almost 1,000 basis points, from low twenties to 30, you know, 30+. You've got reoccurring revenue going from 60% to 80%. For those that don't know, the reoccurring revenue is what we consider for our reagents, assays, services, and software businesses, or more so the sticky revenue. From an EPS perspective, that high single digits growth should be a mid-teens % growth year-over-year in the midterm outlooks.
Lastly, on cash, we should be up closer to upper 80s% from a free cash flow conversion standpoint. From the time when I joined, you know, sort of pre-pandemic to where we are now, I would say it's quite a dramatic shift in the financial profile. As I mentioned in the beginning, you know, the financial profile is just one piece. The other piece if you look from a technology capability standpoint, the majority of our portfolio now is in high growth end markets, and we have market-leading positions in those domains. As that's very sort of different than what we divested with the AES business, and we're excited about that as well. The last piece is culturally.
I would say now the majority of our company now, also, given that it's mostly from the acquisitions, operates in much more of like a startup mentality. Big focused on innovation, being nimble, and really, I would say, working much more from a partnership level with our customers. It's also allowed us to reenergize our talent bench, and I think that's, you know, one area where we've actually had the opportunity to take a lot of leadership roles, you know, within the company and fill them with the talent pool from the acquisition. I think a lot of good things all around, and we're excited about the transformation here.
Got it. Just staying on that financial profile for a minute, while the growth outlook is a little bit harder, just given the macro dynamics that we're dealing with, you know, we see the 30% operating margin target is highly achievable, and maybe a base level to some degree. Could you maybe talk about some of the levers that you have moving forward, where, you know, you can expand that operating margin level over time?
For sure. I'm actually I'm glad you mentioned that. That 10% does require sort of a stable macro outlook.
Yeah.
We'll have to see what the next, you know, couple of years look like. You know, that definitely was our assumption. You know, if you look at that on the margin profile perspective. Again, you know, our goal this year is to be at 30%, which we think is, you know, in the upper end of best in class in the industry. Then I think we have sort of the highest margin expansion targets out there from a midterm outlook perspective. Our midterm outlook is 75 to 100 basis points of operating margin expansion. If you think about the composition of that over the next 3 years per year, you know, it's really probably two-thirds on the SG&A leverage perspective, and maybe one-third from a gross margin.
The SG&A is really driven by the fact that after the divestiture, we were left with some stranded costs, whether that be people, facilities, systems, et cetera. We'll have time to grow into that cost base over the next couple of years, and so that'll be a big volume leverage play for us. On the gross margin front, you know, it'll be a combination of net price being greater than inflation and a little bit of volume leverage. I think the really exciting thing for us is what we're working on for, you know, years, I would say 4+.
It's not something that we've come out and given targets for, but these are sort of, I would say, the bigger swings from a margin expansion, that we have as a company, and those are really around the synergies that we can now drive with the recent acquisitions. To give you a couple examples of those: so one would be on footprint optimization, right? I mean, that's something that takes a lot of time, but it's something that we have not started to do yet with the acquisitions. The second one would be, like, freight lane optimization and making sure all our warehousing and distribution networks are set up appropriately for our scale. The third one would be, you know, vendor consolidation, right?
We buy plastics from, gosh, I don't know how many vendors today across all our acquisitions. Leveraging those in our purchasing power. The fourth one is insourcing, and that's one that I think that we're most excited about now with, you know, BioLegend and the antibodies on the diagnostic side. We've got stuff that we manufacture on the diagnostic side that fit into our life sciences workflows and reagents. I think that the longer term gross margin plays, I think, is what everyone's really excited about.
Got it. Maybe pivoting to the life sciences segment, where a lot of the changes kind of post the divestiture, what are the most important factors within the segment that you think will determine your ability for growth and improve profitability? I guess what I'm asking is, what are you most excited for in this new life sciences segment as it stands today?
Yeah, maybe just to start with profitability. I mean, I think in Q1, our life sciences operating margin was almost 40%. I think from a profitability standpoint on life sciences, we're pretty happy with where we are today. You know, I would say from a growth algorithm perspective, if you look at our midterm outlook, our growth algorithm on the life sciences side is low double digits growth overall in the midterm. The composition of that is low double digits to low teens in our reagents business, which is more than 50% of our life sciences portfolio. We've got our instrumentation, which should grow mid to high single digits, and then you've got our software business, which should be a low to mid teens grower. That's kind of the algorithm, how you get there.
