Welcome everybody. Today we have Prahlad Singh, CEO of Revvity. Maybe I will just let you start. You did announce a small tuck-in acquisition this morning. Maybe I will just let you explain what you bought, how it fits into your portfolio, and maybe what it lets you do, that you could not do prior.
Yeah. Good morning, Evan. Thank you for inviting us. I think, as we have talked about, Human Cell Design is a great tuck-in acquisition for our reagents business, and it fits perfectly well with what we have talking about how our reagents business has been doing good on the preclinical stage. As you go from preclinical to clinical, you go through looking at tissue culture, cell culture, cell lines, and human cell designs that are as close to looking at humans possible. Going through this process, the Human Cell Design portfolio fits very well in our reagents business, and I think it will be a great tuck-in acquisition.
Great. So, 2Q, sounds like things were generally in line with expectations, life sciences maybe a little bit weaker than expected, stronger in DX. I think you also had some. I guess you were not able to fully meet demand on some of your high-content screening. So maybe just walk us through the quarter, how it played out versus expectations.
Yeah, I think 2Q, as we have talked about on the earnings call, it played out pretty much as we expected. I think, as you said, diagnostics did slightly better than what we had. Both Reproductive Health had a great quarter. Immunodiagnostics did very well. On the life sciences side, software was as expected as we had forecasted. Instruments on the platform side, we have got a very strong backlog. On the reagent side, we were low single-digit growth. So it is pretty much played out, with a little bit of nuance up and down here and there, but pretty much along what we had thought it would do.
Great. Okay. Going into pharma biotech, I think it was down mid-single digits, positive X software. The commentary did seem to be a little more optimistic, I think, or constructive than it has been in the past. Are you seeing that you are having conversation with customers, and where the budgets are actually turning into orders? Is this revenue more likely to impact later this year or more into 2027?
Yeah. I think pharma biotech, the phenomenon has not been just from the last quarter. I think, I would say there was a lot of uncertainty last year that carried into 2025 that came from a bunch of issues, whether it was tariffs in, tariffs out. I think for us, what we use as a marker is the meeting of Pfizer at the White House sort of was somehow a key point in the turn, and then brought certainty into the investments and the spending and then it brought through a start of the resurgence of pharma biotech after a prolonged period of time. I think the calming down of the chaos allowed for pharma biotech customers to start planning and reinvesting back to what pretty much normal should look like.
I think we have seen that continuously over the past several quarters, where the investment in pharma biotech is gradually coming back to what normal should look like. I think it is going to continue to play out, especially now with the sort of resurgence or the engagement that you are seeing with new modalities and technologies such as AI playing a role. So that is adding an added resurgence to the end market.
Helpful. We just had Bruker up here, and I figured I would ask you this too, because you guys talk a lot about AI. They made a comment that they think that AI spending has likely impacted, to some extent, normal spending on life science tools, your more traditional life science tools. Do you sign on to that? Maybe it's not your high-content screening or maybe other parts of your portfolio, where there's just been a reallocation of resources maybe this year that will translate into more demand, maybe for your tools next year or 2028 as they look to train their models that they've been.
Yeah, we don't believe so. From our perspective, I think the pharma biotech end market coming back to normal was more of a consequence of the calming down of the chaos and uncertainty, and the reinvestment back. Because you've got to have investment in preclinical, and you've got to have the innovation because of all the patent cliff issues that the pharma biotech companies are facing. From our point of view, we see that as more of a normal course of investment coming back. I think the AI component is not taking money out from left pocket and putting it in right pocket. I think it's incremental investment that is going to go on and is the beginning of it to accelerate drug discovery and development.
I think this is, as we've talked about, if you go back and listen to what Max, Steve, and I have been talking about from the beginning of this year at investor conferences in our 1Q call, in our 2Q call as to how this is playing out, and it pretty much is playing out as we had hoped and forecasted.
That's great because no one's been able to forecast it, so makes it even more impressive. But you're right. Like I said earlier, you guys have been talking about this and leading the discussion, I think, within the life science tool space, so it's nice to see it play out. Sticking with that theme, high-content screening was a really big part of the conversation on the 2Q call. Spent a lot of time on it. Maybe talk about how big that business is for you right now. What the funnel looks like there. I know we talked about earlier that you did have some capacity constraints, which I believe are pretty easily fixed by just adding more people. But yeah, just tell us about what the funnel looks like there and maybe down the line, what that could potentially mean for reagents pulling through.
