Financial Data and Key Metrics Changes - Total as-reported revenue grew 10% in the second quarter, with constant currency organic revenue growth of 9% driven by volume and a 210 basis points price increase [4] - Gross margin increased by 60 basis points to 44.3%, while EBIT margin rose 90 basis points to 23.1% of revenue, primarily due to operating expense leverage [4] - Adjusted earnings per diluted share from continuing operations were $2.47, reflecting a 15% increase year-over-year [5] - Free cash flow for the first half of fiscal 2026 was $527.7 million, indicating strong performance driven by increased earnings and improvements in working capital [6] Business Line Data and Key Metrics Changes - In the healthcare segment, constant currency organic revenue grew 9%, with services growing 13% and consumables increasing by 10% [7] - For AST, constant currency organic revenue grew 7%, with services up 13% but capital equipment revenue anticipated to decline [8] - Life sciences saw a 12% increase in constant currency organic revenue, driven by a 39% growth in capital equipment shipments [8] Market Data and Key Metrics Changes - The healthcare capital equipment backlog exceeded $400 million, with orders up 3% year-to-date [7] - Capital equipment backlog in life sciences increased over 50% to $114 million [8] Company Strategy and Development Direction - The company is increasing its revenue growth outlook to approximately 8%-9% for fiscal 2026, with constant currency organic revenue growth now expected to be 7%-8% [9] - The earnings outlook has been revised to a range of $10.15-$10.30, with EBIT margins expected to improve by 10-20 basis points [10] - Free cash flow outlook has been increased by $30 million to $850 million for fiscal 2026, indicating confidence in meeting revised expectations [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth trends, particularly in services, driven by stable volumes from medtech customers and recovery in bioprocessing [14] - The company acknowledged headwinds from tariffs and inflation, estimating a 90 basis point impact from tariffs and 130 basis points from material and labor inflation on margins [17] - Management noted that while there is some noise in customer volume due to manufacturing location shifts, the overall global footprint remains strong [14] Other Important Information - The company highlighted that the strong first half cash flow was due to improved working capital and faster collections [32] - Management indicated that the expansion of capacity in AST is a long-term process, taking two to three years from decision to operational status [38] Q&A Session Summary Question: What drove the second consecutive quarter of double-digit growth in AST services? - Management noted stable volume from medtech customers and recovery in bioprocessing as key drivers, with confidence in the 9%-10% outlook going forward [14] Question: Can you elaborate on the operating margins despite headwinds? - Management confirmed that tariffs and inflation were significant headwinds, with tariffs impacting margins by 90 basis points and material and labor inflation by 130 basis points [17] Question: What is the outlook for healthcare subsegments? - Management expects service growth to remain strong, with consumables performing well and capital equipment growth being a bit of a wild card due to timing [30] Question: How is the company addressing capacity constraints in AST? - Management stated that capacity expansion is a long process, with ongoing and planned expansions to meet demand [38] Question: What is the state of the single-use scopes trend? - Management indicated that while there is a place for single-use scopes, particularly small diameter ones, the bulk of the business remains with large diameter scopes [48]