Good morning, everyone. My name is Robbie Bamberger, Senior Research Analyst covering life sciences and diagnostic. I am very pleased to be joined this morning by Steve Willoughby, Senior VP of Investor Relations at Revvity. Steve, thanks for making the trip.
Yeah.
Before we get into segment specifics on the company, would you just mind giving us a quick breakdown snapshot of the company coming off of Q2 earnings print? What went right in the quarter, and anything you would like to just point out to investors about the quarter in general?
Sure. Thanks for having me, first of all. Maybe just a quick overview of the company for those who are not familiar. Revvity, a couple of years ago, was previously known as PerkinElmer. We divested 30% of the company, including the PerkinElmer brand name, rebranded as Revvity in the middle of 2023. Revvity today is in the life science tools and diagnostics industry, and what I like to say is what we do in life science tools and what we do in diagnostics is typically a little bit different than other publicly traded companies. So, specialty diagnostics and then on the life science tools side, really focused in preclinical R&D, providing instruments, consumable software that are used by academic and pharma biotech customers to really drive innovative science, which I am sure we will get into.
As it pertains to the second quarter, the second quarter for us overall was better than anticipated, I would say sort of top to bottom line. Revenue, organic growth, margins, were all a bit better than we were anticipating. When you break that down, we had very strong growth within our diagnostics business, both in reproductive health as well as our immunodiagnostics business. On the life sciences side, our software business was down really due to comps and timing, which I am sure we will get into. Our consumables and instruments on the life sciences side both grew in the low single digits, which were in line with our expectations, maybe a smidge below. As we talked about, we built some fairly significant backlog, which should help us here as we move into the back half of the year.
Awesome. Has anything changed in your view about Q3 or 2026 in the 6 weeks since reporting Q2?
We are not going to provide any inter-quarter commentary.
Yeah.
We will leave that for when we report Q3.
Yep, makes sense. Then maybe just starting on life sciences, that is about half of revenue for Revvity. Organic growth went from 3% in the first quarter down to negative 3% in the second quarter. That swing was essentially that 20% software decline, which you mentioned was due to the comp and the contract timing issue, versus anything really demand related there. Life sciences solutions was up low single digits. Maybe just focusing on life sciences solutions, can you walk us through what drove that low single digit growth in the quarter in Q2 between both instruments and reagents?
Sure. So maybe first from an end market perspective, academic and government for us is roughly a quarter of our life science business, so it's about 12% of the total company. That is, I would say, consistently soft, stably soft. Obviously, there were some fairly significant pressures throughout much of last year. So far this year with academic and government, including our outlook for the back half, is that it doesn't really change all that much. It doesn't get much better, it doesn't get much worse. From a pharma biotech perspective, again, the end market was pressured for the last several years, including 2025. The pressures last year, again, were fairly policy induced related. I would say we've started to see some recovery in pharma biotech starting, I would say, in mid to late February, and that recovery has continued through June and July.
I think customers are starting to move back towards more normalized levels of investment spending on the pharma biotech side, particularly amongst the larger customers, which even though we are pre-clinically focused, our products really go into pre-clinical research, the bulk of our revenue goes from those medium and larger-sized pharma companies. As it relates to the actual product lines within instruments, we commented that we exited the second quarter with the strongest backlog we've seen in the last three, four, probably even five years. It's really being driven by one category of instruments so far, which is what's called high-content screening, which we are the market leader in. Where I would say in high-content screening, we sell at the high end, million-dollar instruments, at the mid-range, several hundred thousand dollar instruments.
We came out with a new high-end instrument in late February and it's really taken off. We can probably talk about why that's been, but we saw sort of an inflection, not just a pickup in demand, but an inflection in demand for these systems starting in mid to late May. They typically take us several months to build, and this is a brand new instrument, so it maybe takes us even a little bit longer than normal just given the complexity of a brand new instrument. But we saw that change, and so we didn't get those new products right out the door in the second quarter.
On the consumable side, we actually built even a little bit of backlog in consumables, which is not typically normal, but we had some larger bulk orders that just didn't get done in the second quarter and will get made up here in the third and fourth quarter.