Yeah. Obviously, high-content screening is a significant part of our platform business. It used to be around 25% or a quarter of the business, and I think now it's about one-third of it. It's increased to about a third of the business. High-content screening obviously is critical as you look at drug candidates as to what the impact or what the effect it's having at the cellular level. Then I think with the sensitivity that we bring to it, there is a significant amount of data, terabytes of data that are generated from it. And why it plays an important role now, more specifically is with the advent of new technology, our high-content screening platforms would generate a lot of data.
But basically, from a scientist's perspective, they were only focused on looking at the kill non-kill ratio, essentially, where the impact is having at the cellular level or not. But there's also a lot of incremental data which they were not being able to leverage. Now with AI, they are able to leverage. Then I think this is where we have started seeing a big funnel and pipeline coming simultaneously. At the same time, a lot of companies are starting to build LLM models around these, right? Trying to see as to how could we build models that would allow for faster screening of drug candidates. And this is where we are starting to see more of a funnel and pipeline coming from non-traditional companies, right? Companies that are in the public domain generating data for LLM models, CROs, and of course the traditional pharma biotech customers.
Helpful. Like we said, you guys have been talking about AI since the early part of this year. But even still, it did feel like there was sort of a sudden change in terms of that really inflecting and coming through on the P&L. So why do you think 2Q was the moment that this idea actually turned into orders and revenues for you?
Yeah. I appreciate the impact that you are saying is sudden, but when we look at it through our lens, it was really pretty mapped out. I think as I said, when we started talking about that this could potentially have an impact at the beginning of the year, there was some signs of it coming from our account managers and people in the field who were seeing more interest from traditional and non-traditional customers and inquiries coming in. If you go back and listen to my 1Q earnings call, we actually spend about 10, 15 minutes talking about as to how this could potentially play a role in drug discovery. Then when we came to the second quarter, we actually started seeing that in concrete evidence in terms of those inquiries translating it into orders.
And then I think the resurgence was strong enough that these instruments, each one of them take about 10- 12 weeks to make. These are pretty complex instruments. That is why we saw more of a funnel, which was big enough that we ended up with a stronger backlog than we have seen, I do not know, maybe even before COVID.
Okay. When we think about your broader portfolio, we talked a lot about high-content screening, but are there other parts maybe on the instrument side or elsewhere, that we should be thinking about AI demand being a future driver?
Yeah, we talk a lot about high-content screening because of the sophistication of the instruments, and these are close to $1 million each. They are big-ticket items. But I think if you look at it from a drug discovery perspective, a researcher is looking at tissue, cell, in vivo, Human Cell Design. Our focus has been how do we build a platform portfolio and then back it up with the reagents that those platforms would need so that you have the razor blade model going on. You have got the high-content screening platform, you have got in vivo imaging, which still plays a very important role.
And on the reagent side, we have got now a full suite of portfolio which we will continue to build on, similar to the acquisition that we did today, that would allow us to have the benefit of placing all these equipment today.
Gotcha. Just something came to me. Is there a reason that your high-content screening, why is it open versus, or would there be a benefit to having it so that you have an Illumina sequencer, you have to use this consume? Is there a reason not to try to close it and have it be you have to use Revvity consumables and that's just, or no?
Yeah.
What is the thinking there?
On the diagnostic side, it tends to be closed. We have closed systems simply because you have to go through the regulatory hurdle of getting approval on the whole workflow. Our belief is that we work with researchers hand in hand. As I've said this publicly, if you go to most labs, you'll have a tough time differentiating who's a Revvity employee and who's a bench researcher from the institute. We don't want to encumber or force our customers to only use our reagents. We think that the merit of our instruments and our reagents stand by itself.
I think our goal is how do we build a full workflow that is convenient and easy for researchers to use? I think the both of them stand independently on the merit of their own basis.
Okay. Maybe going to A&G. Results there up at ex software, I think it was pretty similar to pharma biotech, and I think up low single digits. How much of this was driven by ex-U.S., how much of this was U.S., and any interesting tidbits you might be able to add around the A&G market?
