Revvity(RVTY) - 2025 FY - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an uplift of approximately $60 million from Q3 to Q4, driven by three primary factors: the Genomics England contract, seasonal uplift in life sciences instrumentation, and strong performance in immunodiagnostics outside of China [2][4][54] - The foreign exchange (FX) impact was less favorable than anticipated, resulting in a $5-$7 million drag on absolute dollar amounts, which is about 1% less than expected [4] Business Line Data and Key Metrics Changes - The diagnostics segment saw contributions from the Genomics England contract, increasing from $2 million in Q3 to $7 million in Q4 [2] - The life sciences instrumentation side continued to show good activity, with seasonal uplift expected rather than a significant budget flush [3][14] - The reagents business, particularly from BioLegend, faced modest impacts from government shutdowns, but the pharma biotech sector showed signs of recovery [6][10] Market Data and Key Metrics Changes - The U.S. market for immunodiagnostics has grown from 5% to 15-20% of total EUROIMMUN revenue since acquisition, with expectations to reach 40-45% as more assays are introduced [39] - The China market is projected to stabilize, with diagnostics expected to contribute 5-6% of total revenue, while life sciences in China is anticipated to be around 10-12% [46][47] Company Strategy and Development Direction - The company aims to innovate in the Chinese market by operating as a local entity and focusing on reproductive health and newborn screening [45] - There is a strong emphasis on leveraging AI and machine learning across product lines, particularly in drug discovery and development, which is expected to drive future growth [23][38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in the pharma biotech sector, indicating that increased activity and discussions with customers are signs of normalization [17][19] - The company is confident in its 2026 growth projections of 2-3% and 28% margins, having accounted for market stability and the impact of calendarization on China [60][61] Other Important Information - The software segment has outperformed expectations, growing over 20% each quarter, driven by diligent investment and customer engagement [21][22] - The company remains open to acquisitions but is focused on strategic and sensible opportunities rather than paying high multiples [61] Q&A Session Summary Question: Can you discuss the life sciences diagnostics and the impact of the government shutdown? - The reagents business, particularly from BioLegend, was modestly impacted by the shutdown, but the pharma biotech sector continues to perform well, indicating a return to normalcy [6][10] Question: How quickly can biotech recover and what are the signs? - Recovery in biotech is linked to market stability and increased M&A activity, which are expected to normalize over the next couple of quarters [8][9] Question: What is the outlook for the China diagnostics market? - The company anticipates that China diagnostics will stabilize, contributing around 5-6% of total revenue, with a focus on localizing operations and obtaining faster approvals [46][47] Question: How does the company view its software growth trajectory? - The software business is expected to continue growing, with a focus on annualized portfolio value rather than just organic growth metrics [29][30] Question: What are the capital allocation priorities moving forward? - The company remains acquisitive but is focused on strategic acquisitions that align with its core business, while also considering share repurchases as a priority [61]