I think what we're most excited about is probably two things. One is on the large molecule side, really with the recent acquisitions of Horizon, Cisbio, and BioLegend. Those portfolios really, truly have what we think is differentiated technology. We just came out with a press release here in the second quarter on the first Base editing contract that we signed with AstraZeneca. I think the second area that we're incredibly excited about is really our software business. That software business is not one that we've had the chance to come out and talk a lot about externally, 'cause previously, it was just such a smaller piece of the overall portfolio.
We think that business has a long runway over the next couple of years, and we're excited to, you know, educate everyone about what that business maintains.
Yeah, we're going to talk about the. You put out a press release this week talking about Signals and really expanding that offering and almost rebranding it in a way, as a SaaS platform. You know, we've often looked at sort of the software opportunity within life sciences as one of great potential, but the execution has been sort of mixed, whether it's a talent issue or a number of other things that come up. What you kind of came out with yesterday seems to be not just a rebranding effort of Signals, but almost more of a comprehensive platform on the software side. How do you feel you guys can win in that software market, with the Signals platform you have today, particularly given sort of the regulatory, you know, aspects of the business and how sticky that can become?
Maybe talk a little bit about what, one, what you announced, and two, what you think Signals can actually be for the industry.
I mean, you've summarized it pretty well.
Yeah
in terms of what we announced, in terms of the platform. I think, if you look at that business today, its focus is predominantly in upstream research with pharma customers on the small molecule side. We're in, like, 49 out of the 50 top pharma biotech customers today. Again, it's predominantly on the small molecule side. Where we are taking it is much more now into the large molecule side, which is the same transformation we just did with the reagents business through the acquisitions.
The second piece is moving it a little bit further downstream into, I would say, some of the earlier clinical trials, and a little bit maybe in the, in the CRO space, but not all the way downstream into the late-stage clinical trials, where the regulatory thing is gonna become such a bigger hurdle. We are gonna stay, I would say, a little bit further upstream. That business has a lot of opportunities, and our pharma customers are begging us to come out with more large molecule offerings and to stay with them a little bit further down the process. Given we're already so entrenched, you know, the ball is really in our court to come out with just continued growth on our Signals platform.
Got it. Shifting to China for a minute, it's been a topic of conversation this week for obvious reasons. Maybe talk a little bit about what you're seeing throughout China, specifically Immunodiagnostics, you know, which came in a little bit softer than we'd expect in Q1. What are you seeing on the ground, and what are your expectations for China, and has this changed?
Yeah, I guess maybe just starting with some overall context. China now will represent about 17%-18% of our overall company's revenue. If you look at that breakdown, about 40% of it is life sciences and 60% of it is diagnostics. On the life sciences side, that business has grown double digits every quarter for, I think, the past four or five years. That was true again in the first quarter. We expect that trend to continue in 2023. I think we're really excited about that aspect in China, and that continues to perform well.
I think if you look on the diagnostic side, you know, of that 60%, immunodiagnostics is the biggest piece. I think everyone's heard us had the commentary around some of the challenges that businesses have faced in terms of, you know, the lockdowns and the hospitals, in terms of their volume ramps, et cetera. I think some of the recent noise that's come out around, you know, the different COVID outbreaks, et cetera, it really only impacts us when there's, you know, a lockdown and the hospitals are no longer doing what we would consider, you know, sort of routine testing. We haven't seen that be the case. We'll continue to monitor it, but that isn't something that has, I would say, changed our thinking or thought process of what we expect from that business.
Overall, for 2023, to your point, yes, Q1 was a little bit lighter, but essentially what just happened is the volume ramp that we were expecting to happen in March pushed out to April. We said on the Q1 call that April was really the first month where we really started to see the volume pick back up in the hospitals. Our expectation of a full second half recovery was what it was at the beginning of the year, and it's still what it is today.
Got it. You also said the expectation of a cautionary spending level throughout pharma and biotech, which is not unique in the sector. How has your expectation for this end market progressed? You're in a different position today than you were years ago in terms of capital equipment exposure. You're kind of dealing with a slightly different type of purchase, not different customers, but a different kind of purchase and what they're looking at. In terms of exposure to revenue, specifically for pharma and biotech, how are you seeing those end market demand trends happen over the course of, obviously, Q1, but then kind of into the rest of the year?
