PerkinElmer Aktie

All right. Great. Good morning, everyone. My name is Robbie Bamberger, Senior Research Analyst covering Life Sciences and Diagnostics. I'm very pleased to be joined this morning by Steve Willoughby, Senior VP of Investor Relations at Revvity. Steve thanks for making the trip.

Yes.

I guess 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'd like to just point out to investors about the quarter in general?

Sure. So maybe 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'd 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, consumables, software that are used by academic and pharma biotech customers to really drive innovative science, which I'm sure we'll 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'm sure we'll get into. And then 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. But 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.

And maybe just -- has anything changed in your view about Q3 or 2026 in the 6 weeks that reporting Q2.

We're not going to provide any intra-quarter commentary. So I appreciate the question, but we'll leave that for when we report 3Q. .

Yes. Makes sense. And then maybe just starting on Life Sciences. That's 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. So 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 1/4 of our Life Science business. So it's about 12% of the total company. That is, I would say, consistently soft, stably soft. We haven't -- 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.

And so I think it's -- we're starting to -- 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 preclinically focused, our products really go into preclinical research, the bulk of our revenue goes towards -- from those medium and larger-sized pharma companies.

So 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 3, 4, probably even 5 years. And so 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, these are -- we sell at the high end, $1 million dollar instruments, at the midrange, several hundred thousand dollar instruments.

And we came out with a new high-end instrument in late February, and it's really taken off. And 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. And 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 did have actually -- 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.

Yes. 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? And then how much should we think about that converting in Q3 and Q4 maybe into 2027?.

Yes. For a variety of reasons, we have not quantified the backlog or book-to-bill, but let's just say it's orders outpaced revenue. And so it's definitely above 1. 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.

Yes. And then on reagents, you've been growing at low single digits the last 2 quarters, 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 for -- up to mid-single digits?

Sure. Yes. So 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 single-digit range, probably a little bit at the upper end of the low single-digit range versus in the second quarter where it was at the lower end of the low single-digit range.

As we move into the fourth quarter then and stepping up into the mid-single-digit range, it's really just due to some easier comps. So we're 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's really just driven by comps. I would say the one thing to understand about our guidance is we're not assuming -- while I do think that the market could be recovering right now, we're not assuming any further market recovery in our assumptions.

Okay. And then on China, how are reagents growing there versus the U.S.? And what's driving the China reagent growth there?

Yes. So China Life Sciences is about 7% of total company revenue now. And as you probably well know, we announced that we are divesting our Diagnostics business -- the majority of our Diagnostics business in China. And so 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. And 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.

And so I think the question is why? Why are we doing well in life sciences in China? And I think there's a connection here to -- 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. And so 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.

So 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.

And then overall, just on competition, you said that you've seen no share change over the past couple of quarters. How do you measure that? What gives you confidence? And then where do you think you're gaining share, if anywhere?

Yes. So yes, I do think that we have continued to perform in line 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. And as I talked about, we built some backlog even in reagents, which will come through here in the third and fourth quarter.

So -- but no, we're not -- the competitive advantages we have, first and foremost, is innovation. Again, people buy our products when they want to do something new or different. And so by us driving significant innovation in consumables, that's what -- why people want to buy our products. And 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 -- we -- I would say it's 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. And in addition to all of that, we're typically viewed as the value price player as well. And -- value priced, but still have very strong margins in this business.

Maybe just double-clicking on the end markets. Within pharma and biotech, you've noted some improvement there. Maybe can you say where you've seen improvement? Is there any particular customer subsets that are doing better than others, whether it's like early stage versus later stage...

On just reagents or overall?

On reagents.

Yes. I think the -- we saw a lot of reagents, 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. Is it up? Is it down? I think the next -- 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% plus of our pharma biotech-related revenue is to medium and large pharma companies. And so yes, we sell to those small biotechs, but they're small. And so what really moves the needle for us is the larger companies. And I think that's where you're starting to see those customers, now 6, 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 to 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%. So can you maybe just reconcile those 2 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. And today, of our software business, which is 9% to 10% of our total company revenue, today, a little over 1/3 of our software revenue is SaaS in the cloud. And if you're not familiar with GAAP accounting, SaaS software revenue, you recognize the revenue on a monthly basis, evenly over the contract. Call it, 2/3 or so of our software revenue is still legacy on-premise licenses.

And the way GAAP revenue recognition accounting works is it's 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. And 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 contract.

And that APV metric has continued to grow in the low double-digit range, call it, 12% or so. And 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. And so 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. And so yes, it was down 20% organically in the second quarter, which was against a 35% positive comp. Obviously, there's just a contract timing dynamic. We're assuming the software business grows high teens in the third quarter and mid- to high teens in the fourth quarter and feel pretty good about that.

Yes. And then you have a really dense launch cycle this year, BioDesign in April, Signals AI in June and then Anthropic connector in July. Signals for Startups was in July also. So how do you position those competitively? And how do they start contributing to revenue?

Yes, I'd add a couple more to that list, too. I mean, back at the beginning of the year, we announced the launch of an AI model marketplace called Xynthetica in collaboration with Eli Lilly. And before the end of the year, we're going to be launching another new offering called LabGistics, which is another AI native really unique product offering that's coming out later this year.

So we've talked about 2026, is easily the most important new product launch year in probably the history of our software business. Just we've got 3 major new product launches. And then I would say some of these, Signals AI, the Anthropic connector, some of these other ones honestly, really weren't even on the drawing board 12 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 bit of time to get it out in the customers' hands, go through RFPs and contracts and whatnot before you start really seeing more material revenue pick up. So 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. So based off of in one way or another, the number of people using the product. And that will continue. But with a number -- with many of these new products that we're coming out with, Xynthetica, LabGistics, Signals AI, the Anthropic connector, we are adding a consumption element to the revenue model.

And so 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. So that -- and potentially even how much storage you're using, which maybe we'll get into. But I think just data storage is changing in the AI world. And so we might need to account for data storage in addition to compute usage from a revenue perspective.

Yes. And then last week, you announced a deal to acquire Human Cell Design. Wondering if you can just give a little bit of background about that deal, walk through the strategic logic there.

Sure. So I would say HCD, it's funny. Early in the year, we acquired a tuck-in software acquisition called ACD. Now we're acquiring HCD. So whatever next is going to be, something CD. HCD is a novel human-relevant cell line that if you think about -- and where we're really focused here is helping customers analyze what is going on with their drug in a cell, in an animal model and something that looks like a human before obviously going into a human clinical trial.

And 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. And 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. And 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 preclinically. And so it's -- 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. That was above your plan, and then you raised full year to high single digits there. So maybe just set the stage on what's driving that accelerating growth.

Yes. I would say we've seen better growth in both the reproductive health side of diagnostics as well as immunodiagnostics. In Immunodiagnostics, for background, the bulk of our immunodiagnostics is rare autoimmune testing. And we took our assumptions on that business to high single digits for the full year.

And 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 will -- 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% to 4%. And when you look back over the last few years, we've been growing in the 5% to 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, and 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 about 10% in the second quarter, which is phenomenal, especially considering that births globally are declining 1% to 2%. So market growth is negative 1% to 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. And 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 our Investor Day two years ago.

And then on Genomics England, which you just mentioned, where do the extension discussions stand there and then expectations into the back half and into 2027?

Yes. 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 are continuing 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 who have -- their parents have opted into this program to have their DNA sequence 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.

And 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 babies DNA sequence to be part of this. So it's really, I would say, having some momentum. But until it's extended, we're not going to assume anything there.

Appreciate that. It's a good program. And maybe thinking about immunodiagnostics, it was mid-single digit and high single-digit growth the last couple of quarters. Your longer-term plan is 9% to 11%. So what can consistently get you to that 9% to 11% growth? Does that China immunodiagnostics divestiture help you get there? Or can you do that even without that divestiture?

Yes. I mean -- 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 1-, 3-, 5-, 10-year period, whatever period you want to look at, it's been performing in that range.

And the drivers of 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 like emerging areas and then also very strong geographic penetration in the U.S. So we're still underpenetrated in the U.S., and we're growing very strongly in the U.S., which is helping us versus the market as well.

Yes. 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. So what's generally 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. And I think that science is different -- how you do science today is different than it was 12 months ago.

And with AI, AI can allow customers to really process and manage and use vast quantities -- vast data sets that -- some of these data sets are so big that 12 or 18 months ago, they literally could not be used. And 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 preclinically -- test drugs preclinically. And 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. And 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.

And so 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.

Yes. And you mentioned some orders from nontraditional customers building AI discovery platforms. Can you maybe size that, like how many customers, what they're buying? Is it a handful of orders?

Yes. Unfortunately, I'm not going to provide specifics on that. But I would say we have been seeing demand from both -- improvement in demand from both traditional as well as nontraditional customers. I would say the uptick or inflection in orders is probably more from traditional customers than it is from nontraditional customers, but the nontraditional customers, I think, is not insignificant and it's new. So I think it's noteworthy as well.

Yes. And as we're just approaching the last minute, maybe just capping off, what do you think are the 2 biggest opportunities for Revvity over the next year?

Yes. 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 4 or 5 years really driving a number of different operational efficiency programs. In '24 and in 2025, we bought back 15% of the company in 2 years. We just paid off a huge bond in July, 2 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 5 or 6 years ago, which is a long way of saying we've made -- 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 is 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.

Great. Welcome, everyone. My name is Mike Podoll. I lead our U.S. life science tools and diagnostics coverage on the healthcare investment banking side at Morgan Stanley. Pleasure to be joined here by Max Krakowiak, the CFO of Revvity.

So maybe to kick things off, Max, Revvity is an organization that's been through a pretty big transformation over the past several years. And so for an investor that's newer to the Revvity story, what do you think the simplest way is to kind of understand where the business is today?

Yes. I think, as you mentioned, we've undergone a tremendous amount of transformation. And I think the company we now have is an innovative life sciences and diagnostics company that's focused on differentiation. I think when you look on the life sciences side, we are focused on preclinical research. And then on the diagnostics side, we really have specialty focus across reproductive health, autoimmune and allergy markets. And so as you mentioned, we've gone through a tremendous transformation to simplify the portfolio, again, with a big focus on innovation and differentiation. And I'm sure we'll get into more of the transformation as we go along here.

Yes. So on that transformation, can you talk a little bit about how that kind of positions you for the future, where you're heading, especially within the context of AI and life sciences?

Yes. So maybe even just spending a little bit on the transformation overall. From our standpoint, if you look at where we've gone to, for us, the big areas of focus was one being in highly competitive market positions in [ faster-growing ] markets. We think we've accomplished that now with our focus across life sciences and diagnostics. We've also undergone a tremendous amount of, I would say, cultural transformation over the past few years becoming Revvity. I would say we were a little bit more of an old school scientific heavy instrument-based company, and now we are much more focused on innovation, scientific differentiation with a much higher mix of recurring revenue.

And then I think if you look at the financial transformation, we've also taken a significant step change there. I've already mentioned that we're in faster-growing end markets. If you look at our cash flow conversion performance, it's dramatically improved since becoming Revvity with the new portfolio and operational execution. Our conversion now has been consistently north of 90% versus historically 70%, and even when you look at it from a margin profile perspective, this year, we're anticipating being upper 20s from an operating margin standpoint. Before the transformation, it was low 20s, which is a significant change over a short period of years. And I think, again, really a testament to the vision we had we wanted to create.

That's great. You've talked before about the longer-term kind of growth algorithm or the long-range plan being in kind of that 6% to 8% range. How would you kind of deconstruct that? What are the kind of constituent components of that growth? And how should investors think about that?

Yes. So for the 6% to 8% long-range forecast for us as a company, the key baseline assumption is that in a normal market environment, markets grow sort of mid-single digits. And we should be growing several hundred basis points above that. I think when you look at the same percent and how it decomps by business unit, Diagnostics is probably maybe slightly on the lower end of that 6% to 8% range with Life Sciences being on the upper end of that range. And I think even when you look a little further underneath both Diagnostics and Life Sciences, from a Diagnostics perspective, we have 2 main business units. You have your reproductive health franchise, which in our LRP is assumed to grow 2% to 4%. It's been growing nicely above that, which, again, I'm sure we'll get into some details on.

And then on the immunodiagnostics side, it's been 9% to 11% LRP, where it's mostly been executing within. I think then on the Life Sciences side, where we have 2 business units, our Life Science Solutions, which is our instruments and reagents. We anticipate that sort of, I would say, being in the mid- to high single-digits growth over the long term with maybe some particular tailwinds that might drive us to grow above it, one of them you mentioned around sort of this AI momentum. And then we've got our software business, which we anticipate growing 9% to 11% over LRP, and it's actually been probably growing above that as well over the past couple of years.

Great. The past several quarters, I think, in the tool space more broadly, I think a lot of us are all aware of some of the challenges, but Revvity has managed to grow the reagents business in most of those quarters. Where do you -- how should investors think about where that growth is coming from? Is it market share gain? And where do you see that business position going forward? And what do you need to do to drive more accelerated growth even?

Yes. So I think if you look at it from an overall reagents perspective, as you mentioned, the last couple of years have been a challenging market environment. I think though we've been very encouraged that we've been able to grow, I think, several hundred basis points above that sort of market or peer average over this past couple of years, which is a testament to the strength of our portfolio. And I think when you look at what's the real differentiation for us on a reagent standpoint, I would call out a couple of factors.

One, we are, I would say, very proud of our customer relations and really our ability to deliver best-in-class service. More than 95% of our reagents are delivered within 24 hours of the order, which is a true strength for us from a customer engagement perspective. I'd say additionally, we pride ourselves in being one of the more innovative reagent companies out there, but also being able to deliver that innovation with incredibly high quality at the best value price in the market.

And I think third, I think when you look at our just again over reagents portfolio, we do have some, I would say, very strong value chain offering for our customers in their preclinical research and being able to span across their full continuum of needs. So I would say that differentiation is what's really led us to grow above market over these past couple of years.

I think when you then flip it in terms of saying longer term, what do you need to get to sort of get back to that LRP growth I think it's a combination of factors. One, if you look at things from an academic and government perspective for us, that's roughly about 1/4 of our reagents exposure. You need more stability there from a policy perspective. That whipsaw makes it very difficult for customers to sort of plan over the long term and be comfortable sort of releasing budgets.

I think the bigger concentration is obviously with pharma biotech, though. And I think over the past couple of years, you've seen a real pinch down on the budgets from a preclinical perspective. That narrative has definitely changed over the past couple of quarters. You're starting to see the opening of the faucet in terms of preclinical funds, which we knew they could not keep compressed for a long period of time. They need to keep feeding that innovation engine. And then even on top of that sort of, I would say, normal return to preclinical spending, we're starting to see some incremental tailwinds from some of the AI momentum.

Great. So certainly, in the last year, we've seen a meaningful amount of M&A and consolidation, especially involving large kind of flow cytometry and antibody portfolios. You all have indicated that flow represents roughly 40% of Revvity's reagent business. What comprises the remainder of that portfolio? And how should investors think about why that's attractive?

Yes. So I think, as you mentioned, in the reagents portfolio, we have 2 main pieces of it. You have the RUO flow cytometry and then you have what we call sort of our research reagents and non-flow content. It's roughly about another 40%, 45% of the portfolio. And actually, that piece of the portfolio has been growing above our overall reagents performance over the past couple of years. And what our research reagents portfolio is, it's really allows scientists to basically screen and validate their drug candidates against a known number of targets, I mean seeing how they interact at the cellular level. And so for us, we've seen a very strong tailwind over there over the past couple of years.

There's really 2 big players in the marketplace. It's us and then a privately owned company called Promega. We both have market leadership positions. And so I think when you look at what's maybe driven some of that outperformance in the past couple of years, it's actually been around looking at different applications for sort of new therapeutic areas, so think like GLP-1s. And then I think as you look over the next sort of short to medium term here, it's also a portfolio that's very well positioned for what's needed from pharma companies' perspective, data generation for their AI models and that ability to, again, take an AI-developed candidate and screen it against a number of targets to see what that interaction is and generate that data to feed back into your AI models. Again, this portfolio is very well positioned to take advantage of that momentum.

And your commentary around the AI-related demand on the second quarter earnings call was strong, but that there was a benefit that was not necessarily readily apparent yet. Can you talk a little bit about what you're seeing in terms of actual kind of customer behavior that gives you confidence that AI is becoming a tangible demand driver for Revvity?

Yes. So I think first, we're seeing it in the order trend. And again, I think that's the most tangible proof point I'll probably have for you today is the orders are coming in and now it's just an ability for us to go and execute against them. I think when you then look at some of maybe the softer indicators, it's in a lot of the conversations we're having in customers is around this narrative of lab-in-the-loop and sort of how do we get maximizing our ability to take our preclinical research and maximize the data output. And you can just tell based on the customer conversations that, one, there is real momentum and they're setting up their infrastructure to take advantage of these new tools. But then secondly, the discussion around much larger projects, longer-term products. We talked about the bulk orders we're seeing from a reagent standpoint, and that's really giving us a strong indication that we are starting to see sort of a loosening of the budgets on the preclinical side from pharma.

Can you talk a little bit more about -- you mentioned the backlog how should someone think about this incredibly strong backlog that you've seen within the context of the overall Life Sciences growth within the business?

Yes. So obviously, the backlog hasn't quite shown up in the growth numbers yet. I mean we did take up our second half forecast for our Life Sciences Solutions business to account for the stronger backlog, both on the instrument side as well as on -- with the reagents business. And I think for us, again, as we mentioned, it was a nice increase in the order demand. We've just got to go out and execute it now from a supply chain perspective.

You've talked about how you believe there's likely to be a bottleneck in validation-related work in the future. What exactly do you mean by that? How should investors think about it? And where have the bottlenecks been in the past in kind of the preclinical discovery and development work?

Yes. So we actually -- we started talking about this sort of validation bottleneck at the beginning part of 2026. And now that's sort of a little bit transformed into sort of this lab-in-the-loop narrative that you heard a lot about and what I previously mentioned. I think when we refer to the validation bottleneck, the example there is the way to think about it is AI is going to help pharma companies develop and design these compounds at a much faster rate. However, you still need to go into the wet lab and test those AI-developed molecules and compounds. And what you're also going to do is you're going to be creating more compounds than you can possibly put through the infrastructure right now. And so you're going to create this validation bottleneck of these AI-designed compounds and the wet lab work needed again to validate and screen them against a number of targets and see how they interact.

And so that's what we were really referring to in terms of the sort of validation bottleneck. Where it's evolved into that lab-in-the-loop is sort of that sort of constant infinity loop of design your molecule and compound, validate it in the wet lab and then put that back into your AI model, tweak it and you get the sort of iterative loop before you ultimately get your compound into the clinic. And so that's really sort of -- again, a lot of what we're hearing from the customers. It was a lot of what we started to hear and see in the beginning of 2026, and it's really continued to play out here over the first couple of quarters.

Great. So Signals -- your Signals software business is obviously an incredibly important part of all of this. Maybe for an investor who's not a research scientist, can you explain or just kind of give the context of how Signals fits into the overall workflow of your customers kind of end-to-end and what's unique about it relative to some of the other offerings in the space?

Yes. So probably the easiest way to think about our Signals franchise is it's an ERP for preclinical scientists. And so what you're able to do in our product suite is, one, you're able to sort of, again, design and draw your chemical compound. You're then able to build and document your experiment. And then we've got an analytical layer that sits on top of it to help you analyze the results from that experiment. It really is their ERP, which what drives their workflows and operations on a day-to-day basis on the preclinical research side. And so for us, where we've now sort of continued to pivot the portfolio is figuring out how we take that sort of that infrastructure we have from a Signals perspective and layering on top of it sort of where the market is going with these AI models and being able to have those AI models sit very closely to their preclinical research.

And so maybe say a little bit more about that. Like why does AI strengthen the Signals business as opposed to bypassing it or circumventing it?

Yes. I think there was a lot of noise about the whole SaaS apocalypse, which I think has been subdued now since it first came out. I think that's pretty similar for how folks initially thought about it from a Signals perspective for us is big fear of it being overtaken by AI, but that's really not going to be the case. I mean, again, when you think about what our Signals franchise is, it is the ERP for the scientists. It is their sort of their regulatory or their system of record from a preclinical standpoint, which is critical for them as they think about expediting their process from a clinical and regulatory submission standpoint.

And so from that regard, it wasn't really something that I think was ever really in scope to be "overtaken" by sort of this AI narrative. It's really going to be much more of a complement and even a potential tailwind for our business. And I think what we've come out with is our product called Xynthetica. And essentially, what Xynthetica is the infrastructure in a marketplace to host your AI models, and it will sit very closely to all of the preclinical data you have and creating that link between the 2 so that scientists are not operating on 15 different systems. Rather, they're in the Signals Notebook. They've got their AI models. They are tied in again to what they need from a regulatory perspective with the Signals Notebook.

Right. And I think you said before or historically that Signals is a business that you expect to double over the next 4 or 5 years. Walk us through kind of what you would need or how you see that progressing? Is it expansion with existing customers, new customers, pricing, like some combination of all of the above, something else? What's the right way to think about that?

Yes. Look, I think you mentioned it, but we are very excited about the Signals franchise. We do anticipate our ability to double it over the next 4 to 5 years. I think when you look at sort of the growth algorithm for that business, again, 9% to 11% was what we have right now in this LRP. It's been growing above that. I think when you look at where it's going to go in the future, you've got about 106%, 107% is sort of our baseline net retention when a contract comes up for renewal. So you can almost kind of assume that as sort of the market growth rate for where we play.

And then how we get to the 9% to 11% is really 2 factors. One, increasing sort of our breadth of customer base. We've talked about in the past how we are predominantly focused on Tier 1 pharma. We have an ability to continue to move further downstream into Tier 2, Tier 3 and even some of the smaller biotechs. We've recently launched some products that are perfectly positioned for some of those smaller biotechs, which we previously didn't have. And then the second big sort of driver from a customer perspective is around material science. And so this is a new customer group for us. It uses very similar workflows and capabilities that we offer on the [ pharma ] side. And that's been growing significantly, I would say, over the past couple of years and one that we think has a lot of room to run just given how fragmented that market is.

The second, I would say, additional above-market growth rate lever we have in our Signals business is around our new product launches. And whether that's around BioDesign and us expanding what we offer from a large molecule capability standpoint or around logistics and partnering with our customers and how they run their labs. And then I also talked about Xynthetica that we have from an AI marketplace perspective.

Great. Okay. Maybe shifting gears. You've obviously announced a divestiture of the China-focused immunodiagnostics business. Can you give folks a sense of that maybe aren't as familiar with that, how you came to that decision and the kind of time line between now and when you expect that to close? What are some of the risks to that, recognizing that any separation is always going to have complexities and challenges. So how should investors think about the separation in the context of the broader Diagnostics business and kind of what it does on a pro forma basis for Revvity?

Yes. Look, I think, again, we're incredibly excited about the ability for us to divest our immunodiagnostics business. I think it was really a culmination of external factors that were outside of our control that really drove us to the decision to divest that business. As you mentioned, it's going to complete here or execute by the end of 2027. I don't know that I would necessarily call any specific risk associated with it, right? We've talked about the fact that they've got to fully localize their manufacturing. We talked about the fact that we have to roll over the regulatory approvals to the new entity. And it's just a matter of, I would say, execution at this point.

Thankfully, or lucky for us, we've really just run a very similar play when we divested the legacy PerkinElmer. And so we've got a pretty strong playbook of what needs to happen from a sort of execution perspective. It's really just the pole in the tent is the regulatory approvals. The benefit for us is we've at least already been selling these products in the market. So it's just paperwork at this point in time. But that is really, I would say, more of the longest pole in the tent, but nothing really to call from an execution risk perspective.

Got it. And how did you think about the decision to retain a minority interest in that business? Why is that kind of the right answer? And what is that -- what kind of rights or future economic participation do you all retain?

Yes. I think it was actually a critical piece of the deal for us. It was a critical piece for us for 2 reasons. One, look, just again, given the uncertainty in the external market, it was a little bit of an unknown how all these future policies are going to change or play out over the next several years. And for us to maintain that minority stake, we've got the opportunity, I would say, to take advantage of upside if that business is able to sort of exceed expectations and sort of take off as a fully localized company.

The second reason is we did want to keep a close connection with them. We actually have commercial rights of first refusal for any product they make in China that they want to distribute outside of China, which again is a key component for us is we obviously don't want to be creating a competitor for ourselves outside of China. And look, they are really good from a scientific expertise and innovation standpoint. And so I think those 2 components, again, were really important for us as we got this deal done.

Okay. Can you talk a little bit about the reproductive health side of the Diagnostics business? Like, first of all, kind of like what it is and why you've seen so much strength in 2026? And just how you think about the outlook for that business kind of going forward?

Yes. So I would say our reproductive franchise, not even just in 2026, but over the past several years has performed incredibly well despite declining birth rates. And I think when you look at our reproductive health franchise, there's probably really 2 main components that we mostly talk about. One is the newborn screening business, which is about 70% of our overall reproductive health business. And then you have our Omics business, which is our global lab network.

And so when you look at what's really been driving the strength of the performance, again, on the newborn screening side, again, declining birth rates. However, there's still 100 million babies born around the world that don't get any level of testing. You've got different level of either state or country level testing even for those that do have screening programs. And so the ability to get a state or country to add one more marker to their menu. And then we also continue to come out with new assays that allow us to test for things that wasn't possible before. And so I think it's that really sort of 3-pronged attack on the newborn screening side that has allowed us to grow above the declining rates.

And then we've got our Omics franchise. And I think we've talked a lot about why we're excited about this Omics lab network and what it can mean for us in the future really as it relates to sort of either, one, larger genomic screening programs that we can partner with, again, states or countries. We've talked about GEL, which has provided a nice tailwind here for us in '26. And there's much more discussions about either expanding that program, but also starting new ones with other countries. And then the second thing is it is something that's going to allow us, I would say, to get our foot in from a companion diagnostics perspective. And we've talked about type 1 diabetes is sort of the first example of that, but our omics business is really sort of that glue that takes our expertise from the diagnostic assay standpoint and the partnership with pharma companies to be able to play a much bigger role as sort of a companion diagnostics partner.

Got it. And how should investors think about the growth or what you expect from a performance standpoint in the back half of this year as opposed to kind of the longer-term vision?

Yes. So I think first half this year, reproductive health will be up double digits from a growth perspective, which again is really strong performance. I think as you look at the back half, we do expect that to moderate a bit, probably closer to low single digits. And I think really, it's a function of 2 things. One, you've got the Genomics England comp coming back in the second half of this year. So the contribution from Genomics England is less. And then two, we did have some instrument placement timings in the first half of this year that helped our growth rate. But from an overall year perspective, our reproductive health business growing high single digits, which is above its LRP of 2% to 4%. And again, I think even in the past and probably looking forward, we do expect this business to be able to grow north of that 2% to 4% sort of watermark.

Got it. I believe you talked about in the immunodiagnostics business, the ability to kind of grow high single digits this year. Do you still believe that to be the case?

Yes. High single digits is what's implied in our guidance this year. And I think if you even look at that business, that's high single-digit growth with a couple of hundred basis points of headwind related to our TB testing franchise. And we've talked about some of the headwinds we have there, both from a market perspective, but also our portfolio and the fact that we need to get out to new levels of automation to really be more competitive in the U.S. TB market, which is the largest market. But again, immunodiagnostics has shown very strong performance in the first half, and I would argue that it's been that way for the past couple of years.

Can you say a little bit more about that the historical trend relative to now relative to kind of where you see that going in the more near term?

Yes. So I think when you look at our immunodiagnostics business, again, LRP is 9% to 11% growth. The biggest underlying piece of that is actually we are playing in inherently faster-growing markets. So the markets that we play in of autoimmune, allergy, even TB are growing mid- to high single digits in a normal year. And so that's a really strong baseline to be starting from. We've been able to grow several hundred basis points above that historically and what will we expect going forward for like 2 main reasons.