Yeah. Maybe just double-clicking on instruments there. You talked about that strongest backlog in 3 to 4 years. What does that actually represent in terms of weeks or dollars? Is there any way to size that? How much should we think about that converting in Q3 and Q4, maybe into 2027?
Yeah. For a variety of reasons, we have not quantified the backlog or book-to-bill, but let's just say orders outpaced revenue.
Yeah.
It's definitely above one. We will start delivering those instruments here in the third quarter and in the fourth quarter. It's one of the reasons why in our guidance assumptions for the back half of the year, we're assuming life science instruments goes from being up low single digits in the second quarter to mid-single digits in the third and fourth quarter. It's really being driven by that high-content screening, where the other instrument categories that we offer, we are not assuming any improvements in those business lines over the remainder of the year.
Yep. On reagents, you've been growing at low single digits the last two quarters.
You are now guiding to low single digits again in Q3, and then a step up to mid-single digits exiting the year. I guess, what gets you there in Q4 from up to mid-single digits?
Sure. Yeah. As I just mentioned, we have some larger orders that were not fulfilled in the second quarter, which we will fulfill here in the third quarter, which helps reagents within the low double digit range, probably a little bit at the upper end of the low double digit range versus in the second quarter, where it was at the lower end of the low double digit range. As we move into the fourth quarter then and stepping up into the mid-single digit range, it is really just due to some easier comps.
Okay.
We are not assuming any underlying market improvement in our outlook. There could be maybe some of the little bulk stuff that gets pushed even into the fourth quarter that could help a little bit, but it is really just driven by comps. I would say the one thing to understand about our guidance is we are not assuming, while I do think that the market could be recovering right now, we are not assuming any further market recovery in our assumptions.
Okay. On China, how are reagents growing there versus the U.S., and what is driving the China reagent growth there?
Yeah. China life sciences is about 7% of total company revenue now. As you probably well know, we announced that we are divesting our diagnostics business, the majority of our diagnostics business in China. Excluding the diagnostics piece that we're divesting, China overall for us is about 8.5% of revenue today, 7% is life sciences. Our life science business in China, which the majority of it is reagents, has been the strongest growing region for us geographically year to date, as well as over the last several years. Our life science business in China, I think, has also been performing better than any of our peers when you look at all the peer commentary. We've been putting up much better growth numbers over the last several years. I think the question is why? Why are we doing well in life sciences in China?
I think there's a connection here, too, I'm sure we'll get into it related to AI as well. As you know, China's pharmaceutical industry has shifted its R&D over the last handful of years to focus much more on innovative medicines and innovative science. You use our consumables and our instruments to do innovative science. Our instruments and consumables are not used in—we don't sell liquid chromatography. We're not doing the same thing over and over and over again. We're working and focusing on new science, and it plays right into the priorities of what the Chinese industry is focused on right now. Our overall life science business continued to grow above company average in the second quarter with reagents leading that strength. I think reagents were double digit growth in the second quarter, for example, in China.
Overall, just on competition, you've said that you've seen no share change over the past couple of quarters. How do you measure that? What gives you confidence? Where do you think you're gaining share, if anywhere?
Yeah. I do think that we have continued to perform inline to above our peers recently, certainly over the last several years, where the industry has been under pressure. Where that's coming from, I would say it's coming from a variety of factors. From feedback from the field, we're not seeing any meaningful changes out in the marketplace itself. But also you can just look at some of the reported numbers. Our life science reagents were up low single digits. Our peers were up low single digits against easier comparisons here in the most recent quarter. As I talked about, we built some backlog even in reagents, which will come through here in the third and fourth quarter. The competitive advantages we have, first and foremost, is innovation.
Again, people buy our products when they want to do something new or different, so by us driving significant innovation in consumables, that is why people want to buy our products. I think we have the best customer service in the industry. On the antibody side, more than 95% of our orders are delivered next day. In addition to having very high-quality products, which I would say it is very important that we manufacture nearly everything that we sell, unlike some of our peers that have recently come into some controversies that you might be aware of. In addition to all of that, we are typically viewed as the value price player as well. Value priced, but still have very strong margins in this business.