I think I mentioned in the first commentary, too. I mean, this was, I would say, the biggest driver of us opening up the guidance for our full year outlook. You know, I think as we look at the trends of it, there's really two components of it. One is there's the, well, I would say, a little bit more cautionary spend from the large pharma customers as they are working out sort of their budgets for the rest of the year. We are seeing a little bit of a longer sales cycle. I would say the second piece is on the pre-revenue biotech. Now, this is a much smaller exposure for us. It's only 5% of our overall, you know, total company revenue, but it was down mid-teens in the first quarter.
We do expect both the trend on more cautionary spend on the large pharma side, as well as the pre-revenue, to sort of continue throughout the rest of the year, which is again, why we had opened up the guidance range. To your point, I think the difference with us is that if you look at our instrument composition, you know, yes, it's still CapEx purchases for the customers, but we do not have any sort of what I would call routine equipment that we are selling to the pharma customers. We divested everything we have in LC, mass spec, et cetera. What they are buying from us is heavily customized, specific instrumentation, that they are looking for very specific workflows in their, you know, preclinical research areas.
They might only have 1 or 2 instruments of ours in their lab, but they are designed for a very specific purchase, right? As opposed to, you know, them staring at, you know, 100 LCs saying, "Oh, maybe I won't, you know, update them, you know, for this year. I'll just keep running the instrument." For us, they need our instrumentation for very specific research areas.
Got it. Got it. Maybe talk a little bit about, because the question that I continue to field, and I'm sure you do too, is that just given your exposure to discovery and preclinical, there is this assumption that that's an emerging biotech, you know, type exposure. I think people forget that large pharma also does discovery and preclinical work. Maybe talk about how you want to kind of maintain that exposure in terms of the large pharma. Maybe it solves itself, just given the issues with emerging biotech. Just kind of over time, like, do you want to have that sort of 5% of overall company exposure to emerging biotech, or do you want to make some strategic bets, assuming that innovation does come back, and spend does come back, and capital markets reopens?
How are you thinking about that large pharma versus emerging biotech kind of customer mix moving forward?
That's a good question. You know, it's not like we're selling different products to the pre-revenue versus what we are-
Yeah
to the large pharma. In terms of, like, our innovation pipeline, it's agnostic to what the customer mix is. For us, you know, if someone wants to buy it, we're obviously going to sell it, so we're not going to say, "No." We know we have a certain limit of exposure on the pre-revenue side. We'll continue to track it and monitor it, but I don't think it's going to change anything from us from, like, a strategic standpoint.
Got it. Just from an instrumentation standpoint, that growth in Q1 kind of exceeded our expectations in low double digits. What are you hearing and seeing from a placement perspective as you move to kind of throughout the year?
I'd say Q1 was definitely elevated. It wasn't our expectation, I think, to be low double-digits either. If you actually look at the composition of what drove that, it was actually mostly outside the U.S., and it was heavily, I would say, in the academic and government end market. That might continue to do a little bit better, or to maintain that level over the course of the year. Our overall instrumentation outlook on the life sciences side is probably more of a mid-single-digits for the rest of the year, as opposed to the low double-digits you saw in Q1.
Okay. Just staying on the academic, you know, I think there's also a, I wouldn't say misunderstanding, but in terms of how the budgets work, and if we talk about use NIH as a, as a proxy, you know, there tends to be a lag period in terms of when the budget gets set, when they get the grants, when they spend the money. There's been a lot of questions regarding the debt ceiling and in terms of academic funding. How are you seeing sort of the academic customer spend patterns kind of lay out over the course of next year as it relates to sort of the budgets and the spend? Is this fairly defensive in your mind in terms of that end market and what you're expecting?
Yeah, I mean, you know, again, I think if you, if you look at what we're seeing from the academic and government perspective, the strong growth we're really seeing is outside the U.S., and I think we do expect that to continue. I think similar to what we saw with the large pharma in the U.S. and the academic government, it was a little bit more tepid in the first quarter, and I think we baked that into our guidance for the rest of the year, as it will maintain more of a, quote, unquote, cautionary spending level. You know, if we see any updated trends, you know, coming out of Q2, we'll update it at our Q2 guidance call.
Got it. Then just with the divestment that you did, you're moving from a customer sort of spend from sort of a CapEx decision to an OpEx decision, which maybe results in, you know, sort of an easier environment for you to operate in. How are you thinking about that sort of OpEx versus CapEx as a mix of your overall business? How do you think that positions you from, I wouldn't call it defensive, but just sort of like, more insulated from some of the end market demand trends that we might be seeing? If we are in this environment where heavy CapEx purchases will be depressed for a while, how do you think Revvity is positioned today versus what people know PerkinElmer from before?