One, we still have a huge opportunity from a U.S. expansion standpoint. For us, our U.S. revenues is about 15% to 20% of our immunodiagnostics revenue today. 40% of the market is in the U.S. It's the same players that we compete with outside the U.S. And so for us, it's really just continuing to drive further adoption and [ menu ] registrations in the U.S. to be able to get that closer to market. So that's one really big, I would say, growth tailwind for us.

The second one is we continue to be, I would say, on the cutting edge of innovation. When you look at what's needed from an autoimmune and allergy perspective, need a really broad menu. You need one that's highly sensitive and highly specific. Oftentimes, you're trying to figure out or find a needle in the haystack, if you will. And so that ability to have a very wide menu that's very specific is incredibly important for our customers.

Can you talk a little bit about the underlying markets? I mean, you mentioned it briefly, but what is driving that growth? How should investors think about that? Because it's a lot different relative to some of the other areas of diagnostics that you hear about.

Yes. I mean I think when you look at it from a market standpoint, one, it's probably one of the -- still one of the more, I would say, younger or less mature diagnostics markets. Oftentimes, these are not like mass population diseases that you're dealing with, right? These tend to be a little bit more nuanced, a little bit more specific. You've got patients that have symptoms that there's no clear indication of what's really driving those causes. And so you can even have multiple levels of testing for the same patient trying to diagnose, again, the same symptom that they are facing. And so I think it's just really a matter of what you're testing that really drives that sort of stronger market growth rate.

Got it. Okay. Maybe shifting gears again. What are you most excited about from a financial perspective as it pertains to Revvity? And what do you think investors most underappreciate about Revvity and kind of the transformation that the business has gone through?

Yes. I mean I mentioned at the beginning, some of the -- again, the financial profile benefits we've had as part of the transformation. I still think the piece that's maybe most underappreciated, and look, we haven't really had the chance to show it is really around the margin profile. And I think when you look at it, again, our LRP in a normal market environment, we believe growing 6% to 8% organically, we should be able to expand our operating margin 75 basis points per year. In the last couple of years, we haven't really had market -- normal market environments. And so from that regard, we haven't really gotten the ability to show, I would say, the power of our new portfolio and the strength of our incremental margins.

If you look at the fastest-growing area of our portfolio, whether it be software, life sciences reagents, immunodiagnostics, newborn screening, those businesses have inherently higher gross margins and much stronger incrementals. And we believe that we are a company that should be delivering north of 40% incrementals. And then we don't really need to add new feet on the street. Again, if you think of those markets that I just talked about in terms of the fastest-growing areas, most of life science reagents is purchased through e-commerce. And if you look at Signals and our diagnostics reagent business, it's like account management. You don't need to be adding more feet on the street to drive incremental growth. And so I think that was a combination of those 2 things should enable us to deliver what I would consider best in sort of the industry from an incremental margin perspective. We just haven't had the chance to show it yet given some of the market headwinds.

Got it. And how should investors think about the margin targets, whether it's kind of 2027 or beyond?

Yes. I think if you look first specifically at 2027, I would say it should be somewhat of an outsized year from a margin expansion standpoint depending upon our level of organic growth that we ultimately land on for '27. And the reason is because we've got a bunch of cost-out actions that have been executed sort of at the tail end of the second quarter and the second half this year. And those cost actions will have an annualized benefit for us in the first half of '27.

And so that should provide us, I would say, tailwinds above what we would normally expect from a margin expansion standpoint. I think as you look longer term, I think we've been pretty blunt in saying that we expect our business entitlement to sort of be mid-30s operating margin. And I think that's something that we very much still believe in, and we're excited about to show once we again sort of get back to these more normal market environments on the life sciences side.

Great. I know you all have paid down some debt recently that's brought your kind of overall leverage levels down. How should investors think about your capital allocation and capital deployment priorities?

I mean I think if you look over the last couple of years, we've been much more, I would say, balanced from a capital allocation standpoint versus historically, we were almost 100% only inorganic capital deployment. I think if you look over the past couple of years, we bought back nearly 15% of shares outstanding from a buyback perspective. Obviously, that was opportunistic with where the market was. And I think as you look going forward, I think you'll continue to see us both balanced and disciplined from a capital allocation standpoint. Obviously, we'll see what happens from a public market perspective.

We have announced some tuck-in deals over the past couple of quarters here. And so I think, again, as you look over the next couple of quarters, we'll see what happens from a public markets perspective. We'll also see what's happening from an M&A pipeline perspective. But I will say that we have a much higher hurdle rate, I would say, for deals than we did in the past. We really like the financial profile we've created as a company. We really like sort of our market positioning we have in each one of our business units. And so for us, there's just a much higher bar for us to go and spend from an inorganic perspective.

Got it. So you have an Investor Day coming up in a couple of months on November 13. Presumably, AI is going to be a big focus there. But what else are you thinking about? Anything you want to preview?

I don't want to front run it too much. But yes, AI will be discussed. I think we'll have a specific focus on our Signals business and really allowing folks to understand what we do there from a product perspective, but also why -- again, why we're so excited about its future. And then we'll have sort of a normal, what I'll call a corporate update. But we're very excited about the event. Look forward to seeing a lot of you guys out there. And yes, it should be good.

Great. Maybe one last question. You obviously spent a lot of time with investors on the conference circuit and otherwise. What's one thing that you wish more investors understood about the business that they don't today?

From an understanding standpoint, I think it's probably still related to the Signals business. Again, I think it's just because not many in our industry have a pure-play software business like we do, which is, again, why I think a lot of the theme of that Investor Day will be on the Signals franchise to really educate folks. I'd say that's probably the one aspects of the business.

Great. All right. Max, thank you very much for joining us. It's been a pleasure to have you.

Yes. Thanks for having me.

All right. Great. Welcome, everybody. Today, we have Prahlad Singh, CEO of Revvity. And maybe I'll just let you start. I mean, you did announce a small tuck-in acquisition this morning. Maybe I'll let you kind of explain what you bought, how it fits in your portfolio and maybe what it let you do that you couldn't do prior.

Yes. Good morning, Evan. Thank you for inviting us. I think as we've talked about, Human Cell Design is a great tuck-in acquisition for our reagents business, and it fits perfectly well with what we've 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. And 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 H 2Q, it sounds like things are generally in line with expectations. Life Sciences, maybe a little bit weaker than expected, stronger in Dx, but you also had some -- I think you also had some I guess you weren't able to fully meet demand on some of your high-content screening.

So maybe just walk us through the quarter and how it played out versus expectations.

Yes. I think 2Q, as we've 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.

Immunodiagnostic did very well. On the Life Sciences side, software was as expected as we had forecasted. Instruments on the platform side, we've got a very strong backlog. And on the reagent side, we were low single-digit growth.

So it's 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. I mean going into pharma biotech, I think it was down mid-single digits. positive ex software. I mean the commentary did seem to be a little bit more optimistic, I think, than -- or constructive than it has been in the past.

Are you seeing that the -- that you're having conversation with customers and where the budgets are actually turning into orders? And is this revenue -- is more likely to impact later this year or more into '27?

Yes. 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 sort of it brought through a start of the resurgence of pharma biotech after a prolonged period of time.

And 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. And I think we've seen that continuously over the past several quarters where the investment in pharma biotech is gradually coming back to what normal should look like.

And then I think it's going to continue to play out, especially now with the sort of resurgence and or the engagement that we 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. And we just have Bruker up here. And I figured I'd 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, 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 '28 as they look to train their models that they've been.

Yes, we don't believe so. I mean 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.

So 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. And I think this is -- as we've talked about, if you go back and listen to what we -- Max, Steve and I have been talking about from the beginning of this year at investor conferences in our 1Q call and our second quarter 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. makes me even more impressive. But you're right, you guys -- like I said earlier, you guys have been talking about this and kind of leading the discussion, I think, within the life science tools space.

So it's nice to see it kind of play out. I mean, sticking with that theme, high content screening was a really big part of the conversation on the 2Q call, I 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 you -- like we talked about earlier, you did have some capacity constraints, which I believe are just are pretty easily fixed by just adding more people. But yes, just tell us about what your -- what the funnel looks like there and maybe what that -- down the line, what that could potentially mean for reagents pulling through?

Yes. I mean, obviously, high content screening is a significant part of our platform business. It used to be around 25% or 1/4 of the business. And I think now it's about 1/3 of it. It's increased to about 1/3 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.

And 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 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.

And 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 you are starting to -- we are starting to see more of a funnel and pipeline coming from nontraditional companies, right, companies that are, a, in the public domain generating data for LLM models, CROs and of course, the traditional pharma biotech customers.

Helpful. Like we said, I mean, you guys have been talking about AI since 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 kind of the moment that this idea actually turned into orders and revenues for you?

Yes. I mean I appreciate that sort of the impact that was -- you were saying is sudden. But in our -- 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 nontraditional customers and inquiries coming in.

In my -- if you go back and listen to my 1Q earnings call, we actually spent about 10, 15 minutes talking about as to how this could potentially play a role in drug discovery. And then when we came to the second quarter, we actually started seeing that in concrete evidence in terms of it translate those inquiries translating it into orders.

And I think the resurgence was strong enough that these instruments, each one of them take about 10 to 12 weeks to make. So these are pretty complex instruments. So that's why you are sort of we saw more of a funnel which was big enough that we ended up with a stronger backlog than we have seen, I don't know, maybe even before COVID.

When we think about your broader portfolio, are there -- I mean we talk 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?

Yes. I mean we talk a lot about high-content screening, a, because of the sophistication of the instruments, and these are close to $1 million each, right? So they are big ticket items. But I think if you look at it from a drug discovery perspective, right, a researcher is looking at tissue, cell, in vivo, human cells, designs.

So sort of our focus has been how do we build a platform portfolio and then back it up with the reagents that those platforms will need so that you have the razor-razor blade model going on. So you've got the high-content screening platform. You've got in vivo imaging, which still plays a very important role. And on the reagent side, we've 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 sort of have the benefit of placing all these equipment today.

Got you. I mean just something came to me. Is there a reason that your high content screen, why is it open versus -- or would there be a benefit to having it so that like you have Illumina sequencer, you have to use this consumed -- I mean, 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. What is the thinking there?

I mean on the diagnostics 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 will be -- you'll have a tough time differentiating who is a Revvity employee and who is a bench researcher from the institute. And then 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.

And I think our goal is how do we build a workflow, full workflow that is convenient and easy for researchers to use. And then I think we -- both of them stand independently on the merit of their own basis.

Okay. Maybe going to A&G. I mean, I guess -- I mean, results there ex software, I think it was pretty similar to pharma biotech and I think up low single digits.

I mean, is this -- how much of this was driven by like ex U.S.? How much of this was U.S. And kind of any interesting tidbits you might be able to add around the A&G market?

Yes. 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's 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's 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 kind of below -- I think you have been doing strong double digits the past couple of years.

But the good news is the APV is low double digits. And so is that how we should be thinking about the business in the medium to longer term? Is this is a low double-digit growing business?

Yes. I mean that's what we have it in our LRP, and it's done better than that. I think we have it at 9% to 11%, if I'm not wrong, in the LRP, and it's grown 12% to 13%. So it's done better than what we have said. I think given that the majority of our software business is still on-prem, you're going to continue to have these lumpiness quarter-by-quarter.

But as you pointed out, Evan, if you look at the annual portfolio value, which is one way to look at what's 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 2 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 BioDesign at the beginning of the year, Xynthetica.

We are in the process of getting Signals AI out, and it's been just recently launched. And we've got LabGistics coming out, which is a key AI-based workflow. With these 4 key launches, I think the growth of the Signals business has just started. And then that's what I have said over the past couple of years.

All the investment that we've 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 maybe adding to that, I mean, these new products that you're introducing on the software side, I believe, are all SaaS only. And so as you -- can you kind of tell us where are we in the journey of going from on-prem to SaaS?

And then with these new products, if I'm correct, being SaaS only, is kind of the goal? Or do you think this is ultimately like 100% SaaS? And kind of what's the trajectory to be getting there?

Yes. I think we are somewhere between 32% to 34% SaaS right now. I mean, I think we will probably end up around 60 -- 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's 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. And then I think that also gives us an opportunity for incremental ways to look at revenue growth, whether it's through -- as AI comes into play, whether it's 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 lot of attention because it's been doing so well. I mean I think high single digits has been growing. I mean is this -- LRP is 9% to 11% also, I believe. Is -- when -- I mean, do you think we can get to those -- the low double digits in this business? And what's kind of been helping drive the strength there?

Yes. I mean I think, 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 the -- as I've said, the key for immunodiagnostics is autoimmune testing, in my view, is still in its nascency.

I mean it's still not in mainstream clinical medicine. You still have to grow through several hoops before you are able to see an autoimmune specialist. And I think that will continue to drive growth, especially as you move from standard ANA screening to looking at specific disease areas around neurology or nephrology.

There's a lot of undiscovered territory here, which is protected by IP, and that provides the opportunity for this -- 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. So I'm not sure I'm 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. I mean you said ex China. So what has China been doing in ImmunoDx? And then where -- when do we kind of lap those headwinds?

I mean I think it's -- right now, it's -- 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's 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 interim placements and you've had GEL. Maybe just 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.

Yes. I mean just to be clear, we are forecasting low single digit in the back half. And 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. And there are a lot of rare diseases now, which are starting to see the advent of therapeutics coming out for them, right?

Duchenne muscular dystrophy, spinal muscular atrophy and MPS II, these are starting to see therapeutics either get approval or being in the late stages of clinical trial. But 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 across major 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 set to expire middle of next year. Maybe just talk about maybe remind people exactly what you do there, how it's been going in England? And maybe how we should think about the continuation of that contract and when we might know about that.

Yes. I mean, 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.

And we've 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. I mean the partnership is going very well. We continue to do screening, and we will. And we are in discussions to see how we can prolong and then sort of extend this to adults or other avenues.

I mean, obviously, this is -- the government is prerogative and they go through their regular process of doing tenders and getting approvals, et cetera, for budgets. And we remain hopeful that we will be there for the long term.

But we've got other contracts and other partnerships with other countries and other institutes that we are continuing to explore. And in due time, we will -- those that are -- 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 be something...

It's similar to what GEL is based -- it's like doing newborn whole genome sequencing.

Right. Okay. And have any of those discussions or anything been made public?

We've got a lot of discussions going on, none that we have publicly announced yet.

Okay. Helpful. Okay. And then maybe just wrapping up on reproductive health. I mean, again, the mid-teens growth in the first half versus low single digit in the back half, what -- is GEL the main driver of that just as you lap that? Or are there other things that we should be?

Well, I think we had a strong -- I mean, as you pointed out earlier, with a strong instrument placement in the first half of the year and which we right now expect it 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.

So I assume part of this is software comps getting easier, but you also have some backlog in both instruments and reagents. So maybe just kind of unpack that for us and really what's driving that modest improvement in the back half.

Sure. I mean 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.

I mean 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 -- but in the third quarter, but better than what it did in the second quarter. And then 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.

So the more quickly we can install these equipments, get them validated, then the reagent flow through starts coming. So I think you will see that uptick continuing at a regular rate over the next couple of quarters. I think as I said, right, some of these instruments take 10 to 12 weeks each unit to be made. So you should sort of put that lag time in place.

I mean you did mention consumables taking some time to kind of flow through. Is there a way that you could frame the potential opportunity for -- I mean these are expensive machines. So I mean, how much do people typically spend on reagents or in a given year on these instruments?

Yes. I mean it's tough to sort of quantify it 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.

So it's tough to sort of quantify the reagent pull-through that comes from these instruments.

Okay. I mean I assume if you're spending that much money on, I assume it's meaningful, right?

I mean that's the point, because if you're spending close to $1 million on the instrument, you're 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's the one piece that I think we -- and we'll continue to talk about this for a couple of more quarters till it sinks in. Because recall, as I said, first, a research scientists focus would be only on the region of interest that is this drug candidate having the impact on the cell that I wanted to -- that we were hoping to.

And that was the area of interest they were looking at. But there is another now, especially with the launch of OptIQ, which we just launched, which has 4 cameras, right?

There is -- 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.

So 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. I mean it's interesting to say that. And so like I was going through my mind as you said that was I ask the question is, maybe you don't know exactly, but I mean in the past, were these instruments being constantly used?

And if not, like it sounds like this opportunity enables that where you're just going to be constantly running these machines because you're finally actually able to -- you're going to be doing new experiments.

You're not just going to be looking at one specific type of thing because you actually can analyze data now where you probably physically couldn't before.

I think the instruments were being used -- whether they were used constantly or not depending upon -- was dependent upon how busy the lab is, but not all the data that was being generated by the instruments were being used.

Got you.

I think it's 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.

But -- well, it depends, right? I mean not -- again, it depends on the lab the instrument, right? If I have a whole lot more samples than if I have only one instrument, -- the other benefit is.

Sorry, now you have another instrument maybe. That's where it comes, yeah...

Because remember, now you'll also have a whole lot more drug candidates coming because of in silico medicine, right? So this is actually going to end up being a validation bottleneck, which means that you'll, a, either have to get more real estate, place more instruments and do more screening because you have a lot more drug candidates.

And 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. And 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. And you guys had confidence in it.

People questioned your ability. But now you've actually raised the guidance twice this year. Part of it is tariffs, but also just good execution. And I mean, I think it's -- I think the margins -- I think the guide still -- I mean 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 4Q. I mean how should investors bridge that improvement into 4Q?

And what's the potential for further margin expansion, I guess, because you will have a headwind from the tariffs. So I mean, how should we think about that going into next year?

Yes. I mean, you raised a couple of very pertinent questions. 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?

I mean just to the point, Evan, you said we've raised guidance twice, even if there was no tariff tailwind, we would still have raised our guidance on margin. And 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 for starts bearing fruit, and we start seeing the impact of that in the third quarter. And in the fourth quarter, you will have your natural upsurge in volume that you see towards the end of the year. So I think we have a very high level of confidence in our margin story. And I'm just talking about what it is for 2026.

Beyond that, if we start seeing the -- getting back to 4% to 5% organic growth. So if you take the 20%, 25% bps out, you're still -- baseline is still 28.5% and you get to 4% organic growth, you get another 50% margin improvement.

And you get -- for our business, we get 40% incremental margin. So if we are in our LRP range of 6% to 8%, that gives you 75% operating margin improvement.

So that's why I've said we have -- 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's great to see you, and thank you, everyone, for joining us.

Thank you

Ladies and gentlemen, thank you for joining us, and welcome to the Q2 2026 Revvity Earnings Conference Call.

[Operator Instructions]

I will now hand the conference over to Steve Willoughby, Investor Relations. Steve, please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Revvity's Second Quarter 2026 Earnings Conference Call. On the call with me today are Prahlad Singh, our President and Chief Executive Officer; and Max Krakowiak, our Senior Vice President and Chief Financial Officer.

Before we begin, I'd like to remind you that today's call may include forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially from our expectations. Please refer to the safe harbor statements in our earnings release and to our SEC filings for a detailed discussion of these risk factors. We assume no obligation to update these forward-looking statements in the future.

Additionally, we will refer to certain non-GAAP financial measures during this call. Reconciliations to the most directly comparable GAAP measures are available in our earnings release. I'll now turn it over to our President and Chief Executive Officer, Prahlad Singh. Prahlad?

Thank you, Steve, and good morning, everyone. I'm pleased to report that Revvity delivered strong results in the second quarter with pro forma organic growth of 3%, resulting in total revenue being above the high end of our expectations. Our pro forma adjusted earnings per share of $1.41, an was well above the high end of our guidance due to better-than-expected underlying operating performance, tax planning timing and the unanticipated contribution of tariff refunds we received in the quarter, which Max will touch on more in a bit.

These results reflect the continued strength and resilience of our diagnostics franchise the third consecutive quarter of improving conditions across our pharma and biotech end markets, growing customer demand for tools that enable AI-driven science, and the continued momentum of our Signals software business. Given the stronger performance and our improved optimism for the second half, we are raising our pro forma guidance for organic growth, adjusted operating margin and adjusted EPS for the full year, which Max and I will provide additional detail on in a bit. Before I provide more detail on the operational progress we are making. I want to share a brief update on the status of the divestiture of our China immunodiagnostics business which we first announced last quarter.

We have now signed a definitive agreement with the buyer on terms consistent with our initial expectations and we continue to anticipate the transaction closing by the end of 2027. This divestiture is a deliberate strategic decision as China has represented a structurally more challenging environment for this part of our business of late and we are confident this transaction allows us to sharpen our focus on the end markets where our differentiated capabilities generate the highest and most durable returns for our shareholders. While our reported GAAP results will continue to include the contribution from this business until the transaction is completed next year. All of our non-GAAP and organic performance commentary and guidance are provided on a pro forma basis, which excludes the immunodiagnostics business in China that we have agreed to divest.

Now turning to our end markets. I'm increasingly encouraged by what we continue to see. The gradual improvement in demand from our pharma and biotech customer base that we began to observe in recent quarters continued into the second quarter, and we are now seeing tangible signs of a more constructive spending environment. In particular, we are seeing a definitive and progressively larger increase in orders directly related to AI, reflecting demand from both traditional pharma and biotech customers, as well as emerging demand from nontraditional customers that have not historically purchased from us. These organizations are building AI-driven drug discovery platforms and are seeking capabilities that sits squarely within Revvity's portfolio. That is why we are especially well positioned because AR may accelerate hypothesis generation, but those hypotheses still need to be tested, validated and advanced through real-world biological data generation, lab-based experimentation and software-enabled collaboration.

Together, this improving demand from existing customers and new demand from customers outside of our historical base contributed to a higher-than-normal level of instrument backlog exiting the second quarter, positioning us very well as we enter the second half of the year. While we have touched on this over the past several quarters, demand for our high content screening instruments, particularly our recently introduced new flagship instrument the Opera Phenix OptIQ remains extremely robust with continued double-digit growth year-over-year despite more difficult year ago track comparisons. Demand for high-content screening further accelerated during the second quarter with order velocity outpacing near-term production capacity despite dedicating additional resources as the quarter progressed to support customer demand.

As a result, while we may have left some further incremental upside on the table in the quarter, it positions us even better as we move into the third quarter and back half of the year. It is important to note that this build out by our customers of additional capacity will also result in future improvements in demand for our related high-content screening reagents. Because high content screening is commonly used by customers to both generate new data and to validate existing hypothesis, it plays an increasingly important role in AI-driven discovery workflows where Lam generated insights can be fed back into AI models over time. This acceleration in high-content screening demand is a tangible example of the AI adoption cycle I discussed with you last quarter, beginning to play out. At that time, I described how we expect AI to move from solely being in an infrastructure build-out phase to eventually a value creation phase where the real opportunity comes from generating, validating and translating new biological data.

We are now beginning to see that dynamic show up directly in customer behavior. As AI enables customers to identify and design, more therapeutic compounds and molecules that still need to be tested, screened and validated in the lab. That is where Revvity is especially well positioned because the need for high-quality biological data, physical validation and integrated scientific workflows placed directly to our core strengths. This concept where AI models become part of the experimental cycle itself, continuously learning from results suggesting next steps and compressing the time between hypotheses and insight, but importantly, generating more unique data than ever possible in the past, is increasingly being referred to by customers as a lab in the loop workflow. Revvity's instruments and reagents generate the data. Signals on manages and structures it and our recently released Signals AI capabilities and our newly introduced entropic MCP connector now allow scientists to close that loop in ways that was simply not possible before.

These examples highlight how Revvity helps power scientific intelligence as we support customers throughout this new discovery process, reinforcing why we are one of the best positioned companies in the entire industry to benefit from the AI-driven transformation of preclinical R&D that is only just beginning to take place. Against this backdrop, our Signals software business remains a critical part of how we enable customers to manage and apply scientific data across their workflows. In the second quarter, Signals performed in line with our expectations against a very difficult year ago comparison with organic revenue declining approximately 20% year-over-year. We continue to expect a return to strong double-digit growth in the second half of the year in our software business as its ACD continues to grow in the double digits. As you have seen from our many new product announcements so far this year, the level of innovation in this business is robust and has only begun accelerating.

Our large molecule workflow offering, Biodesign is now commercially available and beginning to gain traction. Our AI models as a service platform, [ Xynthetica ] began rolling out to initial beta customers last month and a novel workflow coordination layer offering, which spans discovery through manufacturing, logistics remains on track to be released later this year. In the meantime, we also recently launched Signals AI which embeds leading LLM capabilities throughout our signals platform, allowing users to leverage AI capabilities within the core platform itself where their proprietary data already exists. In early July, we also announced a new connector with Anthropic, enabling customers to use their data along with other outside programs and data sets directly within cloud and cloud science itself. These 2 new capabilities are complementary to each other, and both expand the functionality of the core signals platform, while creating greater stickiness driving increased retention along with adding new consumption-based revenue streams over time.

Finally, just 2 weeks ago, we announced a new initiative called Signals for start-ups which is a new commercial program designed to make our Signals platform accessible to even the smallest of biotechs. This allows these customers to adopt and incorporate our Signals platform with its predefined workflows right from the outset of their corporate journey, so they can more easily scale as their businesses take off. I look forward to sharing more with you on all the exciting developments occurring within signals at our upcoming Investor Day on November 13 in New York City. The strength across our portfolio is also reflected in our Diagnostics business, which again delivered exceptional performance. Overall, Diagnostics grew 11% organically in the quarter, a further step-up from the high single-digit organic growth we saw from the segment in the first quarter. It is important to highlight that this strong performance was broad-based and remains impressive, even when excluding the incremental contribution from our Genomics England sequencing contract which also continues to perform well.

The consistency and durability of this franchise continues to be a defining strength of Revvity's overall business model as both reproductive health and Immunodiagnostics performed well, driven by ongoing strength in newborn screening and strong growth in immunodiagnostics outside of China. Reproductive health again grew in the mid-teens and immunodiagnostics growth outside of China accelerated into the high single digits despite continued latent TB pressures. As it pertains to our ongoing corporate transformation, I'm proud of the progress we are making with strong execution in a number of areas. First, the integration of the recently acquired ACD Labs software business is progressing faster than anticipated, with early momentum in synergy realization and product interoperability across the combined offerings.

Second, we continue to drive our ongoing operational efficiency initiatives with implementation well underway. These initiatives will benefit us more here in the second half as well as into next year. We are also doing a good job managing our balance sheet as we generated significant cash in the quarter with exceptional cash flow conversion of our adjusted net income of 117%. In mid-July, we also paid off a EUR 500 million note we had coming due which we expect will result in our gross leverage being below 3x by the end of the year, and a net leverage approaching 2x overall.

Finally, I'm proud to share that we recently published our 2026 annual impact report. This report reflects the meaningful progress Revvity has made across our environmental social and governance commitments, including continued absolute year-over-year reductions in our emissions, improvement in our internal employee mobility metrics, and our first-ever disclosure of our material Scope 3 emissions, which will allow us to have our targets verified by SBTI in the coming months. The nature of our products inherently enables Revvity to make a meaningful positive contribution to society on a global scale. But we also remain committed to operating, innovating and creating long-term value in a sustainable way, while also providing attractive opportunities for our employees.

As we look ahead to the second half of the year, given the strong diagnostic trends we have seen so far, when combined with what appears to be continuing improvement in pharma and biotech end market conditions, we are now more optimistic compared to 90 days ago. Consequently, we are now expecting total company organic growth this year of 4% to 5%, up from our prior 3% to 4% outlook. We expect to be able to generate adjusted operating margins of approximately 28.7% this year. Due to the stronger organic growth we now expect for the year, combined with the impact of the tariff refunds we've received, which is being partially offset by incremental reinvestments we are making in our strategic initiatives, supply chain and in our people, which should allow us to capitalize on the end market recovery that we believe is now underway. This all results in our updated full year adjusted EPS outlook to now be in the range of $5.30 to $5.40, which is up $0.10 from our prior guidance.