Maybe just double clicking on the end markets. Within pharma and biotech, you have noted some improvement there. Maybe can you say where you have seen the improvement? Is there any particular customer subsets that are doing better than others, whether it is early stage versus later stage?
On just reagents or overall?
On reagents.
Yeah. I think we sell a lot of reagents to academic and government, and as I mentioned, we haven't seen any meaningful change there. I think what we need to see within academic and government is probably some more policy stability so that those customers feel confident enough to go out and actually start spending the budgets. I know there's a lot of focus on NIH funding and is it up, is it down? That's important, but I think another important question is: Do those academic scientists feel comfortable and confident enough to actually spend the money that they're getting? On the pharma side, 85%+ of our pharma biotech related revenue is to medium and large pharma companies. Yes, we sell to those small biotechs, but they're small.
Yep.
What really moves the needle for us is the larger companies. I think that's where you're starting to see those customers now 6 months, 9 months post, Pfizer going to the White House and starting to gain some clarity on the future of how the pharmaceutical industry is going to be in the future. I think you're starting to see those customers begin to return to more normal spending patterns.
Maybe moving on to Signals. Organic growth swung from mid-single digit growth down 20% in Q2. That was due to that contract timing issue that you talked about, the tough comp. But annual portfolio value kept growing double digits, you noted. ARR grew mid 20%.
Can you maybe just reconcile those two pictures for us, walk us through the mechanics of H2 accelerating from sort of down 20% in Q2 back up to high teens in the second half?
Sure. This is my favorite topic, which is software revenue recognition. Today, of our software business, which is 9%- 10% of our total company revenue, today, a little over a third of our software revenue is SaaS in the cloud. If you are not familiar with GAAP accounting, SaaS software revenue, you recognize the revenue on a monthly basis evenly over the contract. Call it two-thirds or so of our software revenue is still legacy on-premise licenses. The way GAAP revenue recognition accounting works is it is very lumpy. You have to recognize a large portion of that revenue when the contract is signed or renewed, which can cause the lumpiness in organic growth.
Which is why we talk about this metric annualized portfolio value or APV. APV is a metric that basically looks at the growth in our software business if we were allowed to recognize revenue of all contracts evenly over the life of the contracts. That APV metric has continued to grow in the low double-digit range, call it 12% or so. I think another way to look at it is the APV is what our organic growth will average in the future without any new business wins.
As we move into the back half of the year, the software business is the one that we have the highest level of visibility into, just because of the contract renewal nature of the business. Yes, it was down 20% organically in the second quarter, which was against a 35% positive comp. Obviously, there is just a contract timing dynamic.
We are assuming the software business grows high teens in the third quarter and mid to high teens on the fourth quarter, and feel pretty good about that.
Yep. You have a really dense launch cycle this year, Signals BioDesign in April, Signals AI in June, and then Anthropic Connector in July. Signals for Startups was in July also.
Yep.
How do you position those competitively, and how do they start contributing to revenue?
Yeah, I would add a couple more to that list, too. Back at the beginning of the year, we announced the launch of an AI model marketplace called Signals Xynthetica, in collaboration with Eli Lilly. Before the end of the year, we're going to be launching another new offering called Signals LabGistics, which is another AI native, really unique product offering that's coming out later this year. We've talked about 2026 is easily the most important new product launch year in probably the history of our software business. We've got 3 major new product launches, and then I would say some of these, Signals AI, the Signals MCP connector, some of these other ones honestly really weren't even on the drawing board 12 months or 18 months ago and were things that as the market has changed, we've been able to really accelerate some innovation in this business.
With any new product launch, it takes a little time to get it out in the customer's hands, go through RFPs and contracts and whatnot before you start really seeing more material revenue pick up. Our assumption for the contribution here in 2026 is fairly nominal, but you should start to see it add more revenue beginning next year and then the year after. I think the other thing to understand about our software business that's changing is historically, our revenue model for software, whether it was SaaS or on-premise, it was all seat or license-based. Based off of in one way or another, the number of people using the product. That will continue, but with many of these new products that we are coming out with, Signals Xynthetica, Signals LabGistics, Signals AI, the Signals MCP connector, we are adding a consumption element to the revenue model.