I think there has to be this perception shift from the investor base as well to like, "Let's see what they can do." Now that this business has completely changed, you know, how do you think that OpEx versus CapEx spend patterns resonates with the new Revvity going forward?
Yeah, I mean, I think if you look at it from a CapEx versus OpEx perspective and within our portfolio, you know, I would say, you know, instrumentation, again, is about 20% of our portfolio. When you break that down, only, you know, maybe 2/3 of that is on the life sciences side, 1/3 is on the diagnostic side. On the diagnostic side, it's really a reagent rental commercial model, which is actually an OpEx decision for the customer, much more than a CapEx one. Yes, on the life sciences side, if there's significant delays from a CapEx standpoint, we'll feel it. Again, it's not like we're selling routine instrumentation, and we even think within that, we should still be relatively insulated.
If you look at the rest of the portfolio, the only other area where it's truly a, quote, unquote, CapEx decision for the customer is when they have an on-prem solution with their software. If they haven't moved over to SaaS yet, it is still a CapEx-type decision that they are making on the software side. That's one other area where we'll feel the pressure from a, from a CapEx perspective. If you take a step back and look, you know, 75% of what we sell is an OpEx decision for the customers.
Got it. Maybe shifting to diagnostics, you touched on a little bit, but just reproductive health specifically. There's obviously been pressure on birth rates that have impacted this market. While it's difficult to kind of see this trend changing in the near medium term, how do you position this business within that environment, with the birth rate pressures that you're seeing?
Yeah, it's a great question. You know, I think reproductive health is one area that we, I think we are truly actually excited about as a company, despite what you've called out, you know, in terms of declining birth rates. You know, if you look back over the past four or five years, I think every mature market has had a declining birth rate on average. Despite that, our business has still continued to grow positively in the mid-single digits. There's really two levers that we have that's allowing us to sort of outpace what you're seeing from a macro perspective. One is on geographic expansion, and the second is on menu expansion. If you start first from a geographic expansion standpoint, I think the most relevant data point is there's 140 million babies born every year.
Only 40 million are tested. There's a lot of countries that just don't do any sort of level of testing amongst their population, so that is an area of growth opportunity for us. The second is when you look at the menu expansion, you know, this is really a combination of, one, the launch of our most recent, you know, NPIs, and us continuing to find new disease areas to test for. The second is the adoption from both states or countries in terms of what they are willing to go and test for. To give you a couple examples of that, in the U.S., you can have states that test for as low as, like, 20 different disease areas with newborns, and then you've got the far end of the spectrum, like California, that tests for more than 50.
As states take on more tests, that allows us to drive that menu expansion. Same thing from a country perspective. You know, there's some countries like the UK, they maybe test for, like, I don't know, 10, 12 disease areas. Egypt is, like, 2. As states and countries continue to build out what they're willing to reimburse from a testing perspective, it allows us to drive additional menu expansion.
Got it. Despite the declined birth rates, there's a penetration opportunity, basically?
For sure.
Okay. In terms of the reproductive health business, does that give you any insight or advantage into the rare disease market? What type of differentiation could that give you over time? Just because there's been more and more discussion about rare disease, and I think having that reproductive health business actually gives you a good entree into rare disease. Maybe talk about how those two work together.
For sure. That's a great question. I'm glad you asked it. It's probably one of my favorite topics to talk about, and particularly as it relates actually to our Revvity Omics business. This is, again, the business that we have not had a chance to talk a lot about externally because it was just such a smaller piece of the overall portfolio. Essentially, this business actually started out as backup testing services for lab, for states and countries on the reproductive health side. We have a global lab footprint that, again, was initially designed for backup reproductive health testing, but we also have a deep domain expertise in these labs on rare disease testing.
This business, I think, over the next couple of years, is going to become the real link between our life sciences business and our diagnostics business. We think this business is actually gonna give us a true differentiated offering to our customers, to our pharma customers, where we can go and work with them and have a comprehensive portfolio on their upstream preclinical research needs. Partnering that with our ability in this global lab footprint to develop assays, procedures, backup testing services for both the screening and monitoring diagnostics associated with the therapeutics that we help them develop upstream in the preclinical research. That it allows us to offer, and I would say, partner with our pharma customers on a much longer perspective of their therapeutic development.
Got it. Maybe switching to e-commerce. You talked about that being a big driver for you, especially on the reagents. How has this transition progressed, and what are you hearing from customers who are utilizing your e-commerce platform?