So in closing, the second quarter reinforced that Revvity is in a strong and increasingly differentiated position. Our diagnostics business continues to perform extremely well with consistency and resilience, our life science end markets are showing signs of improvement, and the investments we've made internally over the last few years are beginning to bear fruit as we are delivering new innovations to our customers at an accelerating rate. We are extremely well positioned to deliver over the remainder of the year while capitalizing on the new opportunities presenting themselves, as preclinical science is redefined in the new AI world. I believe that the true potential of Revvity is beginning to be realized and shine through. With that, I will now turn the call over to Max.

Thanks, Prahlad, and good morning, everyone. We are clearly seeing improving momentum across the business which is evident in both our performance in the quarter and our stronger outlook for the full year. Both of our diagnostic businesses continued to perform extremely well, and improving activity from our pharma and biotech customers supported solid life sciences performance and increased backlog heading into the second half of the year.

As discussed, it is exciting to see tangible and accelerating signs of demand from customers tied to their increasing data generation needs as AI unlocks new ways to operate preclinical R&D labs. We are increasingly optimistic that not only is Revvity extremely well positioned to capitalize on the fundamental shift in how preclinical R&D is conducted but also that we are currently only seeing the very initial stages of that transformation. We continue to execute very well in the quarter from an operational standpoint as evidenced by our margin, earnings and cash flow performance, even when excluding the $16 million of tariff-related refunds we received in the quarter, which drove about half of the adjusted EPS upside, our pro forma adjusted operating margins were still above the 27% assumption in our guidance.

With what appears to be an improvement in end market conditions underway, we have chosen to reinvest about half of this onetime benefit back into our strategic initiatives, supply chain and people to ensure we are well positioned to capitalize on the opportunities we see emerging as we head into the second half of the year and into 2027 given the significant actions we've taken over the last few years to mitigate, and offset the various pressures we faced without having to resort to passing on material price increases to our customers. We are excited. We now have this opportunity to further invest in the business to drive even stronger performance over the longer term while still being able to deliver upside to our financial commitments for this year.

Finally, it was great to see that we executed a definitive agreement to divest our immunodiagnostics business in China on terms consistent with our initial expectations. With separation planning already well underway, we and the buyer are well positioned to complete the transaction by the end of 2027. Now turning to the specifics of our second quarter performance. As a reminder, given the pending divestiture of our immunodiagnostics business in China, all of the following commentary, and our updated guidance is provided on a pro forma basis, which excludes the impact of this business, we expect to divest next year.

Overall, we generated total revenue of $711 million in the quarter, resulting in strong 3% organic growth, which was slightly above the high end of our guidance. FX had an immaterial impact on reported growth and our recent software acquisition, ACD Labs, contributed approximately 75 basis points to growth which was in line with our expectations. As it relates to our P&L, we delivered strong operational performance in the quarter while also benefiting from the impact of tariff refunds. Overall, our adjusted operating margins were 29.3% in the quarter, well above our 27% outlook. While the majority of this outperformance was driven by the tariff refunds, operationally, our margins also came in better than we had anticipated.

Looking below the line, our adjusted net interest and other expenses were $22 million in the quarter, in line with our expectations. Our adjusted tax rate was 16%, a couple of hundred basis points lower than expected due to the timing of discrete items being realized in the quarter that were previously anticipated to occur in the fourth quarter. This change is just timing related as our full year tax rate outlook of 18% is unchanged. We averaged 111.6 million diluted shares in the quarter as we continue to benefit from our share repurchase activity over the last 12 months. Following the end of the quarter, in mid-July, we retired the EUR 500 million note we had maturing, which resulted in a meaningful drop in our gross leverage overall.

Our pro forma adjusted earnings per share in the quarter was $1.41 and which was well above the high end of our guidance due to the stronger top line, better-than-expected underlying margin performance, tax timing and the tariff-related refunds. To quantify the moving pieces for you. Approximately half of the upside in the quarter was from the tariff refunds, roughly 1/3 was from the lower tax rate we saw, which will have an offsetting impact in the fourth quarter, and the remainder was from the combination of stronger revenue and underlying operating margins. Moving beyond the P&L, we generated robust free cash flow of $184 million in the quarter, resulting in an outstanding 117% conversion of our adjusted net income.

On a year-to-date basis, we've now generated nearly $300 million in free cash flow with a conversion rate of 108% of our adjusted net income. Our balance sheet remains strong as we finished the quarter with a net debt to adjusted EBITDA leverage ratio of 2.5x. As mentioned, we retired our Eurobond in July and are still targeting a gross leverage ratio of below 3x as we exit the year. Following this recent repayment, our outstanding debt stack continues to remain very well positioned as 100% of our long-term debt remains fixed rate with a weighted average interest rate of 2.3% and weighted average maturity out another 6 years. I will now provide some commentary on our second quarter business trends, which are also highlighted in the quarterly slide presentation on our Investor Relations website. Again, these results are on a pro forma basis and exclude our immunodiagnostics business in China and are comparable to the guidance we provided 90 days ago.

The 3% growth in total company organic revenue in the quarter was comprised of 11% organic growth in our Diagnostics segment and a 3% organic decline in our Life Sciences segment. Geographically, Europe continued its double-digit growth. APAC grew in the low single digits, and the Americas experienced a low single-digit decline due to software comps and continued latent TB pressures. From a segment perspective, Life Sciences generated revenue of $359 million in the quarter. This was down 2% on a reported basis and 3% on an organic basis. From a business perspective, the decline in Life Sciences was driven by the approximately 20% decline in our Signal software business as we had expected due to contract timing and comps from a year ago. Outside of these comp dynamics, the business continued to perform well as its APV again grew in the double digits and ARR was in the mid-20s.

Life Sciences Solutions grew low single digits organically in the quarter with both reagents and instrumentation growing in that range as stronger instrument performance was held back by timing of shipments which is leading to the stronger backlog we have entering the second half of the year. From a customer perspective, sales in the pharma and biotech declined in mid-single digits due to difficult comp we had in our software business in the quarter. Excluding software, sales into pharma and biotech grew in the low single digits.

As software returns to stronger growth in the second half of the year, and as more of the instrument orders translate to revenue, we expect to see improved performance from this customer base over the remainder of the year. Sales to academic and government customers were down low single digits year-over-year due to software-related year-ago comparisons. In our Diagnostics segment, we generated $352 million of revenue in the quarter, which was up 12% on a reported basis and 11% on an organic basis. From a business perspective, both our immunodiagnostics and reproductive health businesses performed exceptionally well and grew above our expectations. Immunodiagnostics grew in the high single digits organically in the quarter with broad-based strength.

Reproductive health again grew in the double digits organically as it benefited from another strong quarter in newborn screening and from the incremental contribution from our work with Genomics England. Now moving to our updated guidance for the year. Again, our updated guidance is on a pro forma basis, excluding the business we are planning to divest as this is the most appropriate way to view the company and its performance going forward. Overall, many things appear to be moving in the right direction across the business. Right now is our organic growth, operating margins and EPS all came in solidly above our expectations in the second quarter, even when excluding the impact of the tariff refund. Given this momentum, we are now more optimistic about our expected performance over the remainder of the year as compared to a quarter ago. We now expect our organic growth for the year to be in the 4% to 5% range up from our prior 3% to 4% outlook.

FX is still expected to contribute approximately 50 basis points for the full year while the ACD Labs acquisition is still on track to add another 75 basis points to our revenue growth this year. We expect this to now result in our 2026 pro forma total revenue being in the range of $2.83 billion to $2.86 billion. We now anticipate our pro forma adjusted operating margins this year to be 28.7% which is up 30 basis points from our prior guidance. This improved outlook is due to 2 primary drivers. First, the impact from tariff refunds, partially offset by reinvestments we are making; and second, leverage from our stronger organic growth outlook for the year, of which a portion was realized in the second quarter. We continue to make good progress on our major cost initiatives and still expect their impact to be realized starting here in the third quarter as we have already received the majority of the tariff refunds we applied for in the second quarter. Any additional refunds we may receive are anticipated to be immaterial to our results overall.

We still anticipate net interest and other expense to be approximately $90 million and our full year adjusted tax rate assumption also remains unchanged at approximately 18% as the favorability we experienced in the second quarter was timing related, and is expected to be offset in the fourth quarter. We also still expect our diluted average share count to be approximately $112 million. This all results in us now expecting that our adjusted earnings per share this year will be in the range of $5.30 to $5.40, up $0.10 from our prior outlook. This $0.10 increase to our full year adjusted EPS guidance is roughly half from the net impact of tariff refunds, offset by planned reinvestment spending, and half from stronger revenue and underlying operating margins compared to our prior outlook as our full year tax rate remains the same.

For the third quarter, we expect our organic growth to be in the 4% to 6% range. Assuming FX rates as of the end of June and the incremental contribution from the ACD Labs acquisition, this puts our expected revenue for the third quarter in the range of $685 million to $700 million. We continue to look for approximately 29% pro forma adjusted operating margins in the third quarter which is unchanged from our prior outlook despite some incremental reinvestment spending now being planned. We expect net interest and other expense to be approximately $23 million and our adjusted tax rate to be 19%. This should all result in our pro forma adjusted EPS in the third quarter to be approximately 24% of our full year outlook.

In closing, we had a strong second quarter with increasing momentum as we head into the second half of the year. It appears that our pharma and biotech customers are beginning to return to more normalized patterns while increasing AI-related work is creating incremental demand which did not exist in the past. Our diagnostic business performance remains robust and software continues to grow its annualized portfolio value in the double digits with the return to robust organic growth starting this quarter. Our execution on our operational initiatives remain strong and our recent capital deployment and portfolio rationalization actions will benefit us over the longer term. As Prahlad mentioned, we believe the true potential of what Remedy has become is only now beginning to be realized. While we know that we have a lot of additional opportunity still in front of us.

With that, operator, we would now like to open up the call for questions.

[Operator Instructions]

Your first question comes from the line of Dan Brennan with TD Cowen.

Can you hear me all right?

Yes.

Terrific. Great. Maybe first question, I was hoping you can just -- congrats on the quarter guys. Maybe just unpack the Life Science business in the quarter and the outlook. So you referenced several times just instrument backlog. Kind of what can that -- how big is that? What can that contribute? And as we think about the outlook in the back half, you talked a lot about pharma and biotech demand getting better. I'm just wondering how we might think within your new guide, what instruments and reagents to in the back half?

Yes. So Dan, let me just give you sort of -- from an order perspective, we definitely started seeing an acceleration in orders as the quarter progressed. I would say starting 3Q from probably the strongest position that we have seen in terms of backlog we've had in the past 3 to 4 years. Obviously, there's been some timing of deliveries that were pushed into 3Q.

As you know, we launched OptIQ a few months ago, and it's one of the more complex instruments, and you can't turn these $1 million-plus instruments around quickly. So from that perspective, on the instrument side, we've had a strong backlog. But also on the reagent side, we've started seeing backlog build due to some larger screening-related orders, which won't get fulfilled until here in 3Q. So I think both of these are great signs though, of what is happening in the market now. Max, do you want to add anything?

Yes, I would just say for some of the numbers specifics, if you look at the second quarter performance from a Life Sciences perspective, we had positive growth in both our reagents and platforms business. I think as you look at the full year outlook, we are now anticipating an uptick in our platform's performance for the full year. Previously, we were assuming positive low single-digit growth for our platforms business. But now given the incremental commentary and performance from an orders perspective, we are increasing that to positive mid-single-digit growth for the full year. And so that's really, I would say, our updated second half outlook assumptions.

And the platforms business, that's the instrument side or that's the Total Life Science?

That the instrument side, that's correct.

Got it. Okay. And then maybe just a follow-up, just kind of moving over to Diagnostics, another really strong quarter, like obviously, ImmunoDX is keeping the momentum going. Just could you unpack reproductive health a little bit. I know that the initial guide, it looks like you guys were assuming a decel in the back half of the year. on that business, although the results have been really strong. So just kind of in the quarter, how big was Gel? And kind of what do you guys assume in the back half for reproductive health.

Yes. I would say, again, as you mentioned, Dan, reproductive health continued to perform incredibly well in the quarter. I think it's not only the contribution from Genomics in England, but our newborn screening business continues to perform extremely well. I think as you look at the first half versus second half split, first half, reproductive health was kind of in a mid-teens organic growth performance. I think as you look at the back half, no real change to our previous assumptions as we did anticipate that slowing down to the low to mid-single digits growth for the second half.

I think it's really a timing of 2 things. One, you start to pick up the gel comps year-over-year in the back half. And then two, it was a little bit of a heavier instrument placement cycle in the first half for that business, which obviously bodes well for us in the long term as those platforms or instruments will continue to get utilized over the coming years.

Your next question comes from the line of Vijay Kumar with Evercore ISI.

Prahlad, first one is on -- related to your comments on orders coming in from nontraditional customers. Could you elaborate on who these customers are? And does it change your LSS outlook in the medium term, just given it feels like something has changed here. And sort of like how do you tie this right, that optimism versus the second quarter performance when we look at your peers, life sciences in general be and it looks like you guys had some timing element impacting second quarter. Maybe just square the second quarter performance versus this optimism that you're expressing.

Yes. So let me break it down into a couple of pieces here, Vijay, which a great question. So I think let me start first on the trend. As we -- in response to Dan's question, as we said, we clearly saw an acceleration in orders as the quarter progressed. And from a backlog perspective, as I mentioned, it's the strongest position we've been in the last 3 to 4 years. Obviously, it's an issue of timing, and it's spilled into the 3Q. But I think the more important question is that we clearly are seeing a trend, which is a strong indicator of drug candidates that are now coming from creating -- being created by AI and as they move into the validation phase, customers are building out the infrastructure that they would require for data generation and for validation of these drug candidates.

In addition to our traditional pharma biotech customers, we are also now seeing orders coming directly tied to this AI data generation during the first quarter, which is now becoming a clear trend -- orders specific from AI customers who are building out these massive data sets, nonprofits focused on AI, pharma companies that are directly saying that they are now trying to figure out how this lab in the loop workflow model works. So there are -- it's not just one avenue that we could point to and saying that this is the strong pipeline, but there are several avenues that are open -- that have opened up for customers wanting to create this data.

That's helpful, Prahlad. And Max, maybe one for you on this EPS ratio it looks like you just carried forward the tariff refence rate, your organic expectations for the year were raised, why aren't we seeing a little bit stronger fall through to the bottom line?

Yes, Vijay. So I think as you look at the EPS guidance for the full year, again, we took up $0.10 at the midpoint. That $0.10 raise is half of the net tariff of reinvestments that we are flowing through for the full year. And then the other half is due to the incremental contribution from the higher organic growth for the full year. And I think when you do the math on the incremental margins there, you're right around 40 -- low 40s percentage wise, which is kind of right in line with our historical average.

Your next question comes from the line of Michael Ryskin with Bank of America.

I want to follow up on the Life Science Solutions performance. The life sciences results, especially in reagents. You kind of kept alluding to a regrow. But if software declined 20% by our math, it kind of comes down to the rest of that segment was maybe a 1% growth number. So I can understand some of the instrument backlog and timing there. But that reagents is kind of -- we kind of thought there'd be a little bit more acceleration as you go through the year.

Just a little if you could discuss that a little bit. whether that's competitive dynamics or if there are any timing effects there to sort of unpack the performance in the quarter and expectations for reagents through the rest of the year?

Yes, Mike. Look, I think as we look at the reagents performance, I think we remain incredibly encouraged by what we're hearing and seeing from our customers. I think as you look at the progression of our organic growth as we move throughout the year, the reagents business was low single digits here in the first half of this year. And then I think as you look in the third quarter, we expect a similar sort of low single-digit growth performance. but then we do expect a step-up in the performance in the fourth quarter, kind of exiting this year at a mid-single-digit organic growth rate.

And then maybe I'll ask a follow-up on Gel Genomics England. You kind of -- I think you made some similar marks of performance was good, but results would have been ahead even excluding that. It would just be great to unpack that. What was Gel in the quarter? How that trended? And just any expectations updated expectations for the rest of the year?

Yes. I think when you look at it from a genomics sequence standpoint, it came in line with expectation in the second quarter, so similar performance to what it was for the first quarter of this year. I think from a full year perspective, we now probably anticipate it being closer to $25-ish million of full year revenue for us, and then we expect it to continue contractually through the first half of this year. And as we have sort of previously discussed, we are in active discussions in terms of expanding that partnership, extending the relation the agreement here from a genomic sequencing standpoint. And I think we'll remain focused in execution of the partnership.

Your next question comes from the line of Puneet Souda with Leerink.

I'll wrap it in one. First of all, on the backlog, could you outline how much of that is high content analysis, Opera Phenix and related instruments. Obviously, those are the ones that are being utilized in lab and look workflow and bio FMs and foundation models that are being built out there. Could you maybe just elaborate sort of what's the visibility you have into that order book? And lastly, on the software side, what gives you the confidence in recovery in the second half? Maybe just talk to us about the integration of Signals with the leading LLM and other alpha fold, and other programs and other tools that are meaningful in the marketplace today for the scientists.

Puneet, lot to unpack here. Let me at least hopefully, I recall on the -- starting with the -- on the platform side. We really -- most of what we sell on the instrumentation side, our noncommoditized products and instrumentation, which are, as you pointed out, high content screening being the primary one of them. Now obviously, these are big ticket items, and they are complex to make and they take time. But we have a very good and strong and robust pipeline on that, as I mentioned, and some of that did spill into 3Q.

In regards to the software side, the second half, the confidence comes from, obviously, the contract renewals, which are up for renewal in the second half. So it's a natural progression of the bumpiness that we see quarter-over-quarter in the organic growth, and that's reflected in our guidance. And in regards to our partnerships, as you saw, we announced the connector with Cloud. We announced the launch of Signals AI, and we've got LabGistics coming to 4 in the second half of the year. So we have a very active pipeline. We continue to try and work with all LLM providers and those that are developing models and put them on the Signals platform because that is the natural place for all of these 2 reside and to be used by researchers and research scientists for the work that they are doing.

Your next question comes from the line of Josh Waldman with Cleveland Research.

Can you hear me?

Yes, we can.

Sorry about that. I wondered if you could comment on more on the types of products you're seeing benefits from customer AI investments. And then I guess, do you think this is something that really kind of only impacts instruments? Or are you starting to see reagent pull through? And then I guess any way to start to frame the potential magnitude of the opportunity? For example, if you look at the magnitude of order growth on the Opera Phenix, is that a good framework? Or are there other kind of ways you're starting to put bookings around the AI infrastructure buildout opportunity for you guys?

Yes, Josh, I think the way to look at it is you look at some of our industry peers that went out a few days ago. Those that are at the more front end of developing drug candidates, right? As you see the growth coming into them, that sort of builds the pipeline for those drug candidates that will need to go into the validation phase for testing, for looking at the cellular analysis. And I think with OptIQ, the new NPI that we launched, it's sort of the instrumentation itself gives a whole lot more data in a much shorter period of time.

And with using AI, you are able to get a more comprehensive look at the cellular analysis and the performance of these drug candidates as to how viable they are. for the therapeutics that they are being looked for. So from a trend perspective, I think we sort of are right behind what you are seeing from some of the earlier companies that are now seeing that growth phase come in because of AI. And I think that's why I'm saying we are at the very early innings of this growth trajectory that has just started.

And the -- Sorry, Josh. Just to -- your second part to the question was ordering agents. And the reagents is a follow-up that as soon as these CapEx are put in place, the natural requirement will be for the reagents that we go through these flow through because without reagents, those instruments are not going to be of any use anyway.

Got it. Okay. And Prahlad, do you think it's still too early to start to again, kind of put bookings around how impactful this could be for you guys, I guess, be it either on the instrument side, the initial instrument build-out or the reagent pull through?

Honestly, Josh, I think it's so early, and it is -- the growth spurt is just at the very beginning here. So that is very going to be very tough even for us to put our arms around it and try to say what the magnitude and scope of it is.

Yes, it makes sense. Okay. Fair enough. And then, Max, I mean, it sounds like pharma biotech is improving more broadly. I guess, is this something that you guys have factored into your guide? I mean do you think this hits revenue in '26 or more likely to be a '27 driver?

Yes, it's a great question. Look, I think maybe I can take a second just break down the different pieces of the updated full year guide. So if you look at the full year guide for us, we've got 4% to 5% organic growth now overall, which is up 100 basis points from our previous outlook. I think when you look at the different segments, we are anticipating Life Sciences to grow low single digits for the full year and Diagnostics to go high single digits. Within the Life Sciences, I already talked through sort of our back half assumptions on Dan's question. But we are anticipating now a stronger performance across both reagents but also on the instrumentation side of things. within Life Sciences.

I would say the market assumptions there are still what we're seeing today. That's not anticipating a further acceleration of end market environment. So if this momentum to build and improve from today, that's not what it is assumed within our guidance on the Life Sciences side.

Your next question comes from the line of Luke Sergott from Barclays.

I kind of wanted to talk about more about the software side. And so you continue to build out the software suite and you have all these different applications and different customer bases and end markets. Can you talk a little bit more about the cohesion that you're trying to build in there so that some of these pieces can start talking to each other. I know it's not going to be a perfect like Microsoft Office suite because of the way that the industry is structured. But any other type of investment or launches that you guys would come up over the next year that you can have this stuff have greater adoption and more synergy?

Luke, I think Signals AI and the Anthropic Connector are actually start of the complementary capabilities that we are building to sort of expand the functionality and value of the core Signals platform in itself. For example, Signals AI now allows customers to use leading capabilities of LLM directly within the signals environment. And that can be done now without even moving the proprietary preclinical data outside of the platform.

So I think that's the benefit that this core signal platform brings to forth and there are many such examples with the connector that allows the leveraging of cloud capabilities within the data sets of the platform. And I think as logistics come to 4, that allows our research scientists to use that, again, as a connector across different workflows that they are working on. So I mean I could go on and take up all the time, but I think the capabilities that we are building allows for the vision of signals being the core functionality that one will need to use in the new AI world.

Great. And then a follow-up there on the AI side. It seems like things are starting to pick up there. We hear a lot about the LLMs. Can you just give us a sense of how many AI customers you guys have right now that are either foundational model or LLM plug-ins, however you want to cut it, but then -- and give us a sense of what that pipeline or funnel looks like, so we get some idea how that continues to build?

No. Luke, I'd say, look, as we mentioned on the previous one, we are at the very beginning of this AI momentum. And I think it will be a little bit too early to call to start sizing up how much opportunity I think we're incredibly excited about what we're hearing from customers. I think as we've reiterated, we believe Revvity is perfectly positioned to take advantage of this across the instrumentation reagent and software pieces of our portfolio and so I think we'll continue to be focused on executing it and delivering for our customers.

Your next question comes from the line of Jack Meehan with Nephron Research.

I wanted to follow up on Josh's questions and was just looking for a little bit more commentary around the high content screening business. So you talked about orders outpacing manufacturing capacity there. I was wondering if you could just flag like what was the growth rate of that business? And what are the plans to expand manufacturing capacity for it?

Jack, look, I think as we look at the high content stream as you mentioned, this is one of the areas that's benefiting the most from the sort of AI drug discovery build out here. So again, for this quarter, it was double-digit order and organic growth performance for that business. I think as we look in the future, we expect again to continue to have momentum around our high content screening.

I do think when you go back and look at some of the areas that we are looking for investments on some of the tariff refunds that we did receive in the second quarter, the capacity build-out relating to both, I would say, the screening instrumentation, but also from a screening reagent standpoint and making sure we're ready to meet the building customer demand is one of the areas we'll look to invest in.

And then on the diagnostics side, just as I was looking at the quarter, newborn -- or, I'm sorry, reproductive health was clearly better than I was expecting -- understand the gel dynamics, but can you talk about what you're seeing in terms of newborn screening in terms of birth rates and menu expansion? Like how durable is performance you're seeing there?

Yes. So look, I think even when you look at things from a newborn screening side, it continued to perform well in the period, it grew double digits. As I mentioned, and one of the other responses, there was some instrument timing. We did have some additional instrument placements in the first half. But if you even look at just the reagent growth performance on newborn screening, and what is still a declining birth rate environment, reagents grew high single digits for our newborn screening business here in the second quarter, which was consistent with its performance in the first quarter of the year as well.

And we're on a trend that we really expect to continue over the back half of this year. I think when you look at the drivers of the reagent performance, it's really a combination of, one, again, continued geographic expansion in the areas that didn't have screening program; and two, further menu adoption from those countries that are already running screening programs today.

And just to add to that, Jack. As Max said earlier, the more of these instruments we place the more it bodes well for the future of the newborn screening business because they eventually end up using our reagents on those, and that's why the instrument placements happen. And congrats, by the way, for kicking off Opera.

That is all the time today we have for questions. I will now turn the call back to Steve for closing remarks.

Thank you, Karina, and thank you, everyone, for this morning. I know it's a busy morning, and so we look forward to catching up with you later on today and in the coming days. Take care.

All right. Good morning, everyone. I'm Evie Koslosky, the life science tools and Diagnostics analyst here at Goldman Sachs. I'm joined here by Prahlad Singh, the President and CEO of Revvity. Thank you so much for being here.

Maybe to kick us off, you had a solid start to the year, growth driven by both Diagnostics and Life Sciences. Maybe start by walking through some of the key takeaways from the quarter and how things have progressed since then.

Yes, good morning. Just as we look at the businesses, as you said, we had a great start to the year. On the Diagnostics side, our reproductive health franchise continues to do very well. Immunodiagnostic to ex China was performing well across other geographies. On the Life Sciences side, [indiscernible] single, our reagents business grew low single coming back as we've said now for a couple of quarters. Academia and research did well. So it was more broad-based, and we've started seeing signs of recovery, as we pointed out during the earnings call across geographies and across end markets. So we feel very optimistic as to what's in front of us.

Great. And sort of the other major announcement on your quarterly call was the divestiture of your China immunodiagnostics business. So maybe digging into some of the implications there. That was a drag on growth, but also on the cash flow side as well. So maybe now that you strip that out, how do you think about plans for reinvesting this cash flow? And any particular areas in the remaining portfolio that you would focus it on?

Yes. I mean, again, as we mentioned during the earnings call, this is -- and we expect to close on this towards the end of 2027. And as you said, it was a drag blow both on growth and on cash flow. So we don't expect to have a huge cash influx coming in from the acquisition -- from the divestiture. But we would typically use it whatever comes in for typical either share buybacks, which is probably our primary target right now or look at tuck-in acquisitions that would fill any gaps we would have in our portfolio. But primarily, Evie, I think if you would see us, we will continue to be as we have been aggressive on our share buyback.

Yes. And maybe touching on some of the logistics of the divestiture itself. You signed a letter of intent. Can you talk through your confidence in the level of communication that you have with the management-led buyer group? And then when we should expect to see kind of a definitive agreement on the deal?

Yes. As we've said, and as you mentioned, Evie, the -- we know the buyers. They are the management team that have led and created this business over the past few decades. We have a very high degree of confidence in their ability to run the business and for us on closing the deal. Timing-wise, we hope to sign in the near future. And when we do, we'll sort of publicly announce it, but it is progressing very well.

Great. And shifting to Diagnostics and maybe specifically reproductive health, which I think had a very healthy growth rate, low double digits. So I understand there's -- you had the Genomics England contribution, you had extra selling days, but there's also some Revvity specific drivers there. So maybe walk us through the moving pieces and then how durable the above LRP growth is in reproductive health.

Yes. I mean, again, let's start from the LRP piece that you pointed out. The reproductive health business has done much better than what we have had it in our LRP model. And this is despite significant pressure on birth rates that we've seen across geographies. So I think inherently and fundamentally, what we have put in place in terms of geographic expansion, as we know, there are nearly 100 million newborns today that are still not screened and menu expansion with more and more emergence of therapeutics for rare diseases, there is a desire and intent to have a screening program for those diseases. SMA, DMD, MPS-II, there are a whole host of these rare diseases, which require screening programs. So that has really been the engine of growth for the reproductive health business.

In terms of the extra big, that reproductive health really didn't contribute towards that. All of that came from the reagent side of the business, so -- on the Life Sciences reagent side of the business.