You still have to have a seat or a license, but for many of these, it will be based off of compute usage. So how many tokens, how much compute are you using in these different product offerings? Potentially even how much storage you are using, which maybe we will get into, but I think just data storage is changing in the AI world, so we might need to account for data storage in addition to compute usage from a revenue perspective.
Yep. Last week, you announced a deal to acquire Human Cell Design.
I am wondering if you just give a little bit of background about that deal, walk through the strategic logic there.
Sure. I would say HCD, it is funny, earlier in the year, we acquired a tuck-in software acquisition called ACD.
Yeah.
Now we're acquiring HCD, so whatever's next is going to be something CD. HCD is a novel human relevant cell line that if you think about where we're really focused here is helping customers analyze what is going on with their drug in a cell, in an animal model, in something that looks like a human before, obviously, going into a human clinical trial. This is a really novel set of cell lines. One in particular is this pancreatic cell line that so far has been really being used in metabolomic research focused on diabetes and GLP-1s. You're using the cell line to effectively see how your drug is interacting with these cells, which is very important for those types of conditions.
It plays right into the heart of our strengths, which is in high-content screening and high-throughput screening, where we provide the instruments and the consumables to evaluate and analyze what is going on with cells pre-clinically. I think it's a small tuck-in deal, but in a very exciting area of science that is extremely complementary to what we're already doing.
That's great. Maybe moving to diagnostics. Organic growth was 9% in Q1, accelerated to 11% in Q2.
Yeah.
That was above your plan, then you raised full year to high single digits there. Maybe just set the stage on what's driving that accelerating growth.
Yeah. I would say we've seen better growth in both the reproductive health side of diagnostics as well as immunodiagnostics. For background, the bulk of our immunodiagnostics is rare autoimmune testing.
Yep.
We took our assumptions on that business to high single digits for the full year. I would note that that high single-digit growth this year is despite probably a couple of hundred basis points of headwind from some pressures we are facing throughout all of this year in our latent TB business. Those pressures should abate as we go into 2027, but I think it's worth noting that we're growing high single digits this year with those TB pressures. On the reproductive health side, our LRP assumption for reproductive health is 2%-4%.
Yep.
When you look back over the last few years, we've been growing in the 5%-6% range. Year to date, we're growing double digits. Very strong growth. A part of that is incremental revenue contribution from a DNA sequencing contract that we won a year ago with the U.K. government, whereby it's called Genomics England, and the organization is. We are doing sequencing of newborns for this project they are doing. So that, in the second quarter, added about 500 basis points to growth. But even excluding this Genomics England contract, our reproductive health business still grew by 10% in the second quarter, which is phenomenal.
Yep.
Especially considering that births globally are declining 1%-2%. So market growth is negative 1%- 2%, and we're growing double digits. Part of that is strong instrumentation placements, but we've also had very strong diagnostic test demand as well. It's a combination of geographic expansion, greater adoption of a broader array of our portfolio, uptick of new products we've come out with. It's sort of the algorithm we laid out at Investor Day two years ago.
On Genomics England, which you just mentioned, where do the extension discussions stand there, and then expectations into the back half and into 2027?
Yeah. So right now, this Genomics England contract, it started in the middle of last year. The way it's currently structured, it will run through the middle of next year. As we've talked about, we continue to remain in active discussions with them, I would say, on extending the contract, continuing to do that. I would encourage you to maybe do a quick search. There's been a couple of recent BBC articles out about Genomics England, and some of the very positive clinical outcomes that are happening because of this work. There have been some babies whose parents have opted into this program to have their DNA sequenced, and have been identified as having some extremely rare conditions, which, if caught early enough in life, can be treated and managed and lead a normal life instead of having what otherwise would be a terminal illness.
There was another article written by the BBC just in the last 2 weeks. So it's pretty cool being part of this project, which I think also from a financial perspective, also bodes well that it should hopefully be continued. If you're having these positive clinical outcomes, more and more parents are opting in to have their baby's DNA sequenced to be part of this. So it's really, I would say, having some momentum.
Yep.
But until it's extended, we're not going to assume anything either.
Yeah. Appreciate that. Good program. And maybe thinking about immunodiagnostics, it was mid-single digit, then high single-digit growth the last couple of quarters. Your longer-term plan is 9%-11%.