Yeah, maybe just to clarify, too. Yes, it is a, I would say, a very large, strategic initiative for us, but we probably actually won't launch the new U.S. platform probably till early 2024, and then sort of Europe and some of the more, mostly just Europe will be sort of late 2024. We still have a couple quarters, I would think, until we can actually really get a grasp of the impact from the new e-commerce platform. You know, today, for instance, we have less than 10% of our overall company revenue on e-commerce, so we are very much in the early innings of this. The majority of that revenue is from BioLegend on their legacy platform, and they've been a huge driver of helping us design our new e-commerce system.
Essentially, that is -- it's not gonna be something we feel this year. It'll be, I would say, really probably till 2025, where you're starting to see material impacts to the financials. We've got our work cut out for us, but we are excited about where we're heading.
Just following up on that, from a margin versus sort of volume standpoint, do you think the initial impact we'll probably see is on margins going forward? Do you think this can actually drive additional volume as well, or higher velocity?
Yeah, I mean, I think it's a great debate to have. I think you're gonna have probably the first uptick, I would say, is probably a little bit more share of wallet growth From your customers. It'll take time for us to work through the margin piece of it. I think over time, you will see both dynamics play out.
Okay. Then just you mentioned BioLegend. Just kind of give us an update on how that's progressing. Just given the size of that, of that acquisition, can you maybe talk about some of, you know, how that's progressing and what your expectations are for the BioLegend business moving forward?
I think we are very pleased with the performance of BioLegend and excited about where it's going over the next couple of years. You know, BioLegend is the majority of our $700-$800 million reagents business, which continues to grow in the low double digits to the low teens. BioLegend obviously being a very large proponent of that. It is something that we think has been a great addition to our overall portfolio.
Got it. Maybe shifting to the financials a little bit more, maybe talk about sort of free cash flow expectations for this year. You talked about the free cash flow conversion rate, which has come up, but, you know, what are your expectations for free cash flow? Where do you expect the leverage to land at the end of this year?
I think from a free cash flow perspective for this year, it's obviously a little bit noisy with the divestiture, and as we did on our Q1 call, we'll keep calling out the impact related to it. On a normalized basis, I would say our free cash flow conversions for this year should be north of 85%. Again, that's sort of our midterm outlook is to be in the upper 80s from a conversion perspective, I think we feel confident in our ability to deliver against that. We look at it from a leverage perspective, assuming we do no additional M&A or share repurchases, we should end the year at less than 2x net leverage.
Got it. Got it. I'm gonna ask the obligatory AI question, which I think there seems to be like an evolving understanding of how AI is being leveraged, both in the tools and diagnostics area. You know, I think about one of the necessary recipes for AI is large, complex datasets, and life sciences and diagnostics certainly has that. Maybe talk a little bit about, and I don't know if it relates to the sort of the Signals platform, but kind of how you're leveraging AI and where do you see that playing into your business moving forward?
I would say we are continuously monitoring it. I think I'd be lying if I said up here that we have a crystal ball and we know exactly where AI is heading in this industry. I would say that our Signals team spends a good amount of time debating it and figuring out how they position themselves to take advantage of that over the next coming years. I can't sit here and say we have a perfect crystal ball on it.
Got it. Maybe talk a little bit about capital deployment, buybacks versus debt paydown. Maybe help us understand a little bit more about how that cash is coming in over the course of this year. What is sort of your thought process in sort of deciding the prioritization in terms of capital deployment for Revvity over 23 and maybe in the future?
Yeah, maybe starting first from just an overall, I would say, capital allocation perspective. If you look at what we got from the divestiture, we got roughly $2 billion, call it an after-tax proceeds. We have about $1.3 billion of debt that's, you know, due over the next 15 months, some of which we've already started to chip away. If you sort of net those two together, you're left with roughly $700 million of cash coming out of the divestiture and the short-term debt paydown. If you look at our free cash flow conversion over the next 3 years, call it $500 million a pop per year, you know, that's $1.5 billion. Add that to the $700 million.
You've got about $2.2 billion, I would say, of free cash that we have available to deploy over the next 3 years. There'll be a little bit more additional capacity we have, too. Maybe you get to roughly $3 billion of capacity while remaining investment grade. In terms of the prioritization, M&A will remain our prioritization, and it's what we've done historically. It's what we're going to continue to be focused on going forward. I would say, you know, there might be a little bit more of an organic investment step-up for us. We've talked about e-commerce today. We've also publicly discussed our intentions around GMP investments on the specifically related to BioLegend. Those are two areas we'll invest in.