And I think within newborn screening, the guide does imply a little bit of a step down in growth from 1Q. How much conservative is baked into that assumption? And why shouldn't we see the strength kind of continue in that market?

Yes. I mean I think as you pointed out, maybe there is a level of conservatism in the guidance that we have for the reproductive health business. And as we pointed out in the first quarter, it is not just in the reproductive health business. If you look at the way we've guided for the year, we don't have any ramp in the second half at all. So I think we feel very comfortable and optimistic about the way we've guided for the year. And the reproductive health business, if you look at it, it's not that the growth that came in, in the first quarter was from any one-offs or any big CapEx deals that we did. So we feel, I would say, very optimistic about the way we have forecasted it.

Great. And you touched on the geographic expansion a little bit earlier, but maybe dig into that a bit more. Are there any particular areas where you're finding success in penetrating new markets?

Yes. I would say, globally, we are seeing markets wherever newborn screening programs are going. And even in there, it is a twofold approach. Areas where newborn screening today has been adopted, they are taking on newer disorders which were not screened. U.K. and France being 2 primary examples where the number of disorders that they are screening for has now increased. Italy has always been at the forefront of screening, type 1 diabetes that they have launched. That's the only country right now that screens all newborns for type 1 diabetes. Among emerging geographies, Indonesia, India are 2 countries where we are starting to see an adoption of newborn screening at the more basic level, TSH, PKU, basic disorders that and probe that country start screening for.

Great. And moving to the ex China immunodiagnostics. This grew mid-single digit in 1Q. Is there a framework we should think about moving forward on the path to ramp back to the LRP target of 9% to 11%?

Yes. I think obviously, China had been a drag on that business for some time. But if you look at other geographies, right, I mean U.S. is a primary example, as we said, it was 5% of the revenue for EUROIMMUN when we acquired the business, it's around 15% to 20%. Rightfully, it should be around 40%, 45% of revenue coming from the U.S. So there's a lot of traction in this geography, Latin America, Asia, parts of Europe that the incidence of detection of autoimmune diseases is still in its nascency. And that's where I think the EUROIMMUN business and overall immunodiagnostics portfolio will do well.

I think the one piece that has been a bit of -- has dragged it a bit has been the Oxford Immunotec business with latent tuberculosis, as you've heard, whether it's around immigration policies or around testing for latent TB has seen a significant slowdown. So until that comes back up and ramps up, that will be the one, I would say, the opposite side of it where it will be a bit of a drag on the portfolio.

Got it. And I guess within the U.S. IDX market, what are the gating factors for driving further penetration there, maybe excluding TB? I think in the past, you've talked about additional automation. So maybe where are you in terms of commercializing the high-throughput system? And how should we think about the penetration ramp in the U.S. over time?

So the automation and the high throughput system is for latent tuberculosis. So as that comes on board, obviously, that will help get some more market share on the latent tuberculosis side. But outside of that, it is just us getting more and more assays through the system, whether it's through the FDA regulatory bodies or putting LDTs out in the marketplace. So on autoimmune side, there is still a lot of room and leeway for growth in the U.S. marketplace. On the latent TB side is where we would need to get the high throughput system into place.

Okay. And shifting to the Life Sciences side of the portfolio. We saw low single-digit growth in 1Q, which is a slight acceleration off of the 4Q exit rate. Maybe talk through some of the moving pieces in that portfolio. How much of an impact did the extra selling days have versus underlying improvement of what you saw in the end markets?

Yes, I would say the extra selling days were probably about 1% of the growth that you saw. But I would say 50 bps of it was also a drag from the snow and the storm days that we expressed. As you know, this is a run rate business. So every day that reagents are not used is a day lost. So I would say it was overall a 50 bps net improvement -- net benefit from the extra selling days. I would say, again, if you recall, for us, what [indiscernible] even academia and research [indiscernible] of life and coming back, which is actually a very good sign.

Yes. Digging into the biopharma biotech piece to start, we've seen improved funding in recent quarters. This can take a while to translate into performance for the tools companies, maybe less so on the consumable side. But it feels like a lot of that funding is actually focused on clinical stage assets rather than preclinical. So what are you hearing in the market? And maybe help us understand how should we should think about these recent funding improvements in biotech?

Yes. I think it's -- just to bifurcate the question, you're absolutely right. When the funding that you are seeing primarily tends to go into clinical side of it. And that's where you see the initial benefit of it, both in terms of the actual clinical trials, but everything else that supports that piece to get new therapeutics out for approval and commercialization. But overall, I think these fundings eventually requires that you start filling the funnel back from an innovation perspective through discovery and development.

And I think that's where, if you recall, what we've said is over the last couple of quarters, we are starting to see signs of that coming back clearly, as you've seen in our performance on both in the fourth quarter and even in the first quarter. And this is where eventually, whether it's big pharma or biotech or even mid small pharma biotech, the innovation engine will have to take off.

And then you mentioned an improvement in the academic end market. I guess what are you seeing from those customers? The budget -- the NH budget seems to be slightly higher. Are you seeing that start to flow through? And what's the activity level at the academic customer?

I would say still at the initial stages because in the first quarter, there was still a level of nervousness that is this permanent? Or is there going to be another wave or another policy change that might impact there. So as you would naturally expect, there is a level of nervousness and edginess in that customer base, but that eventually is starting to subside. And then whatever the new normal is, is essentially taking place. I think that we started seeing signs, I would say, of [indiscernible] research, but signs of growth in pharma biotech. That's the way I would differentiate between those 2 end markets.

Okay. That makes sense. And another piece of the Life Sciences portfolio that's been particularly strong for Revvity is the China piece. We've seen a lot of funding go into that market from MNC pharma sort of entering the region. I guess why is Revvity well positioned to capitalize on this growth? And what are you seeing from the biotech investments there? And maybe how you think about the durability of that market in China?

Yes. I mean, China, if you look and you compare our performance in the Life Sciences side of China versus our peers over the last even 2.5, 3 years when the market has been quite depressed we've done exceedingly well. And I think that is where the differentiation in our portfolio shows up. And I know we are talking about the China, but even about China as a region, but even in other geographies, that is where we are going to start seeing the benefit of the portfolio that we have.

If you look on the platform side, we sell non-commoditized specialty instruments. We are also on the reagent side. Once we get into a program, whether it's for screening or validation purposes, they are very sticky. So they are there for several years. And it is a big turn for a customer to swap from what they are using to another reagent or an assay. And that's the benefit that we are seeing in terms of how the growth of our reagents business is taking on and also on the Life Sciences platform side.

Great. And then another kind of key growth driver you mentioned on the earnings call was GLP-1s and the impact those have on your instrument portfolio. Can you remind us how your portfolio is positioned in that market?

Yes. I mean, again, it comes down to screening and validation. Once a customer puts a screening program, I mean, the hurdle rate to get into that program, whether it's from a validation perspective or a screening perspective is high. But once you get into that program, and GLP-1 is a classic example, as GLP-1s are being explored for newer indications, they are already on the screening pathway where our assays and our platforms are being used. So that stickiness is where we see the advantage coming from. And as more and more -- and then GLP-1 is just one example, whether it's around GLP-1s, neurodegenerative diseases, or nephrology. These are areas where there is a lot of stickiness to our reagents, and that's the benefit that we will see earlier on, I would say, than compared to our peers.

Okay. Okay. And shifting to the Signals business. I mean, you've had a lot of recent innovation in the signal software side. Maybe highlight some of the recent and upcoming launches and then timing of when we should expect those to actually flow through the P&L.

Yes. I mean I think as Steve likes to say, either one of these NPIs would be one of the biggest launches that we would have in the history of that business. And having 3 of them in the same year is going to pay very rich dividends over the next several years for that business and Revvity as a whole.

I mean starting with BioDesign, that was essentially adding features to our Signals One portfolio in the large molecule area where we did have a gap. And I think this fills that gap on the biomolecules and the large molecule side. Xynthetica, which we announced the partnership and launched of it earlier in January, will be launched in a couple of weeks. So that launch is coming up. And that brings the ecosystem of 200-plus biotech companies that TuneLabs and Lilly brings to the table.

And then the last one is LabGistics that essentially provides an integrate AI integrated workflow into Signals One, seamlessly bringing in from discovery to filing to taking it on to the clinical, one unique enterprise-level platform that is able to have all of this ecosystem for drug discovery to commercialization.

Great. And then BioDesign is one it was very recently launched, and you mentioned that it kind of fills this unmet need. I guess what has the early feedback been on that launch? And what are you hearing from customers?

Yes. I mean I think if you recall, Evie, the way we develop our NPI portfolio, especially on the signal side, is through user groups that we hold 3 to 4 times a year. So BioDesign is an ask from our customers. So the features that they are is something that they have been trying and playing with for several quarters even before the launch of it. And then I think early beta customer feedback has been pretty positive. But typically, it takes a couple of quarters or a few quarters before you start seeing traction. And it all comes down to contract renewals or when those features are added on to the new contract for the customer.

Okay. And the ACD/Labs acquisition, which closed in January, are there any areas of the software portfolio where you feel another small tuck-in acquisition would make sense? And how do you balance the decision to build versus buy?

Yes. I mean ACD/Labs is a perfect example of a tuck-in for the Signals portfolio specifically where it was an add-on. It provided a lot of synergies, both from a revenue perspective and from a cost perspective as it seamlessly integrates to our offering today. We have a great team of talent that came along with the acquisition. And not only are they going to help with what currently ACD/Labs offers, but also the newer pipeline. And then I think as we look for opportunities if something come along that fits that mold, whether it's in Signals or in Life Sciences or Diagnostics, we will continue to be acquisitive.

Would there be like a ranking of where you would be focused on more? Is it more when the deal comes along?

I think more than ranking, we really tend to look at strategic fit, unmet need and financial profile. I think we sort of rank more based on those 3 elements than which company it is.

Okay. Okay. In AI impacts, thinking about your software portfolio, what's the risk that pharma companies try to develop some of these software solutions in-house? And then thinking about that investment from a pharma biotech perspective, how quickly could they replicate these internally using AI? And would it even make sense for them to do so?

Well, let me start by saying Signals is in every pharma and biotech environment today from a research perspective. It is the plan of record over the past several decades in terms of where all the research is done, where all the data is collected, where all the analysis is done, but more important, where all the information is housed for QA, QC, nomenclature, IP filing, regulatory filings. So I would say that it is the system of record.

Now would you be able to eventually move to a point where some of the mundane and more routine work can be done in an automated fashion? Absolutely. But I think the real benefit for our customers, which our customers also fully appreciate and you realize is how do we take advantage of what automation and what AI does to bring it into the ecosystem and work and collaborate together so that the output improves both productivity and efficiency for our customers. And I think that is where our focus is on working with all, if not some of the automated automation companies.

Yes. The other question we get from investors often related to AI is how pharma companies change their behaviors in the preclinical R&D settings in terms of wet lab work versus in silico. And I think an emerging theme is the need to actually build out data sets to fuel AI models. So what instruments in your portfolio to be most exposed to this trend? And how do you kind of see that playing out over the longer term?

I mean we've talked -- we and others have talked about this lab-in-the-loop model, right? When you start with in silico design, you take it to the wet lab, you do the validation post discovery and then take that data, come back to the in silico design. I think our portfolio is the best suited, and I'm not just saying because of where I sit. But if you think about it, right, on the in silico side, you've got Signals that sort of is the plan of record in terms of the platform where in silico designing would be done.

As these compounds come and become lead candidates, they would go through the validation phase in discovery and into validation. This is where high content screening is required. As you go into animal studies, you would require in vivo imaging, you require reagents to do the research and then move to screening and validation. This is where our reagent portfolio fits well. So I think the way the portfolio is designed and unlocking the value of the portfolio is what the new process as in silico designing becomes an integral part of drug discovery will start playing a role.

And is the data set build-out something that will be continuous over time? Or will it get to the point where you have your data set and you can just keep going back to that same set? Or will it be something they have to continue to do over time?

I mean I think it's like akin to saying that in the next 5 years, drug discovery will be done and then there'll be no more drug discovery. So it's not going to happen, right? There's always going to be new diseases, unfortunately, and there's always going to be new discoveries both for existing diseases and newer diseases. So I don't think innovation is going to stop. I think what definitely will happen is that it will be much faster, much more efficient, much more productive. So I think the way to envision it is that there'll be a whole lot more therapeutics coming out at a faster pace, but that will require where the bottleneck will end up being is around the validation of these compounds.

As these lead candidates move from early discovery to lead candidates to IND candidates, that's where the validation probably. Or another way to think of it is that the amount of the funnel, as I keep saying, might get narrower, but the stem of the funnel will get broader. So you'll have a lot more compounds moving into the development phase that will require more and more of our reagents and instruments.

Okay. And when we talk about some of these trends, I guess, what are you seeing today with customers? Or like are these more conversations that you're having as they talk about their plans longer term?

I think some of the initial growth rates that we are starting to see in our portfolio is a direct result of this. As the discovery, I would say, probably towards the second half of last year, when there was a new way of thinking and more of certainty around MFN status and sanctions and tariffs and all of that. And as the discovery engine started to take traction again, we've started to see this new behavior coming into play, where this is now another integral part of discussion around drug discovery and development.

Okay. Maybe shifting to guide. You updated the pro forma organic revenue growth. It's 3% to 4% now for the full year, but that kind of implies a step down from what you saw in 1Q. So maybe remind us of some of the moving pieces as we move throughout the remainder of the year? And then anything on cadence that you would call out?

Yes. I think we did close to 6% pro forma in 1Q, and we've said 2% to 3% in the second quarter. I mean I think the best way to think of it, Evie, is that we have no ramp-up in the second half. And then I think that's what should give significant level of confidence to our investors and shareholders as to how we have structured and guided to the second half. You talked about reproductive health as to how much conservatism you might expect to be baked in. Our reagents business is starting to do very well in pharma, biotech and academia research is coming back. And our platforms business, again, grew mid-single digit in the first quarter, and we expect that to continue to do well. So I would say rather than skepticism, there is a significant way of optimism on our side and then some level of conservatism that we have built in our forecast.

That's great. And on the margin piece, the divestiture helps, but you also had some underlying margin and EPS improvement as well in the first quarter, excluding the divestitures. So how should we think about the margin cadence throughout the year? And I know there was an impact in extra selling days in 1Q. So I guess, should this actually help you later in terms of ramp?

Yes. I mean I think we did 24% in the first quarter, which was better than what we had expected. And this was despite, I think, 50 bps from FX drag and 100 bps coming from the extra week that we have, which would not be there in the second quarter. And I think we are at 27% in the second quarter. And in the second half, we are 29% and 33%. I think we'll start seeing, as we have said, the impact of the cost measures that we have taken in the second half of the year. And in the fourth quarter, it's just the normal volume growth that you see typically in the business towards the end of the year.

So again, we feel very comfortable with the margin profile that we have now, especially as we look at it pro forma. But I think more importantly, as we move into 2027, that is also going to be a significant driver of continued margin growth into 2027 and beyond.

And that's like operating leverage kind of on some of these end markets coming back.

And the calendarization that we would naturally see from the second half of this year on to the first half of next year. And because these are structural costs that are coming out of the system, whether it's from rooftop optimization, integration activities that are going on in the company. And we'll start -- and these will be lasting -- these will have a lasting favorable impact on the margin.

Okay. Great. And you touched on it a little bit before, but the capital deployment strategy and balancing between share repurchase and M&A moving forward, how do you view the M&A environment? And then yes, balancing with your aggressive share repurchase strategy?

Yes. I think if you were to ask me today, we still feel that share buyback is the best opportunity that we have in the marketplace. But at the same time, as we've said, we will continue to keep our eyes and ears open. And as long as there is a strategic fit, a good financial profile and something that fills a gap in our portfolio, we'll continue to do more tuck-in acquisitions similar to the ACD/Labs acquisitions. But outside of that, we've got the bond that we have to pay off, which we plan to do in the second half of the year and be acquisitive around share buyback.

We feel very strongly there is -- today, there is no better opportunity than buying our shares back given the growth profile that we have for this year and beyond. I mean if you were to -- all we need is for the pharma market to come back to normal, and we are already in our LRP range. If you look at our Signals business, if you look at our reproductive health business, we are already in our LRP range. It's the Life Sciences piece of the portfolio. With pharma biotech coming back, we feel very good that we will soon be in the LRP range of what we have projected.

Yes. And I guess touching on the pharma biotech piece, I mean, we've seen the funding improve, but is there anything else that you think has fundamentally changed in that market? I mean I think as we look at the tools growth rate broadly, not even just for Revvity specifically, but there's a concern of is this market something that is fundamentally changed now post-COVID. I guess how do you kind of see the moving pieces of what we should look for of this coming back?

I think there were 2 or 3 things that really hit pharma biotech post-COVID. One was that there's a significant amount of overbuying that happened during the COVID phase. I don't think people really appreciated the amount of money that was spent during COVID in pharma biotech. Then we had the interest issue, inflation issue, CapEx spending drying up, MFN. I mean there were so many acronyms of 3-letter word, policy changes that were happening, then tariffs hit. So we've had -- pharma biotech has had to endure a significant amount of external policy changes that have impacted the end market.

But at the end of the day, as these therapeutics are going off a patent cliff, right, if the pharma biotech industry is to succeed, survive and we, as a human generation, we need the therapeutics, and that is only possible through innovation. And I bring it back to -- if you look at it, whether it's through in silico design or drug discovery and development. Over the past 5-plus years, we've done a really good job assembling a portfolio that fits that infinity-in a-loop model, which we've talked about for a couple of years now. And now it's -- we're glad to see that it is coming to fruition and is actually playing out as we had hoped for.

And that benefits us because not only do we have the software component of it, but even on the reagents and instrument side, the non-commoditized portfolio that we have, fully leverages this opportunity. So we're really excited with the portfolio we have, and we hope to be able to demonstrate the value of it in the next quarters.

Great. And then one thing you have talked about in the past is building out some GMP capacity as well. So how do you view that shifting over time and your ability to kind of stay with these programs in the early stage through the clinical?

Yes. I think the way to think of it, it is one of the growth drivers. It's one of the ions that we have in the fire because, as you know, to get on to a GMP program, it takes a few years for it to get on. But once you are on, not different to our reagent side of the business, they become very sticky and lumpy. But I think as we get into late 2027, 2028, we are going to start seeing the benefit of that.

But that is one of the irons that we have in fire. The extended number of disorders on reproductive health the application of automation and machine learning on our Life Sciences platforms business, all of these are growth drivers, the partnership opportunities that we have with pharma biotech, whether it's around T1D with Sanofi, or TuneLabs with Lilly or what we are doing with on population genomics with U.K. and GEL as an example. These are all growth drivers that add to the baseline that we have on our LRP. So there are significant opportunities above that provide upside to what we have put on the LRP.

Great. And just I guess with a couple of minutes we have left, what do you feel investors are most underappreciating about the Revenue story today? I mean you walked through some of these growth drivers, but fair to call out a couple as probably most exciting over the next couple of years.

I think, Evie, I talked about them just 30 seconds ago. But I think the component that really is -- we feel not fully appreciated is our ability to be execute. I think as we've brought this in, we are still a very new company. And our investors are looking that will we be able to execute consistently and flawlessly. And I think we've shown that over the past several quarters, and we will continue to do so.

If you look at our cash flow conversion, I would contend that it is at least the best, if not amongst the best in the industry. If you look at our organic growth rate this year, it is in the top quartile. On the margin profile, we probably will have the significant margin improvement that we will see this year that will continue in the next several years. So in each of these components, I think you will see the benefit that bringing together this portfolio will have on our financial profile.

Great. All right. Good place to end. Thank you so much.

Thanks, Evie. Thank you.

[Audio Gap] Diagnostics team. And for our next session, we're joined by Revvity. Pleased to be joined by Steve Willoughby, Senior VP, Investor Relations, ESG and Risk. Steve, thanks for being here.

Thanks, Mike. Thanks for having me.

Thanks for having a longer job title than I do. Maybe just to kick things off, maybe some opening high-level remarks on how the quarter played out relative to expectations, you just reported results a couple of weeks ago. A lot of things to dig in there, but maybe give us sort of like an overview to get us started.

Sure. Obviously, I think we had a pretty good quarter overall from both the top line perspective, margin perspective and obviously, bottom line, too. So we have started to see some early signs of some end market improvements. And I think maybe some of that could be a little bit more company specific to us for some reasons, which I'm sure we'll get into.

But overall, it was a good quarter, and I would say it progressed well throughout the quarter. Obviously, I would say the big news for us here in the first quarter, too, that we announced was the strategic decision to divest our immunodiagnostics business in China. I'm sure you have more questions on that as well, but that was a very key thing that we announced on the first quarter. And I think we also have a prudent outlook for over the remainder of the year, too, which we talked about quite a bit, too.

Okay. Yes, we'll dive into all of that, but maybe let's start on the China ImmunoDx divestiture. You said you announced that in the quarter. You haven't actually sort of formalized the deal yet, but you still -- you now stripped it out of the numbers. Can you walk us through the impact that, that has on 1Q, the impact that has on the full year guide, how to think about taking that out of the model and how that flows through?

Sure. So this was about 6% of revenue last year. We projected it would be about 4.5% of revenue this year. We talked about how by removing this business, it has about $0.20 of EPS dilution, which is offset a little bit by some better execution in our full year guide. From a straight financial metric perspective, it's going to improve our organic growth this year by 100 basis points. It's going to improve our adjusted operating margins this year by 30 basis points.

But I think we also put out an 8-K last Tuesday. And I know last week was a very busy week for investors. And we provided 5 different documents for investors to parse through. One of those was an 8-K. And in that 8-K, we provided a couple of different disclosures that might be of interest to investors. One is a pro forma balance sheet. And so you can see what the business looks like at the end of the first quarter, excluding the China Diagnostics business.

And I think if you take a look at that, one of the things you'll see is that this business had a pretty meaningful drag on our working capital and so consequently, our DSOs and our free cash flow conversion. Max made a comment on our earnings call on how by excluding this business -- if you were to have excluded this business in our 2025 results, despite it only being roughly 6% of revenue, it was a 3 percentage point drag on our free cash flow conversion. And so our free cash flow conversion would have been even better last year than it otherwise was. So a number of different ramifications by making this decision.

Okay. And then in terms of the rationale for the decision, you talked about it for a while, it has been a headwind. It seems like it's a relatively clean cut. what sort of -- there are other ways you could have gone after it. You could have tried to shore up the business, you could have tried to reinvest in it, you could have tried to partner with someone. Or as you said, there was a point that naturally the headwind would have gone away anyway. Why did you decide to go this route of all those?

Yes. So this is a business that has been facing, I would say, consistent mid-single-digit pricing pressure annually over the last maybe 6, 7 years. Obviously, a year ago, we then were -- have been negatively impacted by volume pressure related to DRG. And I would say that this market has become increasingly unpredictable, which is making it more difficult to plan in the future.

And when we look at what has been discussed, not yet implemented or officially announced, but there are some other potential headwinds on the -- coming in the future related to some of these lab reimbursement unification policies, which, again, we don't know the final details yet, but very well could have further pricing pressure on this business.

And we have taken a number of actions to offset the pressures we've been facing over the last 6 or 7 years, including the volume pressures we've been facing over the last 12 months. But I think the amount of change we would have needed to do to remain competitive with further significant meaningful pricing declines, we would have needed to invest significant amounts of capital, time, effort, management focus into this business, I would say, to remain as competitive as we are today, not necessarily improve our competitiveness, but remain where we are today.

And ultimately, given the relative size of this business, roughly 4.5% of revenue, a little bit lower percentage of our profits. And I think it's also important to note, too, that this is not a primary growth driver for the business going forward. Our LRP, which is 6% to 8% organic growth, within that, we're only assuming low single-digit growth for this business in China. And so this was not what is going to be driving the performance of the company going forward. And so the level of investment that would have been required, we ultimately decided was not worth it for us. And so we look to find a partner to divest it to.

Okay. And then you talked about $0.20 dilutive to EPS this year. As you said in some of those other documents, you talked about, again, the deal is not signed, but you talked about a range of possible cash proceeds from the deal. I think it was I think, $140 million to $200 million depending on different conditions...

Earn-out, yes.

Right. So if you look at that, I mean, it looks like it will still be meaningfully dilutive in '27 as well. So how did that factor into your go/no go decision?

Yes. I mean we will -- obviously, we haven't given guidance or anything like that for 2027 yet, and we expect the deal to close in the latter half of 2027. So any proceeds that we would receive, I wouldn't expect them to have a meaningful impact of us redeploying those to offset dilution in 2027. But I think this really is going to allow us to set up to really show -- be able to really demonstrate the potential of Revvity much clearer where the drags on this business has been a little bit masking some better underlying performance. And we will continue to obviously work on our cost efficiency programs. And if top line growth starts to come back a little bit more, that certainly helps from a sales leverage perspective as well.

Okay. And on that point that the drag has been impacting sort of the rest of the business and the optics of the rest of the business, any implications on ImmunoDx outside of China in terms of will this impact your investment in your [indiscernible] areas? Or the other question I've got is, are there other pruning of the portfolio you could do? Is this step one? Or is this really just a onetime?

This is -- I would say this is a onetime thing. I mean the immunodiagnostics business outside of China is doing great. It's continued to grow high single digits, low double digits, very strong growth continuing in the U.S. It's really, I would say, the policy-related impacts that are a little bit more specific to this one region that are having a headwind on the business. So the immunodiagnostics business elsewhere is doing very, very well.

Okay. So let's talk about the rest of the business, like you said, you did about 3% organic in 1Q, but pro forma for ex-China ImmunoDx, it was 6%. It's a very solid result. Can you talk about the moving pieces that you saw there, sort of what draw that -- what delivered that 6% hit?

Sure. So a couple of moving pieces in the first quarter. Every -- the way our fiscal calendar works, every 6 years, we have an extra week of selling days, and that predominantly just really impacts our reagents. And so the extra week impact was in line with our expectations. It added about 100 basis points to total company organic growth. However, about half of that or 50 basis points was -- we had a headwind from the winter storms in January and early February.

So net-net, the summation of the extra week and the winter storms is maybe about a 50 basis point contribution. On a year-over-year basis, we also had the incremental contribution from our Genomics England contract, which was all incremental here in the first quarter, so that helped a bit. We had very strong performance in reproductive health, even excluding the Genomics England business. And then we saw mid-single-digit positive performance in Life Science instruments. We had positive low single-digit growth in life science reagents. And so we did start to see a few things start to get a little bit better than they have been over the last going on 3, 3.5 years now.

Yes. Let's dig into some of that Life Science performance, both on the instrument and the reagent side. You've had a little bit more mixed results last couple of quarters. You have had pockets of strength, high content screening, some of the reagents businesses. Is this trends of -- is this enough that you want to call a stabilization in the market or recovery? Or is there still a lot of noise in the market?

I think we're still being a little bit more cautious in wanting to make a call on, hey, we're through the thick of it here and things are really starting to turn. With that being said, we had -- in the first quarter, we had positive growth for instruments from both academia and pharma biotech, which was the first time in 3 years that instruments grew in both those end markets. For example, in the fourth quarter, we had positive growth in instruments from academia, but not pharma biotech.

I think another thing that's sort of interesting is we have been talking about, and you mentioned it high-content screening has been growing double digits now for 1 year, 1.5 years. Here in the first quarter, we started to see the instrument performance spread out a little bit. And so for example, about 1/4 of our instrument portfolio is in vivo imaging. And in vivo imaging was, I would say, dramatically impacted last year from some of the pressures we were seeing in academic markets.

And while in vivo imaging still was softer in the first quarter, it wasn't anywhere near as soft as it has been for the last 4 or 5 quarters. And so that started to move in the right direction. I think also interestingly is another roughly 1/4 of our instrument portfolio is automation and robotic liquid handling, which has been, I would say, under pressure for probably the last 4 years coming out of the pandemic, which, if you recall, those types of businesses really benefited during the pandemic.

