Release Date: April 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you unpack what is driving the positive trend in bioprocessing orders at the start of the year? Any commentary across customer types like pharma versus CDMO? And any comments on cancellation trends would be great.
A: Rainer M. Blair, President and CEO of Danaher, noted that the bioprocessing business had a better-than-expected start, with mid-single digits growth in orders sequentially from Q4 2023, and a book-to-bill ratio of approximately 0.95. He highlighted that both equipment and recurring orders were in line with expectations, with recurring business performing better. Geographically, larger customers in North America and Western Europe are returning to pre-pandemic ordering patterns. Matthew R. McGrew, CFO, added that cancellations were minimal in the quarter, which is a positive sign.
Q: Why aren't you raising the bioprocess guide for the year, given the positive start in Q1?
A: Rainer M. Blair explained that while the start of the year was encouraging, it is still early, and the full year core revenue growth expectation remains unchanged at a low single-digit decline. He mentioned the need for order momentum to continue building and for stability in run rate consumables, with a longer-term view towards improving equipment demand.
Q: How are you feeling about the M&A environment right now, especially given where rates are and where funding is?
A: Rainer M. Blair stated that Danaher's bias for capital allocation remains towards M&A, but acknowledged that higher interest rates have raised the bar for acquisitions. He emphasized that Danaher remains active in exploring M&A opportunities but will maintain strict discipline to meet earnings expectations and return on invested capital targets.
Q: Can you provide more detail on the Life Sciences margins, particularly why they seemed down more than expected on a minus 3% core?
A: Matthew R. McGrew clarified that the Life Sciences margins came in around expectations at 23%, considering the volume decline and transition costs related to the integration of Abcam. He noted that operating leverage and the dilutive impact of Abcam were factors in the margin performance.
Q: How are you thinking about the potential impact of the BIOSECURE Act on bioprocessing?
A: Rainer M. Blair discussed that it is difficult to predict the outcome of the BIOSECURE Act, but customers are beginning to view it as a risk factor and are taking measures to derisk their businesses. He mentioned that Danaher's solutions can be delivered globally, which positions the company to adapt if manufacturing and clinical trials shift to other locations.
Q: What are your assumptions for the trends in equipment and consumables in bioprocessing for the rest of the year?
A: Rainer M. Blair indicated that Danaher does not break down its guidance between consumables and equipment at the top level. He noted that recurring revenue represents about 85% of bioprocessing, which was the major driver of the improvement in orders and the book-to-bill ratio in the quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