Yeah, I think the A&G market is still not what we would call back to fully normal. I think there is a level of stability there, but it is still not what we would consider it to be normal under circumstances. There is a level of uncertainty in academicians as to what the impact could potentially be or what else could come through. I would say it is a bit more stable in Europe than in the U.S. If I were to differentiate it by geography, I would say A&G is probably a bit more stable in Europe than the U.S.
Helpful. Maybe turning to software. Like you said, came in as expected, down 20% on a tough comp, up mid-single digits for the full year, which I think is below. I think you have been doing strong double digits past couple of years. But the good news is the APV is low double digits. Is that how we should be thinking about the business in the medium to longer term, is that this is a low double-digit growing business?
Yeah, that is what we have it in our LRP, and it has done better than that. I think we have it at 9%-11%, if I am not wrong, in the LRP, and it has grown 12%-13%. So it has done better than what we have said. I think given that the majority of our software business is still on-prem, you are going to continue to have these lumpiness quarter by quarter. But as you pointed out, Evan, if you look at it, the annual portfolio value, which is one way to look at what is the average revenue growth over a period that business has done, the APV has been double digits. Just to give an example, it grew 19% last year, and if you were to take 5% this year, it averages out to 12% over two years, which also happens to be the APV of the Signals business.
But I think more importantly, if you look at our Signals business, 2026 is the launch of some of the most important NPIs in the history of that business. We launched Signals BioDesign at the beginning of the year, Signals Xynthetica. We are in the process of getting Signals AI out, and it has been just recently launched, and we have got Signals LabGistics coming out, which is a key AI-based workflow. With these four key launches, I think, the growth of the Signals business has just started, and that is what I have said over the past couple of years. All the investment that we have made into the Signals business during the pandemic and from then on, is going to pay off now over the next few years with the launch of these key NPIs.
Got you. And so maybe adding to that. These new products that you are introducing on the software side, I believe, are all SaaS only. Can you kind of tell us where are we in the journey of going from on-prem to SaaS? And with these new products, if I am correct, being SaaS only, is the goal or do you think this is ultimately like 100% SaaS, and what is the trajectory to be getting there?
Yeah, I think we are somewhere between 32%-34% SaaS right now. I think we will probably end up around 60s, in the mid-60s in terms of what this business will be in SaaS. I think there will be always a component of our customers base for the Signals business that will be on-prem, either for regulatory reasons or for in-country security reasons. So I think that is the assumption that I would make.
Okay. But is that true that all the new products are SaaS only?
All the new products are SaaS only.
Okay.
Yeah. I think that also gives us an opportunity for incremental ways to look at revenue growth, whether it is through- as AI comes into play, whether it is through computing or through storage, it just gives us incremental revenue opportunities as we look at it.
Right. ImmunoDx , I think it just hasn't been getting a ton of attention because it's been doing so well. I think high single digits it's been growing. I think LRP is 9.11 also, I believe. Do you think we can get to the low double digits in this business? And what's been helping drive the strength there?
Yeah. Look, we are very happy with the Immunodiagnostics business and as I said, when we acquired this company in 2017, since then, as you pointed out, it's been humming along at a pretty good rate. I think as I've said, the key for Immunodiagnostics is autoimmune testing, in my view, is still in its nascency. It's still not in mainstream clinical medicine. You still have to go through several hoops before you're able to see an autoimmune specialist. Then I think that'll continue to drive growth, especially as you move from standard ANA screening to looking at specific disease areas around urology or nephrology. There's a lot of undiscovered territory here, which is protected by IP, and that provides the opportunity for the business to grow at what it has been growing. Ex-China, it has grown in double digits. I think we are very happy with that growth.
I am not sure I am going to push that team to continue to do a lot more. If they can continue to keep the pace of 10% growth, I would be very happy.
Got you. You said ex-China, so what has China been doing in ImmunoDx ? When do we lap those-
Yeah
those headwinds?
I think right now we are showing pro forma. Our revenues are pro forma anyway, so those are not accounted in our numbers. We expect that to close by the end of next year, and then I think that is when that business would be out.
Got you. Reproductive Health, I think that business has been strong as well. I think you've been seeing very strong in vivo placements, and you've had GEL. Maybe not just talking about GEL, but you did mid-teens in the first half, forecasting low to mid-single digits in the back half. Maybe talk about some of the puts and takes there.