And ever since then, they've been softer. But we started to see some of that -- those businesses return to growth here in the first quarter. So it's moving beyond just high content screening. One other piece that I think is interesting as it relates to instruments is, again, we've been talking about good performance in high-content screening. And that was really with a, I would say, our high-end system being fairly dated in terms of how long it's been out of the market.

And in the middle of February, we announced the launch of a new Opera Phenix OptIQ system, which is a new flagship system for us. And so we've been doing -- performing well in this business with, I guess, you could say, an older product. And now we have a brand-new fresh product, which provides much greater automation and sensitivity, too. So very optimistic. I would say the last piece on it is in terms of the durability, we are assuming mid-single-digit growth in instrumentation continues here into the second quarter.

For the time being, we're not assuming that continues over the second half of the year. We are assuming that growth in instruments, and I would say in many other parts of our business slows in the back half of the year in our current outlook. But we'll see how the next couple of months and next couple of quarters ultimately play out.

Okay. Well, I mean, on that point, can you talk a little bit more about the funnel. So for example, in vivo imaging, automation and liquid handling, you talked about broadening from high content screening for those areas as well. If we think about the business between diagnostics and life sciences, so you cut down to life sciences and you cut down between reagents and instruments.

And then you cut down into each of those 4 buckets, you end up with a relatively small dollar amount for each of them. So we always wonder like is this 1 or 2 pharma companies buying 2 or 3 systems, and that's the difference between low single and mid-single, right? Is it broad-based? Is there enough there that you're calling a trend? And sort of what's the visibility in those?

Yes. Like I said, we're not calling it a trend as of right now. We're assuming that this -- in our guidance, we're assuming that instrument slows all the way down to flattish actually in the fourth quarter. But no, I mean, it's -- we sell a variety of instruments anywhere from $20,000 to $1.2 million. I would think the -- around -- our average ASP is probably $350,000, $400,000. So there's always a little bit of variability quarter-by-quarter.

Okay. Okay. Just while we're talking about high content screening, automation and liquid handling, maybe this will be a good chance to jump into some of the AI discussions. A lot of different ways Revvity is exposed, and we can talk about that at length. But maybe one of the things we're wondering is pharma rolling out AI and how it's impacting their spending behavior, what they're focusing on, what they're prioritizing.

We'd imagine that a lot of it has to do with more data generation and therefore, areas like high content screening and automation of liquid handling would be beneficiaries. Is that what you think is happening there? Sort of would you draw any correlation between the 2?

Yes. I think it's very important to understand with Revvity is and this is, I would say, at the highest level of the company is what we do within life sciences and is different than many other publicly traded companies in our space. We overlap with various companies, but the specific products that we sell are a little bit different than others. And I think that differentiation can also -- there's different drivers of demand for different products. And over the last couple of months, there's obviously been a lot of talk about AI and how AI could or is likely to impact various companies and various businesses.

And we've obviously been talking quite a bit about how we think AI and the emergence of AI -- sorry for my microphone, the emergence of AI is likely to be a benefit to our business and potentially meaningfully over time, depending on how things play out. I think our business maybe has seen a little bit better trends right now than some of the other -- some of our peers because we really -- if you think about what our products are used for, whether it's our consumables, our instruments, our software, we're really -- our customers use our products to do novel science to do something new or different.

And I don't know what's going on with the mic here, but -- and so our product -- our customers are using our products to do new science. When you think about AI, you need novel, unique data. And so I know that there's been a lot of talk on AI potentially disrupting preclinical research. But if you actually think about what our products are used for, we help generate new data. And so we think that there could be some meaningful tailwinds. I think right now, what we're seeing is probably some initial signs of AI data generation starting to impact demand.

I think we're also benefiting from some other specific trends. We mentioned a few of these on the earnings call, like GLP-1 research has been benefiting parts of our businesses over the last 1.5 years. I think some of the non-animal methodologies, if you think about things like organs-on-a-chip, when companies are working on developing organs-on-a-chip, they need to validate what they're creating and that it works. How do you do that validation? High content screening. And so I think there's a couple of other specific things going on as well.

Okay. That's on the instrumentation side. Let's pivot a little bit to software, Signals. You've had a lot of updates there. You've seen really good growth in this business in the last couple of years. And now in '26 and beyond, you're really excited about a number of new launches there. Could you just talk about that? Still sort of early, but what initial feedback, interest -- response we're getting from pharma?

Okay. So we have 3 major new products coming this year. We announced LabGistics a few months ago. That's going to launch in June. BioDesign, we announced shortly before our last earnings call. BioDesign is actually launching next week at a major Bio-IT conference. And then at the end of the year, we're going to be launching LabGistics, which is an AI-first workflow offering that we think is going to be unique in the marketplace.

These are, as I mentioned, some of the most important new product launches in the history of our software business. And when you think about software launches, they typically take 6, 9, 12 months before the revenue starts really ramping. And so we really haven't factored in much, if any, revenue contribution from them this year. I think it will be more of a 2027 phenomenon.

I think that the initial discussions with customers are obviously ongoing. I think the trade show next week will be very important in talking with customers and also not just customers, but also other, I would say, partners that we could be working with, too. So yes, it's progressing as expected, but the launches are still to get in customers' hands still a little bit yet to come.

Is pharma developing any of these solutions themselves? Or are they entirely relying on third-party vendors like you?

Think about what our Signals platform is. Our Signals platform is -- think of it almost like an ERP. It is the software that is used on a day-to-day basis by preclinical R&D labs to set up experiments, document experiments, collaborate with the colleagues, report out. It is where the data is created and stored and shared. And what we are doing with these offerings is we're basically making it easier to utilize AI by the everyday scientists within their workflows. And so we're building the connections to anybody and everybody's AI models or systems, LLMs, so you can use all that capability right with where all your novel proprietary data is already created and sits.

Yes. I think a lot of the debate that we've had with investors and companies in terms of how AI gets adopted and used by pharma kind of takes it from where it is now or maybe where AI and what drug discovery look like a couple of years ago prior to AI revolution and what it could look like in the final state and whether that final state is a year from now or 5 years or 10 years from now, but we'll be leveraging AI to process data to develop drugs faster.

Where I think there's a lot of confusion and uncertainty is that transition curve, right? Like how is it going to be adopted over what time? Is there going to be a slowdown at first and then a pickup? Is there going to be a broad pickup -- increase in investment? So anything you can say there in terms of the pharma companies that are sort of at the forefront of adopting this, what steps are they taking? Are they reducing headcount? Are they reducing wet lab? And then with the idea of picking them back up on the back end, sort of like what's that transition process? Because I think there's a fear that could be painful.

Yes. I mean, Prahlad, our CEO, touched on this a little bit on the most recent earnings call and how we think we're positioned. But if you're familiar with the concept of lab-in-a-loop, I think customers are increasingly looking to figure out how They can create their own lab-in-a-loop. And this is the idea of -- because of AI, you're going to have more drugs and more compounds developed. And so there's just going to be more things invented that then need to be work through the preclinical workflows and validated and tested before you go into clinical trials. So I think there's going to be more things coming through the system.

And then because of AI and the capabilities of AI, when you start to go work to test and validate, you're going to take that data and feed it back into your AI models. And that knowledge and then the AI models are going to be able to essentially uncover new and different things that we might not have been able to understand otherwise. And it's going to allow you to refine your drug more and more times than ever possible in the past.

And that's this lab-in-a-loop that everyone is talking about. If you think about what our products are and how they're used, I don't know of a company that is better positioned to benefit from as customers adopt their lab-in-a-loop. We have the automation. We have the robotics, which you need as you have higher and higher volumes. We provide the high-content screening, which generates a lot of the data. We have a lot of the consumables that are used within this process as well.

And so it's one of the reasons why over the last few months as we've been getting a lot more questions on AI and how AI is going to impact things. I know there's been a lot of fears over AI. And to your question, too, displacing things. We think that the most likely scenario that there ends up being a bottleneck of demand in the future where -- particularly at the validation stage, where you're going to need more instruments, you're going to need more automation and robotics and obviously drive potentially more consumable demand, too.

Okay. Just on the topic of some of your own software solutions like LabGistics, you talked about it takes time to ramp, no revenue -- no meaningful revenue contribution expected in 2026. Can you talk about some of the other dynamics? You talked about the result in the first quarter, but 2Q, you've got a really tough comp there. Just talk us through the pacing this year in terms of the comps, expectations for software as you go through 2026.

Sure. So software is 9%, 10% of revenue. It was up mid-single digits in the first quarter. If you recall, we had phenomenal performance in the second quarter of last year. And so because of very strong comps as well as just normal contract timing, we're anticipating the software business from an organic growth perspective is down 20% in the second quarter. However, based on contract timing and comps, we anticipate this business will then grow in the mid- to high teens in the back half of the year.

And as a reminder, for software, given the contract nature and the multiyear contracts, we typically have very good visibility on this business, too. So it's one where we're expecting it to be roughly mid-single digits for the year overall. I think that is -- what's interesting about that is -- so that if you're up mid-single digits, down 20% in the second quarter, puts the first half at down high single digits.

Then let's just say mid-single digits or so -- or sorry, mid-teens or so positive growth in the back half, which obviously is an acceleration. In the first half, the overall company grew approximately 4% is what is assumed in our guidance. Our guidance for the year is 3% to 4%, which obviously then would imply a slowdown in the second half of the year. And we're assuming a slowdown in our guidance and our assumptions despite software improving somewhat meaningfully. And so the other 90% of the company, we're assuming slows somewhat meaningfully in the back half of the year.

Yes. You already touched on the assumption for Life Science instruments being a little bit softer in the second half. Any other moving pieces there, whether it's reagents or more on the diagnostics side?

Yes. Reagents, we have growing low single digits for the year, but I would say also at the lower end or around flattish for that in the fourth quarter as well. I think another key piece is reproductive health. Reproductive health had an excellent first quarter, even excluding the contribution for Genomics England, which the contribution from Genomics England also did better than we had anticipated.

But our newborn screening business still grew high single digits in the first quarter. And we're assuming that grows low single digits over the remainder of the year. We'll see -- again, there was nothing in the first quarter that was sort of onetime in nature or some large contract. It was just, I would say, the culmination of a lot of good commercial execution between geographic expansion, menu adoption, new products, all coming together to lead to high single-digit growth in newborn, but we have taken a more cautious assumption over the remainder of the year, which we'll see if we're proven wrong or not.

Okay. So rolling all that together, you talked about some of the more conservative assumptions in the second half. As we're exiting 2026, 3Q, 4Q, if there is a little bit of upside there, for the full year, like you said, 3% to 4%. How does that carry forward into beyond in an ex-China DX world?

Yes. Obviously, we can't -- I think we talked about software. Software is only going to grow mid-single digits this year. The APV for software, the annualized portfolio values, continue to grow double digits. So ultimately, the APV is effectively what we will average in terms of growth over the coming years. So at some point, that will improve, whether it's going to be next year or not, we'll wait a few more quarters to share that.

We talked about the new products and the new products not really providing material revenue on the software side, it's still starting in next year. So I think about that as well. And then we need to see what happens with the life science end markets. Do the pharma, biotech and academic end markets continue to modestly improve? Do they stay where they are? Do they improve more materially? I think some of our peers are assuming more material improvement in market conditions over the remainder of the year, which if that occurs, that would be -- obviously be great and not factored into our current assumptions.

Our LRP is 6% to 8% growth. And I know the last couple of years have been extremely challenging for the industry. Our confidence in our LRP has not changed. And it's one of the reasons why we have become so aggressive on share repurchases over the last couple of years is there have been a number of different headwinds for the industry, but we don't believe that the underlying market fundamentals of our industry have changed. And so as our stock and our multiple has come down, I would say we've been aggressively opportunistically buying back stock because we don't think that this is going to last forever.

I mean on that point, let's talk about capital deployment a little bit. Like you said, you're not going to get the proceeds for the divestiture for over a year, maybe 1.5 years, but you still have a balance sheet is in pretty good shape. Leverage is healthy. You just touched on share buybacks. Do you see more opportunities here? And can you talk about the pros and cons of that versus M&A or maybe other moves?

Sure. We were pretty active in the first quarter in capital deployment. We bought back $86 million in stock. We completed the acquisition of ACD/Labs right around $70 million, another small software tuck-in acquisition. From a capital deployment perspective, the most immediate thing in front of us is paying back -- paying off this $500 million Eurobond which is maturing in the middle of July.

So given the weaker dollar, it's almost $600 million, and we plan to pay that off. And so we will knock that out here in 2 months from now. And then as we start to look in towards the back half of the year and into 2027, I think our capital deployment proceeds will be -- I would think they would be fairly balanced between opportunistic share repurchases, but also we continue to have a pretty active M&A pipeline. I would characterize it as largely focused on tuck-in acquisitions.

Okay. And along the lines of what you've done before in terms of technology...

yes, really. Focused in software and consumables.

Okay. Maybe just the last couple of minutes, any closing remarks or sort of our standard question is, what do you feel is underappreciated? What do you think is misunderstood? Or what do you think that -- what message would you like to leave investors with?

Sure. I think the thing that is most maybe not appreciated or misunderstood is, we went through this dramatic transformation during the pandemic. And coming -- during the pandemic, we did 11 acquisitions, then subsequently, we sold 30% of the company. And then we became Revvity 3 years ago, almost to the day. And ever since then, right, it kind of coincided with pharma biotech end market slowing down.

And then you had obviously, the academic pressures, incremental pressures in 2025. So the entire time we have been Revvity so far, we've had pharma and then academic end market pressures. We have not been able to show investors what our potential actually looks like. And I think one of the things that is most exciting for us is not only differentiated organic growth, which I think we have been showing over the last couple of years despite the depressed market conditions, but it's really our incremental margins.

And when you -- when we start to show a little bit better organic growth, I think you will start to see industry-leading incremental margins shine through. And the driver to our incremental margins is the fact that for the vast majority of our products, we don't need to add a lot more people in order to grow. And so we will get tremendous SG&A leverage once we're able to generate a little bit better top line growth. And so I think that is the thing that is -- and I get it. We haven't been able to show it yet, and it's been 3 years. And so it's still a little bit theoretical, but I think we're getting closer and closer to having that come through.

Okay. Great. All right. That's a good point to end it on. Thanks, everyone, for coming. Steve, thanks so much for being here. Really appreciate it. Thank you.

Ladies and gentlemen, thank you for joining us, and welcome to the Q1 2026 Revvity Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Steve Willoughby, SVP, Investor Relations. Steve, please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Revvity's First Quarter 2026 Earnings Conference Call. On the call with me today are Prahlad Singh, our President and Chief Executive Officer; and Max Krakowiak, our Senior Vice President and Chief Financial Officer.

Before we begin, I'd like to remind you that today's call may include forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially from our expectations. Please refer to the safe harbor statements in our earnings release and to our SEC filings for a detailed discussion of these risk factors. We assume no obligation to update these forward-looking statements in the future.

Additionally, we will refer to certain non-GAAP financial measures during this call. Reconciliations to the most directly comparable GAAP measures are available in our earnings release.

I'll now turn it over to our President and Chief Executive Officer, Prahlad Singh. Prahlad?

Thank you, Steve, and good morning, everyone. I have several important developments to discuss today. First, I'm really excited to report that Revvity delivered strong first quarter results with 3% total company organic growth, demonstrating the resilience and strength of our business. Our adjusted operating margins came in at 23.6%, which was above our 23% outlook. These results are a good start to the year and position us well to achieve our full year expectations, which Max will update you on in a bit.

The better-than-anticipated revenue and margin performance in the quarter led to our adjusted earnings per share in the quarter being $1.06, which was solidly above the $1.02 to the $1.04 outlook that was implied in our guidance.

I next want to highlight a transformative strategic decision we have made that will accelerate our growth trajectory, improve our financial profile and allow for even more focused investments. Following an extensive review, we have decided to divest our immunodiagnostics business in China, which represented approximately 6% of total company revenue last year. This decision reflects our commitment to focusing resources where we can generate the highest returns for shareholders going forward.

The health care market in China, particularly diagnostics, has faced persistent policy-induced headwinds that have dramatically impacted both customer demand and pricing dynamics. Unfortunately, we see these challenges continuing over the medium term.

To maintain our position in this space, it would require us to make substantial investments, including fully localizing manufacturing, supply chains and regulatory capabilities. This would require meaningful capital allocation, resulting in a deprioritization of other higher potential return initiatives available to us.

Rather than deploying material dollars and management attention to address the structural challenges in the China immunodiagnostics market, we are choosing to concentrate our efforts on business areas where we have clear competitive advantages and see healthy growth trajectories. This is an intentional strategic allocation of our resources towards higher value opportunities that will drive and further improve our future performance. In fact, this selective approach is being validated by our performance in other parts of our China business.

For example, our Life Sciences business in the region, which was larger in absolute revenue dollars last year than the immunodiagnostics business we will be divesting, continued to perform well with reagents growing solidly above our overall reagents performance last year. We anticipate a continuation, if not acceleration, of our strong Life Sciences performance in China as we move through 2026, demonstrating our ability to succeed and grow meaningfully in China with the right products, market positioning and appropriate policy backdrop.

We have signed a letter of intent with a local management-led buyer group for the purchase of this business and expect to reach a definitive agreement within the next 2 months, which would include our retaining a minority interest in the new company. The transaction is anticipated to close by the end of next year, allowing time for the buyer to establish local manufacturing capabilities and obtain necessary regulatory approvals.

Until closing, we will continue to report the financial impact of these operations, but will exclude them on a pro forma basis to provide clear visibility into our ongoing business performance.

The financial benefits of this planned divestiture are meaningful. On a pro forma basis, China will now only represent approximately 8% to 9% of our total revenue with approximately 7% being Life Sciences. If you were to exclude this business, our pro forma organic growth in the first quarter would have been 6%, while our pro forma adjusted operating margins would have been an even better 24% overall.

We expect this change to improve our 2026 total company organic growth by approximately 100 basis points and enhance our operating margins by approximately 30 basis points. This move reflects the removal of a lower growth, lower margin business that has been a significant drag on our cash flow conversion over the last several years and was also consuming disproportionate management focus and capital resources. More importantly, this move further supports our long-range plan, which calls for 6% to 8% organic growth and double-digit EPS growth.

As it pertains to our updated pro forma guidance for 2026, which now excludes the immunodiagnostics business in China, we are now looking for organic growth of 3% to 4%, adjusted operating margins of 28.4%, and adjusted earnings per share of $5.20 to $5.30, which includes a $0.20 reduction related to the planned divestiture, offset by $0.05 of benefit from improved operational execution throughout the year. This move will result in a more focused business with cleaner financial metrics that better reflects our core growth drivers.

Turning to our end markets. We saw a modestly improved pharma and biotech spending environment in the first quarter, which led to positive low single-digit year-over-year organic growth from these customers. This was the strongest year-over-year growth we've had for reagents and instrument sales to this customer group since the first half of 2023. While customer behavior continues to remain somewhat measured as customers work through budget cycles, we are seeing early indicators that we believe should lead to future improvement.

On the academic and government side, there have been some promising developments from a budget and policy perspective, which also bodes well as we look ahead. I'm encouraged by the positive mid-single-digit growth overall in the first quarter from our academic customers. And in the U.S., we also saw positive growth from these customers for the first time since the second quarter of 2023. So while we are pleased by the first quarter trends in this end market and recent policy developments, we remain mindful of the world we live in today and how quickly policies and regulations can change. Consequently, until we see a bit more consistent performance from both our pharma and academic customer bases, we plan to remain prudent with our forward-looking assumptions across each of these end markets.

As it pertains to diagnostics, we had a fantastic quarter within reproductive health as it grew in the low double digits organically overall. This was driven by a combination of continued success in our newborn screening business despite continued challenging global birth rate trends and a better-than-expected contribution from our Genomics England contract.

Within immunodiagnostics, we saw challenging conditions in China as anticipated, while the business outside of China performed in line with our expectations. During the first quarter, we also continued to demonstrate strength in our ability to drive innovation, a consistent priority of ours. In our Signals software business, we introduced Xynthetica in December. Our AI models as a service platform that serves as a secure marketplace, connecting computational capabilities to wet-lab research.

Last month, we introduced BioDesign, our cloud-native molecular design platform for biologics development. Upon its official launch at a major industry trade show next week, BioDesign will be the only cloud-based offering of its type, addressing a critical need for molecular biology teams developing the next generation of antibody, cell and gene therapies. Then towards the end of this year, we'll introduce LabGistics, a novel AI-first drug discovery to drug development workflow offering, rounding out an impressive year of software innovation that demonstrates our ability to rapidly bring new capabilities to market.

In our instruments business, we have been highlighting to you for several quarters that we have been seeing stronger demand for our high-content screening portfolio, driven by increases in GLP-1-related research, new approach methodologies, including organ-on-chip development work and data generation for AI model creation and training, amongst other validation-related work.

Our launch earlier this year of our new flagship Opera Phenix OptIQ system will only further build on this momentum. The OptIQ's enhanced confocal imaging capabilities, advanced 3D cell analysis and automated phenotypic profiling aligned perfectly with current market trends focused on complex disease modeling and precision medicine research. This is another great example of one of our key product lines, which we believe will meaningfully benefit from increasing AI adoption by our customers in their preclinical R&D work.

I think it is important to clearly address the transformational impact of artificial intelligence on life sciences research. AI is dramatically accelerating scientific discovery, enabling researchers to identify and design exponentially more therapeutic compounds and biological targets than ever before. This acceleration means more discoveries to validate and more insights to unlock through physical experimentation than ever before.

To understand the opportunity, let me provide you an example to consider in where we believe we are in the AI adoption cycle. Today, we are in what would be called the infrastructure build-out phase. Similar to the early days of the Internet, when companies were laying fiber optic cables and building foundational systems that would support the digital transformation. After that Internet infrastructure was established, we witnessed an explosion of value creation. Companies like Google, Amazon and Meta built entirely new business models that created fundamentally new ways of organizing information and commerce.

AI in life sciences is following a similar trajectory. We expect our consumables, instruments and software to see significant increases in demand in the future as they are utilized by our customers to create new insights at an accelerating rate in order to capitalize on the new capabilities that AI provides. Our offerings are used by our customers to actually uncover and translate the new data that the AI models and infrastructure can then learn from.

This value creation phase is only just beginning, and this is where the real opportunity lies for Revvity. Every AI-generated discovery will still require physical validation through wet-lab experimentation. One cannot approve a drug based solely on computational predictions. It must be synthesized, tested, screened and validated through rigorous laboratory work given that only a small fraction of human biology is well understood. We believe that as more compounds are designed and combined with new ways to develop and refine them, a continuous loop of innovation and improvement will be created. That is likely to result in a demand bottleneck in validation related work for our customers. As AI generates more promising therapeutic hypotheses at an unprecedented rate, the downstream demand for laboratory tools, reagents, and instruments to validate these discoveries will grow substantially. This inflection point sits squarely within Revvity's core strengths, providing the critical technologies that translate AI-driven insights into real-world biological validation.

Looking ahead, I anticipate a third phase emerging after value creation, which is value capture. This is where our customers will begin realizing substantial returns on their AI investments through faster development time lines and higher success rates. These gains will incentivize even greater investments in research capabilities, creating a virtuous cycle that expands the entire market for scientific research tools. Beyond our external AI strategy, we are dramatically transforming our internal operations through AI adoption that I believe is quite differentiated and includes appropriately repositioning our employees and their roles.

The well-known research from Gartner recently published a research paper highlighting our internal AI deployment, which stands out across the industries that they've researched. They noted how our structured approach has accelerated software delivery and enabled impactful initiatives that previously would not have been feasible. With our unique rollout of multiple leading LLMs to the entirety of our global employee base, we are seeing employee adoption rates of AI well above corporate averages. And we are doing so at a fraction of the cost of traditional AI corporate implementations.

We also continued to execute on our operational efficiency initiatives that we discussed on our fourth quarter call. Implementation is well underway and remains on pace to be fully completed around midyear, which will result in a greater impact on our financials starting in the second half of this year. These initiatives are a meaningful driver of the operating margin expansion we have communicated. Since the contributions from these actions will not anniversary until midyear next year, it positions us well for robust margin expansion in the first half of 2027 as well.

Before turning the call over to Max, I want to make you aware and invite you to our Investor Day in New York City on Friday, November 13. This will be an excellent opportunity for us to showcase the progress we've made across our business and share our vision for where Revvity is heading in the future. Software will be a central theme of that discussion, and we are excited to provide much deeper insights into how our offerings in this space will enable long-term growth.

I've never been more excited about the future potential of Revvity than I am right now. We are exceptionally well positioned in both the near and long term to lead the transformation of how preclinical research is performed, while delivering an outstanding opportunity for our shareholders as end market demand trends normalize.

With that, I will now turn the call over to Max.

Thanks, Prahlad, and good morning, everyone. As Prahlad highlighted, we started 2026 on a strong note as our first quarter organic growth, adjusted operating margin and adjusted earnings per share all came in ahead of our expectations, which sets us up well to achieve our full year expectations.

Additionally, the plan we have announced to divest our immunodiagnostics business in China is an extremely important strategic decision for the future of the company as it allows us to continue to refine Revvity so that we can focus on the areas that we believe have the highest returns for our shareholders in the years to come. This is a bold decision and one that has a multitude of benefits for the company, including improved financial performance metrics and returns, streamlined operations and management focus and reduced future uncertainty from a market, which has been challenging over the last several years and will likely remain pressured over the medium term as the impact from policy changes continues to unfold.

As Prahlad mentioned, we are actively working with a local management-led group and expect to reach a contractual agreement with them over the next few months with an expected closing of the transaction to occur by the end of next year as it will take them some time to receive the necessary regulatory approvals and to localize manufacturing.

Going forward, our guidance and reported organic growth will exclude the financial impact of this planned divestiture. We have provided historical financials for 2025 in a supplement that is available on our Investor Relations website, which excludes this business so that you are able to understand what the future of Revvity looks like and how we plan to provide guidance and report our results going forward.

For 2026, our plan to divest this business would result in the reduction of approximately 4.5% of our previously expected revenue. When combined with FX, which we now only expect to contribute approximately 50 basis points to our revenue growth, down from our previous 100 basis point expectation, these 2 factors represent the entirety of change in our updated 2026 total revenue outlook, which now calls for $2.81 billion to $2.84 billion in total revenue this year. We anticipate this planned divestiture will also positively impact our organic growth by approximately 100 basis points this year while also positively impacting our organic growth rate in the years to come.

For 2026, we are now estimating 3% to 4% organic growth overall, which excludes the impact and contribution of the China immunodiagnostics business. We also expect this change to positively impact our adjusted operating margins, leading to our adjusted operating margins this year now expected to be approximately 28.4%, up 40 basis points from our prior outlook. Finally, by excluding the financial impact of this business from our outlook, we also anticipate a net reduction of our expected adjusted EPS this year of approximately $0.15, resulting in a new EPS outlook for this year of $5.20 to $5.30.

Another important benefit from this action is a dramatic further expected improvement in our cash flow conversion. For example, in fiscal year 2025, when excluding this business in China, our free cash flow conversion of our adjusted net income would have been approximately 300 basis points higher than the already solid 87% conversion we had reported. With these changes, I am confident that we are well positioned to be in an even stronger position to deliver accelerated top and bottom line growth in the future.

Now turning to the specifics of our first quarter performance. All of the figures I'm about to provide are on a total company basis and the same format that we provided guidance during our fourth quarter earnings call, which includes our immunodiagnostics business in China. I will then separately provide an update on a pro forma basis, demonstrating what our performance looked like when excluding the China immunodiagnostics business that we plan to divest.

Overall, the company generated revenue of $711 million in the quarter, resulting in 3% organic growth with an approximate 3% tailwind from FX. We also had a 75 basis point incremental contribution from ACD/Labs, our recent software acquisition. As it relates to our P&L, despite known headwinds from FX, having an extra week this fiscal quarter, tariffs and the timing of our cost efficiency initiatives, we exceeded our expectations for the quarter by generating 23.6% adjusted operating margins.