I'd say in terms of the other areas, in terms of debt repayment, other than the short-term debt, our long-term debt is very favorable. It's, you know, average duration out to 2031 at, like, 2.5% of fixed costs. There's not much I don't think we would do from a debt perspective. In terms of share buyback, we have come out and announced that we got additional authorization from the board to do $600 million of share repurchases. We wanted to have that flexibility. We'll continue to monitor what happens from a market perspective, our priority is going to remain M&A.
Got it. You took the CFO role during an interesting time in terms of managing all the integration of the various acquisitions and divestitures. Maybe talk a little bit about how you're managing the current integration versus your ability to do additional M&A and sort of the balance of time that you spend, and how you're allocating your resources internally in terms of integration versus new acquisition opportunities.
Yeah, it's a great question. I mean, I think our integration strategy is also why we win a lot of deals, truthfully. If you go back and look at our track record of what we've acquired, most of it has been private companies that were founder-led. Our pitch to them is, you know, we're not gonna do the Danaher or the Thermo model. You know, Thermo being, come out and rip out the management team and replace it, or Danaher, you know, here's your DBS playbook, now go and run. For us, we do a much more, I would say, customized integration approach, and one that is like, take BioLegend, for instance.
Rather than forcing BioLegend to integrate into our legacy processes from a reagent standpoint, we're taking our reagents business and actually reverse integrating it into BioLegend and giving them more scope and control over our whole entire reagents portfolio. We don't have a set rulebook on, "Here's the integration playbook. Now go and run." We see what's the best way for us to create value for our shareholders. Each one has a little bit of a different fit to it. Each one moves at different speeds. You know, as I mentioned on some of the gross margin initiatives, those are longer term plays that we're excited and working on now, but they're gonna take a little bit longer to play out. I don't think our integration strategy prevents us from doing other acquisitions.
We're gonna be able to figure out what's the best fit for the company and make a call.
What is your view in terms of the opportunity set as it relates to valuation, you know, attractive areas for you in terms of public versus private? As you mentioned before, you've done a lot of private company acquisitions. I think the bid-ask spread in the private market has probably narrowed a little bit in terms of expectations versus what people are willing to pay. Maybe talk a little bit about public versus private, and how you think about that from an M&A standpoint, and where valuations are today versus what we were seeing a few years ago.
Yeah. I do think our preference probably still is more on the private side. It doesn't mean we wouldn't do something on the public side. You know, if the right asset came available, and it was a strategic fit and the price made sense, I think that, you know, we would absolutely, you know, put our name in the hat. I think for us, really, the on the private side, what we're seeing is we're actually not seeing really the compression on the bid-ask spread. I think we're kind of a little bit to see what happens here over the next coming months. At some point, we think that's gonna have to change. I think you're gonna see a tale of two cities.
You're gonna see the private companies that are, I would say, well-capitalized, they're profitable, they're growing well, and for them, it doesn't make sense to sell it something that they don't think they're, that, you know, they think is short of what they're worth. They'll wait, and they'll just hold, and they'll wait till the public market come back up, and they'll sell again when the valuations sort of recover. I think what you will see, though, is for some of the companies that aren't as well funded and might be burning some cash, and for them, rather than going into another round of funding, I think they're gonna, you know, be more open to an acquisition.
I want to go back to something you said earlier about the difference and what makes you an attractive partner or acquirer. You brought it up with BioLegend, which I think was a really interesting example, where you have this reagents business already existing within Revvity, but then you acquire experts in reagents, essentially, and allow them to say, "Hey, we've got this great business. What can you guys do with it?" How does that resonate with potential acquisition targets in terms of what it allows them to do to expand their footprint and basically leverage their expertise? Does that sort of resonate really well when you're coming into making your pitch in terms of how Revvity can be an attractive place for them to be?
It does, for sure. I would say actually, the other piece, too, that is, I think a differentiator for us, is we keep a lot of the founders of the companies that we acquire. I think if you go back and look at the 10 acquisitions we've done over the past 3 or 4 years, 8 of the founders are still there. What they really care about when they're selling their business is that someone is gonna come in and sort of rip it apart, right? Ruin what they were trying to accomplish from a business perspective.
The fact that they can stay on as part of that journey and be a part of a larger company and get the chance to actually take on more responsibilities, like we've done with BioLegend, is definitely a selling point for them.
Great. With that, we're out of time, Max. Thank you very much for joining me.
Yeah, thank you.
Appreciate it.