That's right.
What can consistently get you to that 9%-11% growth? Does that China immunodiagnostics divestiture help you get there, or can you do that even without that divestiture?
Yeah. So the China divestiture is now excluded from our pro forma results. I would say that the pressures we faced in China have really been masking what has otherwise been some very strong results in our immunodiagnostics business. Our immunodiagnostics business, excluding the China piece, has been growing in the high single digits to low double digits over the last one, three, five, 10-year period, whatever period you want to look at. It's been performing in that range. And the drivers to that are very strong market growth. The market growth for esoteric autoimmune is probably growing in the 6%, 7% plus range. And then on top of that, we have a strong cadence of new products in additional emerging areas. And then also very strong geographic penetration in the U.S.
We're still under-penetrated in the U.S., and we're growing very strongly in the U.S., which is helping us versus the market as well.
Yeah, I wanted to touch on AI a little bit more. You made the case that AI generates just more hypothesis that have to be physically validated. What's genuinely differentiated about Revvity's position there to win as more AI is essentially being used?
Sure. I'll reiterate some past comments, which is, we believe that Revvity is one of, if not the best-positioned company to benefit from how AI is changing science. I think that how you do science today is different than it was 12 months ago. With AI can allow customers to really process and manage and use vast quantities, vast data sets. Some of these data sets are so big that 12 months or 18 months ago, they literally could not be used.
Yep.
I think that is probably understanding that and what the ramifications of that are, I think it could be very meaningful to the future and the future of Revvity. Our products on the life sciences side are used to test drugs pre-clinically. I think most people are now in agreement that AI is making it easier to come up with new hypotheses, new drug ideas, which is likely to lead to more drugs being invented overall. I think many people now are also in agreement that you are still going to need to test those drugs. You can't just simulate them in the computer. Our products are used to do that wet lab research. Just using the high-content screening example, our high-content screening systems are these super high-resolution imaging systems, imaging of what's going on in a cell with your drug.
It generates so much data, terabytes of data per instrument per day, that in the past, it was not possible to actually process all that data. But now with AI, you can. It's changing how some of these products are even being used, which ultimately I think will lead to more refined and hopefully better drugs.
which I think is one of the reasons why we're seeing the inflection in demand in high-content screening so far. But it would make sense though, that over time you start to see improvements in other areas as well.
Yep. You mentioned some orders from non-traditional customers building AI discovery platforms. Can you maybe size that? Like how many customers, what they're buying? Is it a handful of orders?
Yeah. Unfortunately, I'm not going to provide specifics on that. But I would say we have been seeing improvement in demand from both traditional as well as non-traditional customers. I would say the uptick or inflection in orders is probably more from traditional customers than it is from non-traditional customers. But the non-traditional customers, I think, is not insignificant and it's new, so I think it's noteworthy as well.
Yep. As we're just approaching the last minute, maybe just capping off, what do you think are the two biggest opportunities for Revvity over the next year?
Yeah. I would say the thing with Revvity, we've gone through this dramatic transformation. We did all these acquisitions during the pandemic. We sold 30% of the company. We rebranded as Revvity. We've spent the last four or five years really driving a number of different operational efficiency programs. in 2024 and in 2025, we bought back 15% of the company in two years. We just paid off a huge bond in July, two months ago, so our leverage is in a very good spot right now. We've made dramatic improvements in our free cash flow and free cash flow conversion. We're running over 100% free cash flow conversion year to date, for example, which is a tremendous improvement from where it was five or six years ago. Which is a long way of saying we've completely shifted the business. We've made a ton of improvements operationally.
We've made a ton of improvements on the balance sheet from a cash flow perspective. What we need now, the company's in a great position, is just a little bit better organic growth, and the company is really positioned to do well because I think the last closing comment is we believe that Revvity has some of, if not the highest incremental margins in the entire life science tools industry. We just need a little bit better organic growth to actually demonstrate that sales leverage, and so hopefully it's coming.
Awesome. That's about all the time we have. Please join me in thanking Steve and Revvity for coming to the conference.
All right. Thank you.
Thank you.
Thanks, man.
Appreciate it. Thanks, Steve.