Looking below the line, our adjusted net interest and other expenses were $23 million in the quarter, and our adjusted tax rate was 18.3%, both in line with our expectations. We repurchased another $86 million of our shares in the first quarter, resulting in an average of 111.9 million diluted shares in the quarter. Our adjusted EPS in the quarter was $1.06, which exceeded the high end of our expectations due to the revenue and margin upside.

Moving beyond the P&L. We generated free cash flow of $115 million in the quarter, resulting in a robust 97% conversion of our adjusted net income. Our balance sheet remains strong as we finished the quarter with a net debt to adjusted EBITDA leverage ratio of 2.8x, with 100% of our debt being fixed rate with a weighted average interest rate of 2.6% and weighted average maturity out another 6 years.

As we evaluate capital deployment, we still plan to pay off the roughly $600 million we have outstanding on Eurobond, which is coming due in mid-July, which will leave us with a gross leverage of below 3x as we exit the year.

I will now provide some commentary on our first quarter business trends, which are also highlighted in the quarterly slide presentation on our Investor Relations website. Again, these results include our immunodiagnostics business in China and are comparable to the guidance we provided 90 days ago.

The 3% growth in total company organic revenue in the quarter was comprised of 3% growth in our Life Sciences segment and 4% growth in Diagnostics. Geographically, organic growth declined in the mid-single digits in APAC, with China being down double digits overall due to diagnostic pressures, grew in the low single digits in the Americas and continued to grow double digits in Europe.

From a segment perspective, Life Sciences generated revenue of $362 million in the quarter. This was up 6% on a reported basis and 3% on an organic basis. From a customer perspective, sales in the pharma/biotech grew in the low single digits in the quarter, while sales in the academic and government grew in the mid-single digits in the quarter.

From a business perspective, Life Science Solutions grew in the low single digits organically in the quarter with low single-digit growth in reagents and mid-single-digit growth in instrumentation. Our Signals software business grew in the mid-single digits in line with our expectations. As it pertains to some of the software industry specific metrics, our SaaS pipeline continues to grow robustly with 40% ARR growth year-over-year, leading to the business, again, growing double digits from an APV perspective.

In our Diagnostics segment, we generated $349 million of revenue in the quarter, which was up 8% on a reported basis and 4% on an organic basis. From a business perspective, our immunodiagnostics business declined in the low single digits organically in the quarter, which was in line with our expectations. Our performance was strong outside of China but was offset overall by meaningful declines in China as anticipated. Our reproductive health business had a great quarter and grew double digits organically with broad-based strength across the portfolio, including in newborn screening, which grew low double digits in the quarter. Reproductive health also benefited from an increasing contribution from our work with Genomics England, as sample volumes from this project are now running slightly ahead of our initial expectations.

I now also want to give you some perspective of what our first quarter performance looked like on a pro forma basis, which excludes our immunodiagnostics business in China that we plan to divest as this is how we will be providing guidance and reporting our results going forward. Overall, on a pro forma basis, we generated total revenue of $687 million in the quarter. This equates to pro forma organic growth of 6%. While there is no impact from this change on the 3% growth in our Life Sciences segment, on a pro forma basis, our Diagnostics business grew 9% organically in the first quarter. There is no impact to our reproductive health performance, but our immunodiagnostics business grew in the mid-single digits on a pro forma basis.

Moving to the P&L. Our pro forma adjusted operating margins were 24% and our adjusted pro forma EPS would have been $1.04. Now moving to our updated guidance for the year. Our updated guidance is on a pro forma basis as it excludes the business we are planning to divest as this is the most appropriate view of what the company and its performance will look like going forward. As Prahlad discussed, we are pleased with our first quarter performance and believe key end markets may be starting to show signs of moving in the right direction, though we want to remain prudent in our outlook until we see more sustainable signs of concrete improvement.

With this backdrop, we are now expecting our pro forma organic growth this year to be in the 3% to 4% range. FX is now expected to positively contribute approximately 50 basis points to growth, while we still expect the ACD/Labs acquisition to add approximately 75 basis points to our revenue growth this year. We expect this all to result in our 2026 pro forma total revenue to be in a range of $2.81 billion to $2.84 billion overall.

We performed well from a margin standpoint in Q1, and our cost efficiency programs are in flight and progressing as planned. Consequently, we now expect our pro forma adjusted operating margins this year to be 28.4% with 30 of the 40 basis points of the improvement versus our prior guidance reflecting the impact of excluding the business in China that we plan to divest.

Our outlook for net interest expense and other is now approximately $90 million and we continue to anticipate our adjusted tax rate for the full year will be approximately 18%. We also still expect our diluted average share count to continue to be approximately 112 million. This all results in us expecting that our pro forma adjusted earnings per share will now be in the range of $5.20 to $5.30.

For the second quarter, we expect our pro forma organic growth to be in the 2% to 3% range, which is an improvement from our prior assumption as it no longer includes the immunodiagnostics business in China. Assuming FX rates as of the end of March and the incremental contribution from the ACD/Labs acquisition, this puts our expected total pro forma revenue for the second quarter in the range of $699 million to $707 million. We continue to expect an improvement in our margins as we progress throughout the year and anticipate them being approximately 27% in the second quarter on a pro forma basis. With net interest and other expected to be similar to the first quarter and an assumed 19% tax rate, this should all result in our pro forma adjusted EPS in the second quarter being approximately 23% of our updated full year pro forma outlook.

Overall, we had a good first quarter to start the year and are on track for our full year expectations. Our decision to divest our immunodiagnostics business in China is the right one for our company and will benefit our performance going forward while removing a business that required a disproportionate amount of internal and external focus, as well as requiring near-term capital investment for what has become an increasingly small contributor to our overall company.

I'm extremely excited about the direction in which Revvity is headed, and I look forward to sharing more with you in person at our Investor Day in November.

With that, operator, we would now like to open up the call for questions.

[Operator Instructions] Your first question comes from the line of Patrick Donnelly with Citi.

Prahlad, maybe on the software SaaS piece, helpful to get some data there. Can you just talk about the recent conversations with customers? I know you talked a lot about your offering with all the focus on that business. Would be curious just the recent trends.

And then Max, on that business, I know there's some comp dynamics. So if you'd be able to talk through just the cadence of the software as we work our way through the year would be helpful.

Sure, Patrick. On the software side, as we've talked about both -- you heard in the prepared remarks and even during some of the investor conferences, the excitement and the engagement with our customers continued to remain high. We announced the Lilly TuneLab's partnership, which is a great launch pad for Xynthetica, leveraging the ecosystem that Lilly brings to the table.

But more importantly, I think as we talk to our big pharma/biotech customers, the question really is not really how AI is going to impact, but how are we going to leverage AI in the development of the software into bringing Xynthetica early on. As Signals continues to be on the plan of record, the excitement level around Xynthetica, BioDesign, LabGistics, as you know, these are 3 of the biggest launches that could have happened in the software business, and all of them are coming in this year. So the engagement level and excitement level continues to remain very high for that business.

Yes. And then, Patrick, on the OG cadence piece, I think a couple of things to mention. First, I would say, as you look at our software business, organic growth is not always the best measure to look at the performance of this business. As we mentioned, we always quote the APV, which sort of normalizes for rev rec and that again was strong double digits in the first quarter here and a trend that we expect will continue and has been playing out over the past couple of years, especially as we bring a lot of these new products to market.

It was also encouraging in the first quarter, we continue to see robust growth from a SaaS and ARR perspective, and that was north of 30% in the quarter. And then I think when you look at it from an organic growth standpoint, for the full year for this business, we are calling for positive mid-single digits organic growth. If you look at the cadence over the course of the year, it was positive mid-single here in the first quarter. In the second quarter, we do have tougher comps. And so we expect that business to be down approximately 20% in the second quarter. However, those comps eased in the second half of the year. And for the second half of the year for this business, we expect it to grow in the high teens. That's how I think about it from a cadence perspective.

Okay. Okay. That's helpful. And then maybe just on the reagents business, it sounds like that was improving a little bit, Prahlad. Can you talk about -- it sounds like Ac and Gov got a little bit better. Are you seeing the recent biotech funding start to show up a little bit? What do those conversations look like? Would love just some more color on the reagents business and how you're feeling there.

Yes, Patrick. I would say that I would characterize it as positively stable. We expect -- we experienced better performance from this customer segment in the first quarter as our revenue was up positive mid-single digit. There might -- there has been in this market a continuation of soft trend last year, but we are definitely starting to see signs of improvement, both around the instrument and on the reagent side. And as we continue to see this uptick in the reagent behavior from our customers, it will build on the optimism that we are starting to see in this end market.

Your next question comes from the line of Puneet Souda with Leerink.

First one, actually, both of them high-level questions, I would say, on the portfolio side, you've obviously taken important steps early on, and this appears to be another important step for -- on the China Dx side. Does this change your appetite for further M&A and capital deployment in the space? I mean I appreciate the deal hasn't closed yet. And -- but when we look at the broader tools multiples, they took a step down further after a larger peer recently reported, but you guys are clearly showing stronger momentum versus that peer.

Yes, Puneet. I think this is the journey that we have taken in the portfolio transformation. We are starting to see the differentiation in our performance on the end markets versus our peers. This was the intent and the idea of setting up what we have today. If you look at our performance, especially in pharma/biotech and in academia, we are diverging from the peer group in terms of what we are seeing in growth. But the journey doesn't get over.

Obviously, with the China divestiture, it is a challenging and uncertain end market environment there, particularly in Diagnostics. And this was a strategic direction to address that. It brings us back to what I would say our China business would be 8% to 9% of our total revenue, of which 7% is now in Life Sciences, which is a strong growth market there, and about 1% to 1.5% is reproductive health, which we've already localized. So we feel very good with the way we have set up the portfolio.

In terms of capital deployment, we'll continue to be an acquisitive company. But when we look at our share buyback performance, if you see what we've done over the last year, we'll continue to be aggressive and opportunistic on the stock buyback too. So we have enough avenues to deploy capital in both ways.

Got it. Super helpful. And then on the software side, great to see the progress. But I just wanted to understand a bit more about the AI corporate implementation. What are some of the steps there that you're taking that could yield sort of an immediate or near-term result? And how are you thinking about margin uplift from that this year?

Yes, Puneet. And some of this I addressed in my prepared remarks. From an internal operations perspective, the AI adoption, I would say, is going very well and is quite differentiated. I referred to the Gartner research paper that was recently published that sort of laid out what we are doing in that.

We've tried to use a much more structured approach and we are starting to see the benefits of it primarily around the software development component. It is enabling initiatives in the company. We are rolling out multiple leading LLMs to our total employee -- global employee base. And the adoption rate is well above what we are seeing in terms of peers' metrics out there from corporate averages perspective.

But I think most importantly, we are doing this at a fraction of a cost that you would see from traditional AI corporate implementation. So we feel really good about it. And the feedback that we are getting from an employee -- our employee base in terms of productivity and efficiency initiatives. And in the mid- to longer term, the cost-out impact that it will have on the business will be remarkable.

Your next question comes from the line of Dan Brennan with TD Cowen.

Maybe just starting on the quarter for reproductive health. Can you just unpack a little bit the strength there? You mentioned GEL strength in the quarter, you're running samples. So just kind of what's now incorporated for the full year for GEL? And just speak also on the underlying ex-GEL reproductive health for the full year.

Yes. I'd say from a reproductive health perspective, it was a very strong quarter. It grew double digits versus our expectation of high single digits. And I think when you look at the drivers of it, it was really a multitude of factors.

One, we did just have stronger underlying performance from a reagents perspective but also benefited from some additional instrument placements, which will bode well for us in the years to come? And then secondly, GEL, the Genomics England, partnership was a little bit stronger than what we had anticipated. I think just to answer your question on what that looks like for the rest of the full year, there's been really no change in our assumption to contributing about $20 million for us in the first year, obviously, for this year. First quarter was obviously a little bit stronger than we had anticipated, but we'll see how the rest of the quarters play out from a sample volume perspective.

But just stepping back, I would say, on reproductive health, it continues to be a really strong business for us. And I think when you look at even with the challenging birth rate environments, the performance, not only in the first quarter, but over the past several years has well outpaced that and has been growing above its LRP. That's really due to the fact of, I would say, the execution of our commercial pillars where there's still 100 million babies born every year that don't get any level of testing. There continues to be differing levels of testing menus across different geographies and countries around the globe. And we continue to come out with new assays where we can test for different rare diseases. And so that business continues to have, I would say, a lot of Revvity-specific tailwinds that should allow us to well exceed whatever happens from a birth rate perspective.

Great. And then maybe as a follow-up, just on the ImmunoDx business in China. Just can you speak to a little bit of like the deal itself? I mean you're kind of pulling this business out of your guide. The deal hasn't closed yet. Like what kind of protection do you have certainty of closing, things like that, if you could?

Yes. Look, I think as we mentioned in the prepared remarks, we have engaged in a letter of intent to divest our immunodiagnostics business in China. We expect definitive agreements to be completed here within the second quarter. So I do think we have a high degree of confidence in our ability to get this done. It is being led by an internal management group as part of the buying consortium. And so obviously, we've got a lot of strong coordination there and communication. And I think we are confident in our ability to get this deal closed in 2027.

Your next question comes from the line of Vijay Kumar with Evercore ISI.

Maybe Prahlad, on your Q1 pro forma organic of 6%, that came in quite nicely, excluding China, was certainly well above expectations. But when you look at the annual guide, pro forma 3% to 4% implies, I think, a step down to 3% for the remainder of the year. Why -- your comps don't necessarily get harder, right? So maybe talk about why the 6% slows down. Was there anything one-off in Q1? Anything that stood out?

Vijay, thanks for the question. Yes, I think as you -- maybe just speaking holistically on our 2026 organic growth guidance and the cadence over the course of the year, the way I would think about it is with our updated guidance, we're now calling for, again, 3% to 4% for the year and with us doing about 6% here in the first quarter on a pro forma basis and a guidance in the second quarter of 2% to 3%, we essentially are averaging about 4% in the first half of the year. So then if you look what's required for us to hit our 3% to 4% organic growth for the full year, that would imply about a 3% to 4% growth in the back half of the year.

I think when you look at our assumptions, I would say for 2 of our business units for Life Science Solutions and Diagnostics, we do have [ conservatism ] assumed in the back half of the year versus the trends we're seeing for the first half. I already talked about the software cadence as a result of Patrick's question. But I do look -- expect us to have, I would say, a strong performance here in the first half of the year and continued trends on that in the second half. And should markets maintain where they are, if not, even improve, we would expect to see potential opportunity for upside versus our current organic growth guidance of 3% to 4%.

Understood. And maybe one more sort of guidance-related questions, Max. Organic was raised by 100 basis points. EPS came down by $0.15. So one, is the organic raise, is that all driven by removal of China immunodiagnostics or did base go up? And on EPS, does it include any contribution from proceeds -- from sale proceeds?

Yes. So on the organic growth, the only change of that 100 basis points was a result from the removal of the China immunodiagnostics business. So you're correct in that. Secondly, as you look at the EPS for 2026, it does not include any benefit from proceeds, as we mentioned in the prepared remarks, the deal won't close until 2027, which is when we would expect to see the proceeds.

Your next question comes from the line of Mike Ryskin with Bank of America.

Great. Let me just pick up exactly where you left it with Vijay there on impact of the divestment in the model and how to think about it going forward. So you talked through the bridge for this year. I want to dig a little bit into the future years. So I mean, I realize you haven't even announced the deal yet, so hard to talk about cash incoming proceeds, use of proceeds, anything like that. But just any high-level thoughts on how we should think about dilution in future years? You've got $0.20 impact this year, but what about future years?

And the same thing on the margins and on the top line, it's 100 bps uplift this year. I think it's -- you said it's 30 bps impact to margins. Is that -- should that relatively flow through the future years as well? Or any other moving pieces we need to think about in the out years for adjusting the model for this? And I got a follow-up.

Yes, Mike, let me start by addressing it at the higher strategic level, right, and then Max will give you more color. This definitely further fortifies our LRP. Let me start with that, right? This was one of the overhangs, and we were over-indexed on China, especially in the end market around Diagnostics, which was in a challenging market environment. That takes away that overhang. It further fortifies our LRP.

More importantly, I think from the question around what we would do with the proceeds, share buyback is a great opportunity to leverage the proceeds that we would get. And from an EPS impact perspective, the cost efficiency initiatives that we are putting that will be fully implemented starting in the second half of this year will also go a long way in offsetting the earnings-related dilution as we move into the next year. And we'll continue to see the impact from their impact throughout the first half of next year and 2027. Max?

Yes, I think that's right. I mean maybe the only other color I would add is in terms of the operating margin adjustment, that is going to be a permanent change. The pro forma results are meant to represent what our business would look like excluding this business. And as a result, we're calling for 28.4%. So that is sort of, I would think, the new baseline exiting this year, Mike, just to add that point on.

Okay. And then I want to dig in on 2Q a little bit as well. I think you're guiding for 2% to 3%. You previously talked to flat, give or take. Obviously, the change is China. So I want to dig into that. Did anything change ex-China? If maybe you could give us that bridge? I think one point you called out, I think with Patrick's question was you said you expect software to decline 20% in the second quarter now, and you previously talked down mid-teens. So can you just talk about the moving pieces in the 2Q guide?

Yes. Thanks, Mike. Look, I would say on its surface for the second quarter, the biggest change is really the removal of the China IDx business. And so again, we're calling 2% to 3% organic growth here. I mean some things might have moved around on the edges, but I would say fundamentally, the underlying business assumptions more or less remain the same.

And just to provide a little bit of color on what those splits look like. So if you look at the 2% to 3% overall organic growth for the company in the second quarter, Life Sciences, we expect to be sort of roughly flattish with Life Science Solutions, which again, comprises our reagents and platforms business growing in the low single digits in the second quarter. And then software, we have down, as I mentioned, about 20% expectations for the second quarter. And conversely, if you look on the Diagnostics side of things, we expect Diagnostics to be up mid- to high single digits in the period with relatively similar results across immunodiagnostics and reproductive health.

Our next question comes from the line of Tycho Peterson with Jefferies.

I want to dig in a little bit more on bio/pharma. Some of the signals you're seeing, you talked about working through budgets. When do you think you're really going to see a turn here? Maybe just unpack what it is you're seeing? Is it instrument demand, just more discussions, funnel activity? And I think there's also been a view that spending on upstream is going to go up to train the model. So how do you think about that kind of layering in over the next couple of years?

Yes, Tycho. I mean if you look on the instrument side and on the reagent side, we already started seeing modest improvements in the fourth quarter from these customers, which has continued into the first part of 2026. Our Life Science Solutions were up low single digit from pharma/biotech in Q1, which was the strongest growth we've seen on both instruments and platforms from these businesses from this customer group since the second quarter of 2023.

Low single digit is obviously not where we want to be, but it appears to be slowly moving in the right direction. And I think that is more important that this is coming back to what normal should look like. We would like to obviously continue to see even greater pickup in the reagents before we can say things are on a clear path to improvement. But I'm optimistic that these customers are now starting to move on the right path.

Okay. And then for the follow-up, just on operating margins. Max, can you maybe just talk about some of the gives and takes in the quarter, cost inflation, incremental spending? And then maybe get us comfortable with the bridge from where you are now to 28.4% target?

Yes, sure. Look, I think as we look at the first quarter results, obviously, we are encouraged by the margin performance on a pro forma basis. We finished at 24%, which is about 40 basis points above what we had in our underlying assumptions going into the quarter. I would say that was really driven by the strong incrementals we got on the additional volume that we had in the period. Again, we were slightly above the higher end of our expectations. And so that flew through at about 45% incrementals, which is really where the beat in the first quarter came from.

I think as you look over the cadence of the rest of the year from an operating margin standpoint, we will see an improvement here from the first quarter to the second quarter, going from 24% to 27% on a pro forma basis. That step-up between Q1 and Q2 is really driven by half from not having the extra week and a little bit of FX benefit. And the other half is just from the incremental revenue as you do get a seasonal pickup from Q1 to Q2.

I think then when you look between the jump of 2Q to 3Q, we do expect our margins to go up about from 27% in the second quarter to 29% in the third quarter. That step-up is really driven by the cost productivity initiatives that we've put into place. We've talked about those being completed by the end of the second quarter. We're still on track to drive those costs out on that time line. And I think when you look at some of the dynamics of it, again, the majority of this is really headcount driven by us driving further integrations, additional -- new centers of excellence, and just a general sort of delayering of management and layers across the organization.

And there's about 1/4 of it that's from sort of non-labor operational initiatives, whether that be around footprint consolidation, sourcing, whether it be in-sourcing, renegotiating with vendors, freight optimization. And so I think we're really starting to see a lot of the Revvity business model on our playbook come through here. We have a high degree of confidence in our ability to execute on those cost initiatives.

And the last leg of this is then from 3Q to 4Q, again, I would encourage you to remember that we do have a seasonal step up between 3Q and 4Q from a volume perspective. And really, all you're seeing there from the margin step-up is really just a matter of that incremental volume leverage from the seasonal revenue increase.

Your final question comes from the line of Catherine Schulte with Baird.

I know we're sitting here in May, so we shouldn't be talking about '27, but you did bring it up regarding the robust margin expansion that we could see. So just hoping we could unpack your comments a bit more just to frame the opportunity there? Maybe how should we think about the margin jumping off point for next year, just given the cost initiatives that you have underway?

Catherine, yes, I appreciate your caveat there upfront, too, that we are in May '26 here and aren't giving any guidance for 2027. But I think as you look at things from an operating margin standpoint, what I'd encourage you to think about is if we're talking about the cost actions being completed by the end of the second quarter here and us getting the benefit in the second half, that will mean that we will get the annualization benefit of that in the first half of '27. And so again, we're not providing formal guidance, but yes, there should be an additional catch-up from a margin perspective in the first half of '27 once we exit this year.

And then maybe just back to Puneet's question on capital deployment. Are there other parts of the portfolio you think could be pruned? And then from an M&A standpoint, what are your priorities here? Should we just expect tuck-ins going forward? Or would you be open to larger deals as well?

Yes, Catherine. I mean, if you look at our track record, we continue to be acquisitive and we will continue to be acquisitive to ensure that if there are any gaps in the portfolio, we fill. We don't see anything that is really compelling either from an opportunity perspective that might be large in scale. You might see some tuck-ins here and there. But really, the biggest opportunity for us continues to be the share buyback. Right now, we continue to be opportunistic on that element. But we have a fertile pipeline on the M&A side, and we look at opportunities on both sides.

There are no further questions at this time. I will now turn the call back to Steve for closing remarks.

Thank you, Nicole, and thank you, everyone, for your time this morning. I know it's a busy day, but we look forward to touching base with you later today and over the next few weeks. Have a good day.

Good morning, everybody. I'm Luke Sergott. I cover life science tools and diagnostics from Barclays. With me, I have Prahlad Singh, CEO of Revvity, 2 Vs in Revvity. And we have Steve Willoughby from IR here as well.

So let's start off, and we were just kind of talking about it, like you never got credit for Signals before. And now all of a sudden, with [ Claude ] updates, now it's like a huge issue with you guys. And you have significant launches across the platform. If you can kind of just walk us through like a 1-on-1 of what's in your Signals business or just -- and also with the new launches.

But talk about the customers that you guys serve, the lumpiness -- not the lumpiness, the stickiness there, the data access, like what you're actually doing across that platform and why you feel like AI is the thread of it taking share versus the reality versus the fear?

Yes. Good morning, Luke. It's always good to be here. To start with, the Signals is a deeply embedded scientific platform where research is done today. AI is not a net disruptor, but an accelerator for the Signals platform. And I think you've heard us say that there could not be a bigger disconnect from what the external perception is of what the impact of AI is versus our internal conclusion and anticipation of how AI could help enhance and accelerate the signals business.

And I think a lot of this has got to do with the education of what the Signals portfolio is and how AI dramatically enhances the capability of what Signals can bring to the clinical scientists -- to the research scientists today.

Yes. I mean -- so you have Signals One, ChemDraw, Spotfire, a couple of other smaller pieces in there. And then on top of that, you have these new launches with BioDesign, Xynthetica with a Z, and then you have the logistics. Just walk through like what these updates are, what the launch time is and how you guys think about this, how that builds on your Signals platform, if it does at all? Just walk us through kind of the strategy here with the launches.

Sure. So let's start with what's in the signals platform today, right? Number one is ChemDraw. ChemDraw is the bread and butter jelly of every research scientist that has ever gone through a grad school and done any lab research.

Essentially, it is you use a mouse a keyboard and a mouse to draw molecules. And you cannot verbalize molecules. You have to draw molecules to communicate. So even with AI or when you communicate with humans or with AI or whatever, you have to be able to use ChemDraw to be able to communicate that because -- and again, having spent 20, 25 years of my career on the lab bench, I have intimate knowledge of how it works, how it worked, how it's working and how it's going to work, right?

So ChemDraw is the essential DNA by which you design molecules today, small molecules. Signals One is the platform on where you design, you store, you analyze data and then you use it for your regulatory submissions and filings and your publications, et cetera. So essentially, that is the sandbox in which research happens. Or another way to think of it is it's the enterprise software for research.

Spotfire is the platform where you've created dashboards that you look at the data, analyze it and you create dashboards. So pharma companies have invested and created, I would say, hundreds of thousands of dashboards, which are complex -- leveraging the complex workflows, which are used for all the filings and for the analysis of the research. So this is -- again, these abilities are going to be enhanced by AI. So this is what sort of the current portfolio is today.

Yes. And AI is going to ultimately supercharge those platforms versus just kind of...

They become more of a turbocharger to the current platform.

Okay. On the Xynthetica launch, Steve was walking us through this. This seems like pre-groundbreaking, this is totally different. We've never heard about anything like this in the space. So just walk us through very succinct clear like 1-on-1 for the dummy in me, like how this came to be and really what this does?

So let me start with the other two. This is the biggest year for the NPI launch in Signal's history. Each one of these, as we've talked, Luke, is a major NPI in its own with BioDesign, logistics and Xynthetica. BioDesign, the best way to think of it is it's the large molecule version of ChemDraw. When you are designing biomolecules, you have a string of text sequences, which is a string of peptides, and they are pretty complex. And this was a gap in our portfolio, which is now filled with BioDesign. That's the way to think of it.

LabGistics essentially is an avenue and a place where you're able to extract and digitally capture all the complex workflows. So essentially, all the workflows come and LabGistics essentially a laboratory logistics component where you now have a platform where all this is housed, and this is where it's being enabled by AI. So we are leveraging AI to develop LabGistics, which essentially will become an accelerator to bring these components together, bring these packages together for submission is what LabGistics become.

Xynthetica, the one that you pointed out, to put it simply, it operationalize access to machine learning models for research. So if you think of it, you have a Signals platform. So -- or to equate it, you have an iPhone. Xynthetica becomes the iOS that allows you to operate it. It operationalize access to machine learning models, whether it's through TuneLabs that we've done with Lilly through other pharma companies and private models that would be accessible to publicly available models, which we could curate and then put it on Xynthetica. So there are -- it becomes essentially a place where you have access to all these models. And then if you're on the Signals platform, you're able to operationalize access to it. That's what Xynthetica is.

So if I think about it, it's like kind of the pipes that allow you to connect signals, or whatever analysis platforms you want to use, to the anonymized data within the pharma company that they don't want to necessarily share with the larger AI company.

And I heard it is like, all right, so Xynthetica could also be like thinking about the crypto, like this is like Ethereum allowing the other biotechs to access the TuneLab data set by a token that burn off through your Xynthetica and allowing all the other applications around there. Is that -- it's kind of like that iOS like system, it's based...

Operationally, it's the same. But from a monetization perspective, I would say it's more consumption-based model usage rather than on the crypto side. It's more like what OpenAI or Anthropic would be. So it would be similar to that. But essentially, that's the concept.

Yes. Okay. That's pretty interesting. And then I guess with the TuneLab, is there -- as that continues to gain access and you build out more partners there, it's obviously, the network effects continue to build. How many other customers are thinking about similar collaborations and setups?