Yeah. Just to be clear, we are forecasting low single digit in the back half.
Okay.
It did well. Even ex GEL, I think Reproductive Health grew 10%, and that business has been, again, I've been talking about that for the past decade. Reproductive Health, specifically newborn screening, has still a long way to go. There are still 100 million newborns that are not tested. So geographically, that provides us a lot of opportunity despite a declining birth rate. There are a lot of rare diseases now which are starting to see the advent of therapeutics coming out for them. Duchenne muscular dystrophy, spinal muscular atrophy, MPS II. These are starting to see therapeutics either get approval or being in the late stages of clinical trial.
Identifying patients that would benefit from these diseases is still in its early stage, and that's where our newborn screening platform, which is fully ingrained in our cross-measure geographies as a contiguous workflow that has a regulatory approval, provides the distinct advantage by which it continues to grow.
Great. Maybe on GEL. I think it is set to expire middle of next year. Maybe just talk about, maybe remind people exactly what you do there, how it has been going in England, and maybe how we should think about a continuation of that contract, and when we might know about that.
Yeah. Look, GEL is a great partnership with Genomics England, and they are a great partner and a pioneer in this area of doing population genomic screening, especially for newborns. We have been very supportive of what U.K.'s initiatives have been since the COVID days. So, we established satellite labs across the country during COVID and ran tests, and that sort of eventually benefited us in continuing that partnership with Genomics England, for example, on population screening. The partnership is going very well. We continue to do screening, and we will. We are in discussions to see how we can prolong and sort of extend this to adults or other avenues. Obviously, this is the government's prerogative and they go through their regular process of doing tenders and then getting approvals, et cetera, for budgets. We remain hopeful that we will be there for the long term.
We have got other contracts and other partnerships with other countries and other institutes that we are continuing to explore. In due time, those that allow us to publicly announce, we will announce those, too.
Okay. Are there any of those? Would that be doing something similar to newborn screening or it would be something for?
It is similar to what GEL is.
Similar to what GEL is.
Basically, it is like doing newborn whole genome sequencing.
Right. Okay. Have any of those discussions or anything been made public or?
I mean, we've got a lot of discussions going on. None that we have publicly announced yet.
Okay. Helpful. Okay. Then maybe just wrapping up on Reproductive Health. Again, the mid-teens growth in the first half versus low single digits in the back half. Is GEL the main driver of that just as you lap that, or are there other things that we should be thinking of?
No, I think we had a strong, as you pointed out earlier, with a strong instrument placement in the first half of the year, which we right now expected to normalize. We expect it might do better than that, but that's what we have in our guidance.
Okay. Maybe on Life Sciences, I think you're looking for low single digits for the full year. I think you've talked about it kind of being a continuation of what you've been seeing, but there is kind of an uptick implied on that in the back half. I assume part of this is software comps getting easier. You also have some backlog in both instruments and reagents. Maybe just kind of unpack that for us and really what's driving that modest improvement in the back half.
Sure. I think as you point to software, you already pointed out, that's correct. It just sort of gets back to new contracts coming in, and it's forecasted as such. On the Life Sciences platform side, we expect that to grow mid-single digit in the third and the fourth quarter. Life Sciences reagents grew low single digits in the second quarter. We expect it to grow low single in the third quarter, but better than what it did in the second quarter. I think we'll continue to see continuous improvement. I think the one way to think of it is that as you are getting these slug of platform instruments getting placed and go through their validation, sort of reagents tend to follow a couple of quarters later. The more quickly we can install these equipments, get them validated, then the reagent flow through starts coming.
I think you will see that uptick continuing at a regular rate over the next couple of quarters. I think, as I said, some of these instruments take 10- 12 weeks each unit to be made. You sort of put that lag time in place.
Mm-hmm. You did mention consumables taking some time to kind of flow through. Is there a way that you could frame the potential opportunity for these are expensive machines. So, how much do people typically spend on reagents or in a given year on these instruments?
Yeah. It's tough to sort of quantify it-
Right
because it depends on where it is, right? It could be in a university, in some unique place versus it could be at a pharma biotech in New Jersey, which has got a very high throughput. It's tough to sort of quantify the reagent pull through that comes from these instruments.
Okay. If you're spending that much money on a machine,
Yeah.
I assume it's meaningful, right?