So it's a great question. The best opportunity for us and for our customers is more show up on that ecosystem, right? So obviously, there are a lot of discussions going on. We just announced Xynthetica in December, January time frame. I think in the second half of the year is when we will start the actual productization with TuneLabs and Lilly.

And there are many more discussions that are ongoing and will come to fruition with other pharma partners, with other private models, which would be available, our own proprietary models and more importantly, there's a lot of data in the public domain today. There's a lot of publications. There's a lot of data which has been their housed. The idea really is how do you curate that and provide access to research scientists through Xynthetica.

So this is going to be an ongoing journey for us. But this is really a breakthrough platform for scientific research. And it's -- I mean, obviously, I would say that, but this is our channel checks through our customers. Xynthetica has not been developed out of thin air now. This is through our user groups and through our customers saying that this is the need of the hour if we are going to move in this direction.

How long has that been in the works?

A couple of years.

Okay. All right. And then so as you're thinking about this rolling on, this is a back half -- I mean, you're launching this now, but early data users as you're thinking about the guide and how you guys are back half weighted that. How much is Xynthetica or the BioDesign and logistics is later on the year, that's right. Just kind of bridge us down to how much contribution that is baked in with your underlying assumptions?

I mean I think the way to think of it, Luke, is in our LRP, we've got signals at 9% to 11%. If you look at what the annual portfolio value or the APV by which you should measure software businesses, that has been in the low to mid-teens.

And that's where we've done better than what we have it in our LRP. And the assumption is we are going to continue to be in more than the APV range than what we've officially put it on the LRP. So I think that's sort of the way to measure it. And these are the irons in the fire that are going to continue to stoke the growth of signals over the next several years.

Okay. And from an upside perspective, I was -- I think like a Xynthetica, this is kind of a call option where if you get it right and like it takes off like it could and it is disruptive, like everything else could just be kind of a rounding error in the rest of your software portfolio.

I mean we think of it also as a models as a service component, right? And then this is a new revenue avenue. Today, signals is a subscription-based model, right? The more seats that are licensed, that's how the revenue is. But this is more based on consumption.

So this is a totally new revenue model in our sector and in our way, which has not been done. And as I have said this publicly, if within the next 4 to 5 years, my Signals business has not doubled, then we wouldn't have done a good job.

Yes. All right. I wanted to stick with the AI and the software stuff only half the time. So I went over a little bit. But let's talk about the core business and your overall guide for the year.

And kind of the philosophy around the guide, and it's typically the seasonality for you guys is always back half weighted. But talk about the conservatism that you guys see in the 2% to 3% that you have. You have some of the DRG headwinds still from China in the first half. Those are from a comp basis, just kind of rolling that off.

Just walk us through where you see the most conservatism, especially considering how the NIH and academic government is still really soft, and it's not like a gangbuster year for pharma demand and discovery anyway. So just walk us through that piece of the guide.

Yes. I mean, look, in terms of the guiding philosophy, maybe if I could just go back to 2025 and see where we were at the beginning of the year, right? We came out and said 3% to 5%. And then within a matter of weeks, everything started happening, the tariffs, the administration change, DRG and on and on and on and on, right?

With all those headwinds, we absorbed more than $30 million in tariff. And we had guided 3% to 5% and $4.90 to $5 EPS. We ended the year at 3% OG and $5.06 in terms of EPS despite absorbing all of that tariff. So -- and in the fall of last year, early last year, we came out and said we would be in the 2% to 3% range. And our peers came out and gave their guidance, too.

We have not back from that guidance, and you know what the rest of the industry has done. We feel very comfortable and confident with what we have put out there, right? But at the same time, what we don't want to do is jump the gun and say that we've got upside of X, Y and Z. Because the unknowns are the ones that you've got to factor in, in today's environment. And then I think we've factored in enough conservatism around any potential more policy headwinds coming from China.

We've factored in the disruption going on with the current situation that's prevalent. So we feel very comfortable with where we are today. And of course, as the market condition continues to improve, we will definitely revisit that. At this time, I would say pharma and biotech is in a stable market environment. You talked about the NIH factor that is doing. The reproductive health business continues to do very well. And we are looking at opportunities to sort of take advantage of some of the disruptions that have happened in our end market right now.

All right. And then I guess on the -- I want to come back to that from a competition and the market perspective. But when you're talking about like baking in enough of the downside, your guide right now is a 1,000 basis point jump from 1Q to 4Q, which is, let's say, you haven't done that historically.

So -- and given that a lot of the stuff that's happened in the past has been these like macro shocks that have kind of like, oh, if we -- if they didn't happen, we would have hit our guide. Like given that there's elevated volatility right now, is there -- do you feel like that there's enough absorption built into that margin guide for Middle East conflict and whatever else that might hopefully doesn't happen?

I'm glad you asked that question, Luke, because I do want to provide clarity and more detail around the margin -- incremental margin from Q1 to Q4.

Number one, on a traditional basis, you are right, the margin growth is generally 600 to 700 basis points depend on just 1Q to 4Q incremental revenue, right? So that accounts for nearly 600 basis points on its own. Recall, we have one extra week of cost in Q1. which accounts for nearly $10 million, which is not existing in the fourth quarter. So that's a natural uplift.

And then the cost cutting that we have done in the fourth quarter of last year and that is ongoing right now, whether it's restructuring, plant rationalization, rooftop rationalized optimization, that will start having an impact in the second half of the year. That sort of helps bridge the gap between the 750 to 900 bps. Not only that, the benefit of that will also be seen in the first half of 2027. So one should expect not just 2026, but 2026 and 2027 to be more outsized margin expansion opportunities for the company.

Okay. All right. That's giving a lot more confidence than that.

I wanted to make sure that I provided the bridge.

No, that's all we wanted was that bridge because it's just -- it looks pretty heroic, but we break it down in small pieces, it's not as bad as feared.

I want to go back to your comment on the competitive dynamic and landscape there. And this is more in tune with kind of BioLegend and what's been going on in the flow market. With Waters buying BDX or acquiring BDX, there's -- it's a duopoly market. You guys have a pretty sizable position there from the antibodies and the flow reagents within BioLegend.

Talk about like the different competitive dynamics or any changes that you might see within either Waters taking over BDX, but also with Becton and Danaher owning Abcam. Like is pricing changing that dynamic? Is this like still -- can this be back to that like double digits that you talked about when you guys did the acquisition? Just walk us through how that market ultimately changed and where it's going?

Yes. I mean, clearly, we've taken share in a depressed market environment over the past couple of years, right? And then I think if you just look at our reagents business performance over the past 6 to 7 quarters, albeit one, we've grown in this market environment, right? That's sort of an indicator that the market is nearly not grown, but we've grown and we've taken share. I think our focus is -- look, there's always going to be M&A activities in the marketplace, right?

There's always going to be disruption caused by that. Our focus is from a BioLegend perspective on the 3 things, right, the service quality and on-time delivery. And they've done a really good job. And it's not just on-time delivery that is the differentiator. As I have said, if you go into a lab today, in an immunology lab, you are going to have a tough time differentiating who is the BioLegend scientist there and who is the employee because our focus really is working early with our collaborators and our partners in designing the epitopes on the antibodies and making sure that we are there at the very beginning of when the conceptualization of science happens.

As I have said, most, if not all, of our application scientists and all our commercial folks are PhDs and masters. So they are not account managers, but they are scientific partners to our customers. And I think this noise around on-time delivery being the advantage that BioLegend brings -- of course, that is an element to it. But at the basis of all of this is science and innovation for us. And that is what we will stay focused on. And hopefully, that will be the differentiator.

On the -- so but on that reagents business, the flow -- like your flow exposure, how much of that is between the antibodies and the reagent side? Because right now, there's a fear that with those 2 big players just pushing on the reagents, that's going to weigh on your overall reagents business. But clearly, you've shown that, that's not the case right now. So...

Yes. I mean flow is a component of BioLegend's business and BioLegend is a component of our total reagents business.

Yes. So it's not just -- flow is not 70%, 80% of our total reagents business. Flow, if I would say, if you were to look at it, it's probably 30%, 35% or 30% of our total reagents business. And then outside of flow with AlphaLISA, HTRF, all of these are screening assays that are used on bio pharma biotech for their programs. And GLP-1 is one of the bigger growth drivers that has been one.

And there's a lot of stickiness to this. These are not like quarterly programs. Once you get on these programs, they are on for years. And that's why you're seeing sort of the growth element from the reagents business.

And as that demand -- so and you're talking about these longer-term projects, and that's why discovery, you considered a drug discovery play or a derivative.

As you're thinking about the funding environment, we just had Jim Foss from Charles River up here. I know they're a customer of yours on the instrument side. But when you're thinking about that biotech market and versus the large pharma, what do you think is like the bigger push pull on that reagent side?

I think with the uncertainty and the chaos around the whole MFN status and all of that having subsided, this is the first year where we are seeing clear sign of definitiveness from our peers in pharma biotech around investment in innovation and preclinical research.

So there is a clear sign of that. I think we need to see that stability move from being stable to growth, and that would sort of be the key indicator. So I think we are in the same place where we were at the beginning of the year. Things are stable. Things are moving as we had expected. And we want to continue to see it be that and continue to grow from there.

Great. I guess in the last minute and 45 seconds, let's talk about the other half of the business in diagnostics. The -- particularly in China, the ImmunoDx, right now, the repro business is doing really well. We don't probably have time to dig into the kind of drivers of sustainability there.

But as you kind of look at the ImmunoDx business, particularly in China, with DRG and that rolling off, how much of your business has already been impacted there? And what do you think is left that could be converted, particularly as it's going from the panels to the single test, like just level set where there's, I guess, untouched risk right now that's kind of weighing on people's minds.

No, it's a good question. Look, China immunodiagnostics will be less than 5% of our total business. And we've appropriately guided -- we've appropriately assumed that the impact of that as it calendarizes in the first half of this year will continue to be down.

From a DRG perspective, Sunshine Act, VBP, all of the impacts that are known have been accounted for and that is already impacted. I mean, look, but at the end of the day, there could still be unknown policy headwinds. We don't know about any. There are political discussions around that. But we've accounted for enough that there could potentially be others in our guide today. So we've tried to be as conservative as it is possible to ensure that we appropriately risk mitigate any potential headwinds -- unknown headwinds coming out of China.

Outside of that, like in the out years, the last one, thinking longer term, like is that still that high single-digit plus business? Or is that more mature and structurally different?

I mean I think it's tough to tell because I think the question really is from a clinical perspective, how long can you be in a position where you are going to have a negative and an adverse impact on how clinical diagnostics is done.

This is more about, are you doing the right thing by your population? That's the question. And I think that's the impact more around lives than around businesses.

Yes, it could come back. Okay. That's fair. Thank you.

Thank you, Luke.

All right. Terrific. Welcome, day 2 of the TD Cowen Global Healthcare Conference, 46th Annual. I'm 55, so that's interesting. So really pleased to be with me on stage here with senior management of Revvity. We've got Prahlad Singh, President and CEO. So Prahlad welcome, and thank you for being here.

Thank you, Dan.

Terrific. So yes, I mean, as we started off, most of these, given the timing of this conference, 4Q wasn't that long ago and you offered '26 guidance. Maybe just hit upon what you thought the key takeaways were and kind of the message for '26 for Revvity.

Yes. I think for us, 4Q played out pretty well, both from an end market perspective and from a product execution perspective. On the diagnostics side, reproductive health, newborn screening especially did pretty well. On the immunodiagnostics side, ex China, immunodiagnostics did very well. Even on the China side, despite all the pressure, it did better than we had anticipated. And then I think for us, what the encouraging thing was to see pharma biotech continuing to stabilize, and that reflected to some extent in our results.

But I think the one -- the thing for me that I took most positively was our performance and our execution all throughout the P&L, above the line, below the line, I think we executed very well. And that positions us pretty well for 2026. In early summer, I think it was late summer, early fall last year, and I think it was at TD Cowen when we came out at 2026 and talked about what 2026 would look like. We've sort of stuck with that in terms of organic growth.

We've put a lot of cost measures in place, which started taking effect in the fourth quarter and will continue to do so in the first half of 2026, the impact of which we will see in the second half of 2026. And that's sort of one of the drivers of the outsized margin expansion opportunity for 2026. But I think more importantly, one aspect which has been probably missing from folks' mind is that we will still see outsized margin expansion performance in 2027, at least in the first half from the activities and the actions that we would have taken this year.

Okay. So this is a standard question we've been giving to most of your peers, and we'll give it to you in terms of the 2% to 3% guide, not the same as everyone, but kind of in the same ZIP code. You don't assume any change, which is maybe different than some others in the current underlying end market environment, right? So no change. We're just always looking at, given how far below your LRP this year is starting out, what are some of the key levers in the revenue outlook maybe that could provide upside to that number?

Yes. I think, Dan, if I can break that down into 2 components. One is when you look at our LRP, 70% of our portfolio is in our LRP, signals on the diagnostics side, reproductive health, immunodiagnostics ex China. I think the pharma biotech market is the one where we've made an assumption that it will continue to be stable.

And I think that's sort of what is the 2% to 3% factor that we've played out in organic growth, along similar to what our peers have done. I think pharma biotech now needs to continue to improve and start seeing the growth trajectory that we expected to get to what would a normal market environment look like. All the signs are there, but we need to see the proof points for us to be able to then come out and say that now we expect normal market environment.

Okay. So maybe jumping off that then right in like some of your segments, which is a good segue. So LSS, Life Science Solutions, the growth outlook is something, I think, close to 1%, maybe after a similar negative decline of 1% last year. And you just mentioned the pharma market, you haven't assumed much of an improvement. But the preclinical outlook or the preclinical market has just been a weak spot, I think not just for you, but for other players, Techne and others. Just kind of help frame the preclinical spending. What will it take do you think for demand to inflect? I think you mentioned instruments got a little bit better, but maybe what are you seeing and what can drive it higher?

Yes. I mean I think if you look on the reagent side of the Life Sciences business, Dan, I think if I'm wrong, 4 out of 5 quarters, we've had positive growth. I think -- and then that has been, I would say, a differentiated performance versus our peer group. I think the challenge for us was on the platform side of the business where we were having negative growth. And that's where I think in the fourth quarter, we started seeing a good performance, and we continue to expect that to be better.

And I think that's going to be one of the drivers because the more platforms that get out, the more pull-through you see on the reagent side of the business, and that's where we are going to see an impact. So I think the -- from, I would say, negative low single to positive low single is one driver of that, but that's what we've assumed in our baseline case in our guidance right now.

For reagents, I would assume, when things are humming, I forget what your Investor Day deck had probably 5% growth, I would think, maybe even high single digits. It's a pretty attractive portfolio. So those are -- even though it was positive, you're probably still well -- probably well below that. I guess maybe asked a different way then, you're saying once instruments really start to go, then you think instrument consumables will follow. Is that the way to think about it?

So maybe we start to -- we look at the -- what are the proof points and the green shoots or whatever adjective you want to use, right? Pharma biotech, I would say today, the market environment is stable. And then I think there's a lot more discussion going around. You are seeing funding coming in. You are seeing M&A activity improve. All of these are signs that the market is continuing to move from stable to growth. I think the uncertainty and the chaos around MFN, around tariffs and all of that has sort of subsided.

And if you talk to me and our peers on the pharma biotech side, the mindset and the thought process is more around growth and investment right now rather than cutting and saving, I guess, is a way to think of it. And these are all positive signs that the growth will come to what normal looks like over the next few quarters. The question really is for us is to start actually seeing proof points of that coming to play. Right now, I think stable is good. And that's the way we sort of have played it out and guided accordingly.

And I'm sure there's no normal year anymore. But in a normal year, like with pharma, is there a cadence? Like we've heard in the past, pharma budgets are locked now and then we can start to -- they can start to spend. We're sitting here in the early March. Like is there any reason why we shouldn't start to see this in 1Q, 2Q building through the year? Or I guess, is there no real playbook to how pharma spends in a given year?

I think you will start seeing -- as confidence comes back and as you start seeing the cadence of this improving, I would expect that to improve over the next few quarters. Again, I'll qualify that we've got to start seeing that happen.

Okay. So on instruments, you've got areas across high-content screening, in vivo imaging, sample prep detection, right? Maybe just before we ask you a little bit about the drivers, just from a high level, how would you kind of characterize your position or outlook? I mean you don't have to go through each one of those. But just when you think of those 4 businesses, how should investors contemplate those businesses?

I think the way to think of it is that -- and we talked about this in the third and fourth quarter earnings calls, right? The high content screening business has started to come back and started to do well. I would say that the in vivo imaging, where we have a lot more reliance on academia and research, that's the one that still needs to come back to what normal would look like. But that's the way I would categorize the 2 different poles of it.

And the sample prep and detection, those are just smaller pieces.

Yes, those are smaller pieces and those are -- I would say those are not as differentiated as high content screening or in vivo is right.

Got it. Got it. And kind of the improvement you saw in high-content screening, any more color around that, GLP-1s, other things? Just kind of what was the driver there in terms of a bit of an improvement in 4Q?

I think all of the above. Obviously, GLP-1 is one. I think the M&A funding in biotech, as you get funding, you get more instrumentations being acquired. So there are several elements to it. And those are, to use the word, some of the green shoots that you start seeing.

Are those continuing in 1Q?

Yes. Yes. I mean, again, we don't give intra-quarter guidance, but I would say that the market continues to stay stable and as it was in 4Q.

Okay. Just maybe back to the reagent portfolio for a minute because I was front-running my own questions. We have a colleague here who follows Techne and we try to do work on the reagent market, and there's a bunch of different players there. So you each play a different part. Some of you serve academia more, some pharma more. Some are tied like to more certain products like flow cytometry. How would you characterize your competitive positioning there and kind of what supports that 9% to 11% LRP?

Yes. I mean even in, I would say, a depressed market over the past 8 quarters, if you were to look at it then, I think we've grown, as I said, 5 to 6 out of the 7 quarters, and we've clearly taken share because the market hasn't grown, and we've grown. So we've clearly taken share. I think there are 2 or 3 aspects to look at it. And this is despite the academia market where I think BioLegend plays a larger role despite that.

And BioLegend has done, I think, differentiated itself well, taking some advantage of the disruption that has been in the marketplace. But I think more importantly, the portfolio that we have has a lot of stickiness to it. So once you get on to a GLP program, you are not going to be there only for a quarter or 2 quarters. That has a long cycle to it. And the more of these programs that we have gotten on to the more stickiness and the more predictability that you have for the reagents business.

And then maybe one more on that front, bringing my own question here. So I know your reagent kind of business is expected to be more like short cycle, right? So you kind of see it kind of quick. So maybe it's not instruments first. But just back to maybe one more question. You did grow, you grew 1% in '25. Like why do you think it's so far below? Is it just pharma and is it more academia? Is it more pharma? It just seems like it's such a gap, and it's not you alone in this front, but there is a reasonable size gap.

I think if you look at just the market and the whole market itself, as you pointed out, the end market has been depressed. And I think this is the longest negative cycle that we have seen for a long period of time. I mean, in my history, this is the longest period that we've seen. And there have been several sequential events, which have been positive factors for it, right? Whether it is the MFN status, whether it was initially coming out of COVID, CapEx, interest rates, inflation.

But I think as we entered the fall of 2025 and as the uncertainty started subsiding and the chaos started coming back to what normal would look like post some of the White House meetings with some of our pharma biotech leaders, -- that has been probably the biggest inflection point to start seeing more stability in the market, more of a longer-term thinking around the investments that would happen in pharma biotech. I would say that was probably an indicator of markets getting back towards stability. Now it's not going to be a flip of a switch where it will turn over overnight, but I think we are starting to see signs of that.

Okay. So maybe moving over to software, which I know you've probably gotten a bunch of questions on, just given the volatility in that market from AI. Just maybe starting with Revvity Signals offering. And to what extent -- how would you frame the competitive risk from AI?

That question has not been asked today. To put it in the simplest form that I can, AI, Revvity Signals is a net beneficiary from the AI phenomenon. To put it very simply, the way to think of it is today, Revvity Signals is for matter of record, the platform that is used by preclinical scientists. That is where the experimentation happens. That is where data is housed and that is where analysis is done, right?

On top of Revvity Signals suite, we have launched Xynthetica, which becomes sort of the gateway or the marketplace for using AI models, whether it is homegrown or from the pharma biotech partner or third party or from the public domain. Revvity Signals suite provides a secure and a regulated environment in which you can then use AI models to do drug design in silico, which can then transition on to lead candidates where you start then moving on to the wet lab side.

So there is no better place to leverage the opportunity of AI than for our signals platform. And we could not be more differentiated than what the perception is versus what the truth is. And the best way to do is to do channel checks with our pharma biotech partners and see where and what they are using today and what they anticipate to use it for.

So is there any pricing element to Revvity Signals such that like the way the product is priced like there is a premium price attributed not just to what it does, but from the analysis that could be placed on top of it. So if there's AI software that could come on top of it, maybe it would kind of lessen maybe the value of how you price it. I'm just trying to think out loud about.

Yes. I mean I think, obviously, on the AI side, it's going to be a different pricing model with tokens that you would be using. But essentially, to be able to do that, you would have to have a license to Revvity signals. So I think step one to think of it is no different than SAP or Oracle, where you have an ERP system that you have a license, you buy a number of licenses for. And that's what 49 of the 50 pharma biotech companies have today. And then that, again, as I say, that provides the ecosystem in which research is done and where you would leverage the opportunity that AI brings to do that research in a federated model in a secure environment.

So obviously, you've got a deep software team at Revvity. How much work have you guys done just to pressure test that there's like your thesis and your view here, I mean there's no holes in it.

We do user groups, as I have said at your conferences and many others, we do user groups with our scientists 3 times a year. This year is our biggest launch in the history of the Signals business where we've got 3 product launches coming out. Each one of them in its own would be probably one of the biggest launches for Signals.

But with BioDesign, with which we sort of move on to the biomolecule side with Xynthetica, which provides the platform for what we are doing and with LabGistics, which comes out towards the end of the year. We have the elements that are needed to continue to see the validation and verification for the Signals business. The user group that we have from our customers, they provide the needs that they have for their use. So it's not that we are doing any of this in isolation to what the marketplace's need is.

When will Xynthetica have the full launch?

I would say that probably towards the end of the year or early '27, but we are -- we announced it in December, January time frame. I think we are going to do probably June, July is when it will come out in collaboration with Lilly where we would have the first launch. And then the full launch would probably be towards the end of the year or '27, early '27...

Maybe just one more back to AI risk before we go back to Xynthetica and BioDesign. So what about like Signal Synergy and Signals Clinical? Are those as immune to any kind of AI? I mean, are they exactly incorporated what you're saying on the core signals? Or are those adjacent that could have some risk?

Again, they are modules on the Signals suite portfolio. So they in isolation themselves, they are not big needle movers. So it's not going to be impacted one way or the other, but they are more of an offering that is part of the whole Signals suite.

Okay. So how would you frame Xynthetica? Like what's the -- I mean, we'll find out more as the year goes on into '27. But what's the -- I mean, is there any way to frame what this could mean for the business?

I mean, maybe I can say this for the Signals business as a whole. In the next 5 years, if the Signals business has not doubled, we've not done our job. And a big key component of that is the Xynthetica platform because that essentially becomes the marketplace on which the AI opportunity sort of takes life.

Okay. How about BioDesign? Like what do we think about that product?

Yes. I mean, look, that has been a gap in our portfolio. And with our customers, one of the user group requirements has been that you've got to do on the bio side, on the biomolecule side, what you have done on the small molecule side. So it has been in a gap in our portfolio. And some of our esteemed competitors had a lead on that. And I think that is filling a gap in what we needed to do that.

So you felt it could be one of like that on its own would be a meaningful launch. Is a meaningful launch like a point of growth or what?

It is definitely, I would say, a major NPI launch on its own because it sort of meets a critical need for our customers, which we did not have in our portfolio.

Is there a revenue size of that market?

Generally, most of the -- if you look at most of the NPIs that launch, the way I would frame or quantify the opportunities with this NPI, these NPIs is I would say these are the key elements that will double the business in the next 5 years. Rather than break them out, what BioDesign would do or what logistics would do.

I got it. Okay. So maybe switching gears off software then. Just maybe ImmunoDx really did well ex China or it's been doing well ex China. Just kind of where are we? I know the -- you gave color on the U.S. business. U.S. business has been -- it's been growing a lot. It's been kind of -- I know it's still not a huge part of your business, but it's done well. Just maybe give some color on that part of the business and what kind of growth we can expect there?

Yes. I think U.S. will be an outsized portion of the growth for the immune diagnostics business ex China. When we acquired EUROIMMUN, it was -- U.S. was 5% of total revenue. It's now about 20% of total revenue. Rightfully, the share of it is 40% should be what it should be. So I think it needs to double from where it is today is the way to think of it.

Who do you take share from there? Is it just older, less -- kind of less accurate tests...

I think it's an element of all of the above. One, there is a need. Autoimmune disease itself, testing for it is growing in high single digits. So that itself is a big driver of it. The portfolio that the more comprehensive panels that we bring in sort of takes a market from whether it's other LDTs or homegrown tests or more inaccurate tests.

Okay. Maybe just on China. I mean, I'm sure you got a lot of...

Sorry. Just to complete 2 more elements of it. And as autoimmune moves forward, the expansion into more, I would say, esoteric testing for autoimmune disease, whether it's on neuro autoimmune diseases or nephrology, those are areas that are still uncharted and unexplored territories where we are finding that a lot of the diseases that come out of it are more autoimmune related, which have not been tested before. So these becomes really key markers for growth there.

Okay. Yes, I was just kind of hitting on the China growth, which you kind of took down your guide for conservatism. You said you're not seeing anything. So just kind of discuss that a little bit more, like the reduction in the guide and kind of what was kind of what drove that?

Yes. I mean China today is immunodiagnostics is about 5% or slightly lower than that as part of the total business. I would say that as we look forward, our assumption is it's not going to go above 5%. If anything, it's going to go below. Look, our assumption on China diagnostics is -- immunodiagnostics is we've assumed in our guidance that it's going to go down in the mid-20s or so, right? I mean it did better than anticipated in the fourth quarter. However, from a guidance perspective, we've tried to be conservative enough that we are able to manage it in case of unforeseen policy changes that might happen.

And is there anything because I know in December, there was some noise and -- is there anything that you see possibly on the horizon that led to that? Or is it?

No. I mean, there was some noise, as you pointed out in December. But I think that -- if that were to play out, that would be more towards the health care providers than through manufacturers. But from our perspective, we've tried to sort of calibrate our guidance so that we learned a lesson from last year, I guess.

Maybe just a question I didn't write down here, but maybe just zooming out for a second before we hit reproductive health and then go to the P&L. Just in terms of the targets that you guys set, just kind of remind us like what's the way like management compensation is set? Like what are the targets? Is it 3-year targets, 1-year targets? How do we think about growth rates? Is it on organic growth? Is it on margins? Just can you provide some color?

So I think -- and it's out there in the proxy for us, it's around organic growth. It's around operating margin expansion and around cash flow conversion. Those are the 3 elements that we are compensated on.

Yes. And is usually 1-year targets or 3-year target?

Well, 3-year targets. The long-term incentive plan is 3 years.

Got it. Got it. What's a 3-year target...

You got to go look it up in the proxy.

All right. Okay. So maybe just on reproductive health. Gel, we assume -- I think you've guided for this, right? I mean, $13 million of gel contribution across the first 3 quarters. Is there like tremendous visibility in that? Is that in the bank? Or is there -- is there any uncertainty around that contribution?

No, there is no uncertainty around the gel component of it. But I think overall, you've got to look at the reproductive health business and more importantly, on the newborn screening business. That business has had outsized growth. And it continues to do very well despite birth rates being depressed in most of the developed markets. And that is a direct correlation of a geographic expansion that we've seen and the new disorders that we are launching. And we've got 2 new disorders that just got approved by the HHS. And as we are bringing those into the market through the regulatory bodies, that business is very well positioned to grow at the same rate that it has grown. And that's one of the drivers, Dan, that in terms of what we have in our LRP versus how we've done, it has had disproportionate growth.