Yeah. That is the point, Evan, because if you are spending close to $1 million on the instrument, you are not going to mothball it and wrap it in plastic and keep it, right? The whole idea will be to have continuous throughput going through, especially with the advent of AI. I think that is the one piece that I think we. We will continue to talk about this for a couple of more quarters till it sinks in. Because recall, as I said, first, a research scientist's focus would be only on the region of interest. That is this drug candidate having the impact on the cell that I wanted to know, that we were hoping to. That was the area of interest they were looking at. But there is another now, especially with the launch of Opera Phenix OptIQ, which we just launched, which has four cameras, right?
There are terabytes of data now generated, which they can now take, combine it with the proteomic and the genomic data on that drug candidate, and be able to extract as to the validity and activity of that drug candidate. Which at a much faster pace, which they were not able to do prior to AI. As that starts becoming mainstream, and this still, again, mind you, this still is being done only in some institutes as this is taking place. Once this becomes mainstream, this is going to really take off.
No. It is interesting you say that. What was going through my mind as you said that was. I am going to ask you a question is, maybe you do not know exactly, but in the past, were these instruments being constantly used? If not, it sounds like this opportunity enables that, where you are just going to be constantly running these machines because you are finally actually able to. You are going to be doing new experiments. You are not just going to be looking at one specific type of thing because you actually can, you know, analyze the data now where you probably physically couldn't before.
I think the instruments were being used, whether they were used constantly or not was dependent upon how busy the lab is. But not all the data that was being generated
Okay
by the instruments were being used.
Got you.
I think it is more that that data was not being used. But now with the ability of AI, you are able to take that, combine it with the proteomic and genomic data, and be able to look at it in a much more wholesome manner, much faster, and get more productivity and efficiency out of the instrument.
Okay, so there's no reason to think that utilization/pull-through should go higher now. It was being run-
Well, it depends, right? Again, it depends on the lab-
Use case, yeah.
and the instrument, right? If I have a whole lot more samples than if I have only one instrument, the other benefit is
Oh, sorry. Now you have another instrument maybe, yeah. That is where-
I think that is where it comes
it comes through. Okay.
Because remember, now you will also have a whole lot more drug candidates coming because of in silico medicine, right? This is actually going to end up being a validation bottleneck, which means that you will, A, either have to get more real estate, place more instruments, and do more screening because you have a lot more drug candidates. This is where, if you recall, we started talking about this at the beginning of the year, that we feel that screening of drug candidates will actually become a validation bottleneck. To some extent, we are starting to see that, right? The early signs of that.
Great. I think probably the biggest question we got, I guess earlier this year, on Revvity, or one of the biggest, was on the margin guide. You guys had confidence in it. People questioned your ability, but now you have actually raised the guidance twice this year. Part of it is tariffs, but also just good execution. I think the guide still. You raised it, so I assume you have confidence in it, but there is still a tick up, and I think it goes to the low 30s in the 4Q. How should investors bridge that improvement into 4Q? What is the potential for further margin expansion, I guess, because you will have a headwind from the tariffs. So, how should we think about that going into next year?
Yeah. You raise a couple of very pertinent question. I think of all the aspects of our business, I think the one where we have the greatest level of confidence is in our margin story. Because a lot of that is in our control, right? Just to the point, Evan, you said we have raised guidance twice. Even if there was no tariff tailwind, we would still have raised our guidance on margin. I think this is now, with the tariffs, you get a 20, 25 bps, obviously tailwind. I think in the third quarter, all the cost initiatives that we have taken forth starts bearing fruit, and we start seeing the impact of that in the third quarter. In the fourth quarter, you will have your natural upsurge in volume that you see towards the end of the year.
I think we have a very high level of confidence in our margin story, and I am just talking about what it is for 2026. Beyond that, if we start seeing the getting back to 4%-5% organic growth. If you take the 20, 25 bps out, your baseline is still 28.5. And you get to 4% organic growth, you get another 50% margin improvement. For our business, we get 40% incremental margin. If we are in our LRP range of 6%-8%, that gives you 75% operating margin improvement. That is why I have said, of all the things, we have the strongest confidence is in our margin story.
All right, great. One second left, so perfect timing. Thank you so much for coming, and it is great to see you, and thank you, everyone, for joining us.
Thank you.
Thanks. All right. Really good to see you