Yes. No, it's run well above your LRP for sure. I mean right now... Yes. Okay. So maybe just to ask or talk about the Sanofi partnership a little bit on early detection of type 1. And is that like a nice incremental driver? Just could that actually show up in the numbers?

I think the way to think of it is it's a greenfield, right? It's a new territory. Today, the way a child -- you detect a child has juvenile diabetes or Type 1 diabetes as if there is an event. And that's pretty devastating to parents. I think Sanofi with Tzield has the first approved drug that delays the onset of juvenile diabetes. But you can only give the drug if you know that a child has Type 1 diabetes. And that's where screening plays a very important role. And the partnership with Sanofi is exactly that, that we develop companion diagnostic along with them that allows to identify kids through a screening program as to who has Type 1 diabetes.

And in some progressive countries, Italy being an example, that have implemented that as a mass screening for all kids. And I think you will see that over the next few years, that is going to be adopted by other countries and hopefully, the United States where I think it's whatever another word for criminal is, is to not test kids for a simple screening that allows you to know whether your child has Type 1 diabetes or not.

Okay. So maybe before I hit the P&L, maybe just zooming out, you bought back 15 million shares of stock over the last 2.5 years. Talk a little bit about -- you're -- obviously, you're very positive on your stock price. But talk about cap allocation, talk about maybe M&A, talk about like -- that's a meaningful amount and kind of what you do from here?

Yes. Look, I think if we had the opportunity, we'll continue to be opportunistic in share buyback. I think there is no better opportunity for us than to put our money towards buying our shares. We do have a EUR 500 million bond, which is due in July. So our focus is on paying that back. But as you pointed out, we've bought back 12% of our shares. And I think our focus right now, if we are to do deals, they will be more like the ACD/Labs deal that we did on the Signal side of the business and more bolt-on acquisitions.

I think we are very acquisitive, as you know, since I've joined the company, I have deployed nearly $10 billion in M&A towards mergers and acquisition and divestiture of PerkinElmer. So we are not shy of being acquisitive, but I think it has to make strategic sense and financial sense both for us to be able to want to do a deal.

Right now, it's more bolt-ons is what you're seeing today.

Right now, we are going to -- I mean, right now, our focus is on, a, paying back the debt and continuing to be opportunistic on -- there are no gaps in our portfolio. I think we've gone through the journey of portfolio transformation. We are very happy with what we have. But if there's something that makes sense strategically, we will look at it.

So what's the market missing then? You're buying back your stock hand over fist and you're saying it's the best value you see for your -- for cash, stock trades at -- it's not a super low multiple, but it's one of the lower multiples kind of in that peer group. So what's the market missing?

Yes, I think we are still a proven story. Revvity is a, I would say, 15-quarter company. PerkinElmer was an 80-year company, but Revvity is not. 65% of our revenue was nonexistent 5 years ago, 7 years ago. So I think we've got to be able to put the proof points. But let me give you an example of what we've done in 2025. We came out at the beginning of '25, we said we would be 3% to 5% organic growth, $4.90 to $5 in EPS, right?

We had tariffs hit. We had China immunodiagnostics. We had NIH funding issues. You can go down the litany of items that hit all of us. We still grew 3% in that market environment. We beat our EPS guidance by $0.06. Yes, we had some benefit from below-the-line items. But I think we showed exemplary performance in terms of how we executed on things that were in our control from all across the P&L, top to bottom, and we are really proud of it. And I think that is the differentiated performance you will see. We just need to see the market come back to somewhat of a normal environment for us to be able to prove the value and the strength of the portfolio that we have assembled together. That's the opportunity that we are looking for and waiting for.

Maybe just -- we have a minute left, I want to jump into a margin question. I know I kind of front ran the ending. But just back to gel for one moment, right? So as you articulated -- excuse me, reproductive health was growing that mid-single-digit rate. That was above your LRP, and that's kind of -- we model 2% to 3% in '26. So the mid-single-digit growth rate, you said it was outpacing birth rates. Is there a chance to can sustain mid-single this year above the kind of 2% to 4% that I think or 2% to 3% where the Street is?

I don't know what we've said, but I would say that you see he's shaking his head in the right direction. So the answer is, yes.

That you could grow above that rate. Yes. Okay. That sounds good. Okay. So maybe final question. We talked about just a moment ago, like you need to see the recovery. I don't know, like what's something in 2026, if we look back that will one or two things you think that will not surprise, but will be key for how Revvity does?

I think the things that have been in our control and execution. I'll give you the opportunity around the margin story, right? There has been some skepticism that the margin expansion from Q1 to Q4 is large. But typically, the revenue difference between Q1 and Q4 is $100 million. So that itself accounts for 600 bps of margin expansion, right? We have a $10 million cost aspect in Q1, which is because of the extra week, which won't be there in Q4.

So that adds another element to it. The cost initiatives that we have put forth in Q1 -- Q4 and Q3 and that are also ongoing in the first and the second quarter of this year will have a $20 million impact in the second half of the year and in Q4, but more importantly, also in the first half of '27. So we've got a clear line of sight to the margin expansion opportunities in Q4 to hit 28% a year.

I don't think that story is fully understood. And I think what is still not understood is that you will also see the benefit of that in the first half of second year. So we are going to have 2 years of outsized margin expansion performance by the company. I think we just need to go through and demonstrate that to the Street.

Terrific. Well, that's a great way to end it. So thank you for being here, and I hope you guys have a great rest of the day.

Thanks for joining us at the Raymond James Institutional Investor Conference. I'm Andrew Cooper. I cover Life Science tools here for Raymond James and happy to have the revenue team joining us this morning. We have CFO, Max Krakowiak, here to start us off with a brief presentation, and then we'll jump into some Q&A as well.

So with that, I'll hand it over to Max. Thanks.

Yes. Thanks, Andrew. Appreciate you having us here, and good morning, everyone. So for today, I'll go through kind of a brief overview of revenue as a company in terms of the transformation that we've undergone over the past decade or so as well as talking about sort of the composition of the company and then what we're really most excited about going forward here.

So in terms of the transformation, as I mentioned, at Revvity, it has been a crazy past couple of years. I think when you look at it about 10 years ago, Revvity was roughly 1/3 Analytical, 1/3 Life Sciences and 1/3 Diagnostics.

Our Life Sciences business at that time was mostly focused on small molecule in the preclinical research space. And then for Diagnostics, we just had our reproductive health business. And so, over the past handful of years, we built up tremendous scale in both our Life Sciences and Diagnostics business, expanding into large molecule capabilities on the Life Sciences side and then expanding our Diagnostics business into other areas outside of just reproductive health, particularly in the areas of autoimmune, allergy and emerging disease.

And so then we had enough scale in both our Life Sciences and Diagnostics business to divest our Analytical business. Our Analytical business also sold off the PerkinElmer brand name as a part of the divestiture. And at that time, we then formally launched ourselves as Revvity in March of 2023.

And I think as Revvity, we are incredibly excited about our portfolio. We truly believe that we are in a category of one in terms of our focus on science and innovation, our higher mix of reoccurring revenue and then also really strong financial profile with market-leading positions across the entire portfolio.

And so if you look at Revvity today, it's roughly a $3 billion company. It's about 50% Life Sciences and 50% Diagnostics. Again, from a mix perspective, we do have a very high reoccurring revenue mix, roughly 85% of the portfolio.

And I think when you look at our different businesses within Life Sciences, again, roughly $1.5 billion of revenue. It has two main components to it. It's our Life Science Solutions business, which consists of our -- I would say, highly innovative reagents and instrumentation portfolio, and then about 15% of it is related to our software business. Our software business, the easiest way to think about it is essentially the ERP for scientists in the research labs, particularly for pharma, biotech and academic and government customers.

And then, I think when you look at, again, the themes of our Life Sciences portfolio, the key word is really around innovation and how we are a true partner to our customers, particularly in the areas of our reagents, instruments and software.

I think, when you look at things from a Diagnostics perspective, it's also again, roughly $1.5 billion in revenue. It's about 60% of our immunodiagnostics business, which again, this is the autoimmune, allergy, and sort of infectious disease end markets and then about 40% of it is reproductive health.

This business, I would say, is more so focused in the specialized areas of Diagnostics as you look at the markets of sort of newborn screening and autoimmune, these are somewhat, I would say, smaller markets versus your general areas of Diagnostics, but they are inherently faster-growing areas of Diagnostics that really depend on a high level of science and innovation.

I think one of the beauties of the Revvity portfolio is now with our Life Sciences and Diagnostics business, we are able to really partner with our customers to cover really the full continuum of care across discovery and research all the way to cure for our patients. And I'll mention it here in a little bit. We are starting to see some meaningful traction with customers and our ability to support the full workflow.

One of them in particular is around Sanofi in Type 1 diabetes, where we are partnering with them both on the discovery side and their new therapeutic, but also conversely with the companion diagnostics for their new T1D therapeutic.

I think in the next couple of slides, I'm going to talk just quickly on some of the big sort of near-term priorities in terms of where we're focused on, both from an innovation standpoint, but also from an operational excellence perspective.

When you look at the areas of innovation, I would say there's really four real exciting growth pillars for us as a company. First is in our software business. Right now for our software business, it's probably the largest NPI cycle we've ever had within the business.

So we just recently announced in the fourth quarter, Xynthetica, which is essentially a marketplace for AI models and really linking the in-silico models of AI to the wet lab research that are sort of, I would say, legacy software business supports. And then we've also got two new offerings coming out this year. The first will be BioDesign, which is, again, taking more large molecule software work for capabilities and layering that on to what has been historically a small molecule focus for us from a software perspective.

And then we're also coming out with LabGistics, which is a lab management software capability, which will provide a little bit more detail as we get closer to the launch, which will be in the second half of 2026.

Some other areas of innovation that we're incredibly excited about: One, I mentioned is really around this strategic partnership with customers and linking our Life Sciences and Diagnostics business. I touched upon the Sanofi opportunity, but we also won the Genomics England contract last year, which is the first country to really do large-scale genomic screening, and we believe that is really just the tip of the iceberg in terms of where that's going to go around the rest of the world.

We've also got the GMP innovation, was part of our reagents business. It's a capability and capacity we finished building in 2023. This is something that will take multiple years to really get off the ground from a commercial standpoint, but we continue to make really good progress from a pipeline perspective.

And then I would say the fourth pillar is really around continuing to drive robust growth in our immunodiagnostics business in the U.S. That business has been, I would say, underpenetrated from a U.S. market perspective. About 40% of the market is there. When we acquired our immunodiagnostic assets, they had less than 5% of their exposure. Last year, it got up to 20% of their revenue. It was related to the U.S. and one that we can continue to believe that we have the right to get to sort of the market entitlement of around 40%. And so that's a journey we're excited about over the next couple of years.

From an operational excellence perspective, we've been very focused on Revvity in a couple of key areas. One is really around free cash flow performance. So historically, PerkinElmer at the time was generally about 70% free cash flow conversion on an annual basis. And our 2 full years is Revvity, it's been closer to about 90% free cash flow conversion. It's a testament of the portfolio, but also the operating rigor we've put around our cash flow performance.

Additionally, from a capital allocation standpoint, we've been very active in share repurchases over the past couple of years since becoming Revvity and it bought back more than almost 10% of the company in the past 2 years.

And then from an operational excellence perspective, we remain very focused on our margin expansion. We've got about close to 100 basis points of margin expansion planned in '26. We also expect '27 will have outsized margin expansion as you get the annualization of the cost benefits that we're driving in '26, and that's really driven across the three main buckets of headcount, and then some supply chain synergies, both from a just optimization of how we run our facilities, but also a significant amount of footprint consolidation.

So as we look at sort of the LRP and what we believe this company should execute on over the long range, we believe that this is a 6% to 8% organic growth company, which is several hundred basis points above what we believe the underlying market growth of mid-single digits is for our company. Again, that is in a normal environment. The past couple of years have been more challenged, particularly as it relates to pharma biotech. And so we have been, I would say, a little bit short of what we expect from an LRP perspective. However, there are many other areas of the business that continue to perform even above their LRP targets with reproductive health and software being two of the bigger drivers of that.

And then from a margin perspective, this is one area about Revvity that we remain incredibly excited about. I don't think we've had really the chance to show the full potential of Revvity from a margin perspective given the headwinds I mentioned, particularly around pharma biotech. But it is one where we do believe as Revvity, we have the opportunity to drive industry-leading margins, particularly as it relates to our ability to drive incremental margins on additional revenue, as a lot of our growth opportunities that I talked about in those four pillars do not require additional feet on the ground. And so the leverage that we can drive from an SG&A perspective in a normal market environment, we believe, is industry best.

So from a 2026 perspective, just a few highlights in terms of what's embedded in our guidance. Revenue roughly around $3 billion, organic growth of 2% to 3% and then adjusted operating margin of 28%, which I mentioned is roughly 100 basis points expansion versus 2025. That leads to high single-digit EPS growth in 2026.

So, in terms of the overview, and I think maybe just a couple of thoughts to leave you with is Revvity has undergone a significant amount of transformation. The past couple of years have been challenged from a pharma biotech end market perspective, but we remain incredibly excited about, I would say, some of the Revvity-specific innovation drivers we have over the next couple of years that allow us to continue to drive sort of outsized organic growth versus the market as well as, I would say, significant opportunity for us as Revvity to really drive industry-best margin expansion.

So with that, Andrew, I think we'll do some Q&A.

Perfect. That was great. Thank you. If you want to, yes, take seat. Maybe going to hit the most topical, I think, question first here over the last probably 1.5 months or so, but AI has been something I feel like we can't have a conversation without talking about. So you've talked about some of it before in terms of what the impact is. But how do you think about it? What's the latest and greatest thought on what the impact of AI and drug development is for you and for your products business?

And then secondly, obviously, you talked about it with Xynthetica, but what you guys are doing with AI kind of on the other side of things and whether it's more opportunity for Revvity or risk, which I think is what the market is kind of saying right now?

Yes, for sure. I think the way you phrased it at the end there is kind of how we're seeing things too. There seems to be a little bit of a disconnect, I think, versus what the market perception is on what's going to happen with AI versus what we believe is going to happen internally. I think we believe that AI is going to be a net tailwind for us as a company across both our reagents and our software business.

And I think if we start on the second one, maybe from a software perspective, I think a lot of the perception in the market is that AI is going to have the ability to display software. And I think that's true to some extent.

However, it's not going to impact things that are sort of a record keeper, right, where you have centralized data or things that are critical to sort of the enterprise infrastructure and how you operate your company, which if you look at our software business, that's really what we provide, right? It is the ERP for the scientists. It is where they are logging all of their wet lab research and notes and data associated with that. And it's a reason why that business is so sticky.

Our net retention rate in our software business is north of 107% because it is very difficult to change from our system, just given how much of your operations are entangled in it. So I think there's sort of really kind of minimal risk there from a displacement perspective, right? I mean, I don't tell SAP, but we wouldn't move off of our ERP, just like our scientists wouldn't want to move off theirs.

And I think then when you look at things from a Xynthetica standpoint with our software business, we are perfectly positioned to take advantage of where drug discovery is going with AI, right? And everyone talks about the impact of models. Well, that is what Xynthetica is.

Xynthetica is the infrastructure in marketplace for where pharma companies can take what they do in our existing software today with their wet lab research and being able to pair that up with whatever AI models they're running to create sort of that consistent loop between in-silico models and wet lab data to both accelerate drug discovery, provide better drugs, but also do it at a lower cost.

And so from that perspective, we're agnostic to what AI models folks are running. It is an open marketplace where they'll have Revvity models. It could be the specific pharma companies' model, it could be from ChatGPT, Cloud, you name it, even Raymond James, if you guys have a model, you can throw it in there.

Not quite yet.

I think from that perspective, we are really, truly perfectly positioning our software business to create that connection point between the in-silico models and what we offer from a signals perspective with the wet lab research.

I think then when you look on the reagent side, I know this is long-winded, but I think it's the most topical discussion for us today. I think when you look at things from a reagent perspective, we also think this is going to be a net tailwind for us. And I think when you look at what's going to happen from an AI drug discovery perspective, AI is going to enable them, again, to create more ideas.

However, all these ideas are still going to need wet lab validation. And I think what you're going to end up seeing is, this rate of new ideas is going to far exceed what the infrastructure is right now from a wet lab perspective, and you're going to create essentially a validation bottleneck. And what you're going to have is all these ideas that are going to need to get validated, they're going to need to get tinkered with, they're going to need to feed back into their models to then ultimately come up with a therapeutic that they're going to take to market.

And I think you're going to see some real benefits from that. But it's probably going to lead again to this validation bottleneck where you're going to have more wet lab work being done to validate what's coming out of the AI models.

And I think even if you look at other industries, I think there might be some parallels. I mean, if you look at what's happening from like an NGS or a bioprocessing perspective, both industries have had significant technology advancements where the costs are efficient -- the costs have come way down, efficiencies have come way up. And as a result of that, the volume has gone up as well. And the overall market size continues to increase and it's not -- the market size is not decreasing because things are getting more effective or there's better technology. And I think that's what you're going to see from a drug discovery perspective is AI is going to be a net tailwind to the industry and particularly as it relates to the wet lab research.

That was perfect. I'm definitely stealing validation bottleneck. So I'll credit you. No, that was great. Maybe just taking kind of the step back now that we've covered, like you said, probably the most pertinent thing today. You guys are looking for 2% to 3% organic growth this year, essentially the same as last year, but I think there's a lot of moving parts between that. So maybe just walk us through some of the things that are better, some of the things that are a little bit harder? And then I'm sure we'll dive into those a little bit more from there. But just kind of the overview and maybe a little bit of the macro.

Yes, sure. So from an organic growth perspective, you're right, it's relatively similar year-over-year. I think from a guidance perspective, our assumption is that the end market trends that we really saw in the fourth quarter kind of continue over the course of the year. We are not embedding any sort of market recovery from a pharma biotech or academic perspective. So that's probably the first thing I'd say.

I think when you look at the different moving pieces year-over-year in terms of what's improving year-over-year, it is really the Life Science Solutions business. The first half and really three quarters of last year, we're still a challenging market environment. We did start to see some improved momentum here in the fourth quarter, and we're sort of assuming that sort of steady state we saw in the fourth quarter, what continues in '26. And so that will make the Life Sciences solution instead of being a slight decline in '25. We expect it to be sort of low single-digit growth here in 2026.

In terms of reproductive health, that's another business that continues to perform incredibly well. Over the last couple of years, it's been growing above its LRP. 2026 is another year, we're expecting mid-single-digit growth above its LRP. And so that's a business that we continue to sort of accelerate here in 2026.

I think, in terms of the headwinds of what's changing year-over-year, I'd just call it really probably in two buckets. One, Software growth will moderate year-over-year. It grew high teens in 2025. We have sort of a mid-single-digit assumption in 2026. That's really just a function of the revenue recognition sort of accounting rules, though of software.

I think when you look at the underlying software business, we look at a metric called APV, your annualized portfolio value. And so from that perspective, the business continues to grow in the double digits, which we think is the best metric in terms of the health of that business' growth. So it's really -- I wouldn't call it out as a headwind. It is from an organic growth perspective, but the business continues to perform well.

The last piece I'll mention is probably just China IDX. We are having a more prudent assumption on that business for 26. We have the DRG policy that we're lapping in the second quarter. And so we expect that business to be a slightly larger headwind in '26 versus '25.

Perfect. We'll dive in on a couple of those. I want to start with reagents. Flat year-over-year in 4Q, which was better than 3Q, and I think getting a little bit better as the year went on. So maybe just remind folks how you think about that business long term and then specifically in '26? And then I want to dive in on a couple of specific topics there.

Yes. So I mean, I think you mentioned the key numbers there for '26, right? So we are expecting sort of low single-digit growth in our reagents business, it was flat in '25. I think when you look at the long-term growth rate of that business, we believe it is a high single, low double-digit grower.

I think when you look at the market growth rate over the past decade in terms of sort of the reagents research market, it's a market that grows mid- to high single digits. And so I think for right now, you've seen some turbulent over the past couple of years. But one that, again, whether it's because of AI or the fact that just pharma companies need to continue to innovate, they're coming up with their patent clip. It's one that we do think is going to return to more normalized growth rates. And then there's reasons why we should grow above it. GMP being a big piece of that.

That was one of the pieces I want to touch on. So I think you had the stat up there, 2.5x the projects advancing to GMP relative to where you were, I think, a year ago. So, can you level set where is GMP today ideally quantitatively? And what's the pace that, that business can grow to get to sort of your rightful share of a mature GMP franchise?

Yes. So In terms of the size today, it's relatively immaterial. I mean, you're talking maybe a couple a couple of million bucks. I think when you look, though, at GMP, again, we finished the sort of capability and capacity build-out in 2023. And I think when you look at some of our peers in the past when they've gone through this journey, it's been about 7 years in terms of when they finish the build-out to when they start seeing meaningful commercial traction. We are planning to do it closer in 4 to 5 years.

And I think for us, again, one of the metrics you mentioned in terms of the pipeline, we are continuing to see very good traction. And although it might not show up to 2027, we've got a bunch of operational metrics, commercial metrics for the team that we're pushing and continuing to see really good traction.

Just one that takes time, right? This isn't something where somebody is just buying a $500 vial of antibodies, and then you're never talking to them again an all of a sudden it's $10 million, $15 million.

I mean, this is something where you're working with the customers to really sign up more of a marriage, right a long-term agreement, where there's going to be many puts and takes to it. So it's just something that takes a little bit longer from a commercial perspective to get off the ground, the one that we remain really excited about.

Perfect. And then a pretty big deal in the space with the Waters BD transaction. Any competitive disruption there? Any opportunity? Any change with that asset changing hands in terms of how you think about the competitive landscape?

Yes. I mean, I think first just off, from a competitive perspective, I think we've created a really nice competitive moat within our reagents business. And I think when you look at that competitive moat, there's really a couple of factors that drive it.

One, I think we have sort of best-in-class customer service, whether that's around the fact that most of our sales reps are PhDs, and we're a true partner to the customer, whether that's around the fact that most of our reagents around the globe are delivered within 24 hours. That is a big competitive differentiation for us.

And then you also look at things like we are the value-based offering in the market where we think we have the highest quality and the lowest price point. And then from an innovation standpoint, we have some of the best scientists in the world coming out with new reagents. And we come out with more than 1,000 new sort of reagent SKUs each year. And so it's an incredible level of and pace of innovation.

So with that being said, I think even outside of the deal getting done, I think we have a competitive advantage. But we've seen with past deals, that can cause disruption. And it's something that we'll definitely take advantage if that should persist.

Perfect. Maybe shifting a little bit to software. You touched on a lot of it, but in terms of the near-term trends. But I guess, thinking about the last couple of years, let's say, where a lot of these customers have been holding, spending in check, you've still seen good growth in software. So maybe just talk a little bit about why that is, what enables that and kind of the dynamics there when you talk to customers about software purchases versus, like I said, not spending as much in a lot of wet lab areas.

Yes. I love talking about our software business by the way. But look, I think from a software perspective, it's not really one factor, I would say it's multiple factors that have been leading to the strong performance of that business. Again, we really look at the APV metric versus organic growth. I think if you look back over the past couple of years, it's been a low to mid-teens growth from an APV perspective.

And I think as you look at those factors, right, I think one of the big factors is what I mentioned earlier. It's an incredibly sticky product, right, in software for our customers. It is changing out would be like changing your SAP to Oracle. It's just not a decision that companies take likely. So a reason why our net retention rate is sort of been north of 107% consistently over the past 4 to 5 years.

And I think when you look at that net retention rate, right, there's a little bit of price, but the biggest factor of it is continuing to expand the functionality of what we offer our customers. And so whether that's customers adopting features that have already been out there and they're just expanding how they're using signals or it's the fact that we're coming out with new sort of capabilities in the marketplace that they're biting into. And I think again, when you look at over the next couple of years, we're in the biggest cycle from an innovation standpoint related to our software business than we've ever been.

And it's across the biologics. It's the LabGistics, you've got Xynthetica. And those are three massive NPIs for us and ones that we're really excited about. I'd say the other area, the software business that we continue to do well and it's expanding in areas outside of just Tier 1 pharma.

I think when you look at our Signals business, historically, it was focused on Tier 1 pharma. We're in 49 out of the top 50 Tier 1 pharma companies but we haven't had a ton of penetration in Tier 2 and Tier 3 pharma, which we now have e-commerce and some other things we're doing to specifically reach that end market. And then, we've also got the expansion into material sciences. And that is one that is seen, I would say, relatively robust growth over the past couple of years. We think we're still very much in the early innings of the penetration into that market.

The ACD acquisition that we just announced in the fourth quarter and closed here in the first quarter, that acquisition for us is one that gives us a tremendous foothold or a stronger commercial channel in the material science market. And so we think that can help accelerate our penetration efforts there. So a lot of things to be excited about from a software perspective.

Perfect. I won't bring up the above LRP numbers, Prahlad talks about. Okay. Shifting a little bit, just the instrument side. Flat in 4Q. I think that's one you admitted was a little bit kind of lighter than what you thought. And I think it's a little bit lighter than what some others in the space broadly talked about. What about your portfolio makes that a little bit different than maybe what you hear from some of the, again, other tools players broadly when they talk about their instruments?

Yes. I mean, maybe to say it was a little bit lighter than our expectation. I think we had pretty lofty expectations coming into the fourth quarter. I'd say net-net it was a really strong fourth quarter performance for us for our instrumentation. It's the best quarter we've had in 12 quarters for our instrumentation business. It was roughly flat in the fourth quarter.

I think that's the assumption, too, that we have going into '26 is again sort of a flattish instrumentation market. But we continue to see really good momentum. And actually, the area I would say we continue to see the most momentum is in our high-content screening business.

That's an area where, again, even if I think you link it back to some of the comments I made around AI and where it's going with drug discovery, screening is going to play a massive role in that loop and the connection between the in-silico model and what happens from a wet lab perspective and the drug development. And so we think that product is positionally placed. And we've come out with a lot of AI applications sitting on top of our high content screening that's making that feedback loop to the in-silico models even faster.

Perfect. Just looking at the clock now, I want to shift to diagnostics a little bit. And I'll jump right into China and the DRG impacts and some of what's going on there. So has everything held kind of as you'd expected? And how do we think about sort of risk of additional change in China, if any, when you look at that franchise and thinking about the future?

Yes. Look, so I would say a couple of things. One, nothing has really fundamentally changed from what we laid out. I think we -- again, we'll anniversary the DRG headwinds here in the second quarter of '26. We did take down our assumptions in terms of what the growth rates would look like for IDX China, right? We put a little bit more prudent numbers out. But just given a lot of the volatility that's happened in that market to give ourselves a little bit more breathing room from what we have embedded from a guidance perspective, but nothing has fundamentally changed.

And I think we're, again, excited about what's going to happen once we anniversary the DRG headwind here in the second quarter. And we'll just see how things play out in the time from there.

Perfect. And then, I did want to touch and you mentioned it there in the immunodiagnostics business in the U.S. You brought some automation with the AP 2400. I think you've talked about some higher throughput automation sort of on the come. So maybe just level set for us how we should think about what this next leg, this next kind of high throughput step-up opens up in terms of driving from the 20% to 40% down the road?

Yes. Maybe even just stepping back a little bit further too. As you look at our U.S. immunodiagnostics penetration, right, there's sort of two key components to it. One is on the automation, which we touched on. And then the second is continue to get further FDA approvals.

I think when you look at the automation area that we've been particularly focused on is really related to our TB workflow and our Oxford franchise. And I think when you look at it from there, we've come out with the low throughput and the medium throughput. We need the high throughput.

And I think when you look at the U.S. market landscape, the high throughput is the biggest piece of the market. And when you think about the reference labs and the volume there. So it's something that's, I would say, in the near-term pipeline to be announced from a commercialization standpoint, we've seen really good traction on the low and medium throughput. It's kind of right in line with our expectations in terms of the displacements. But it's also one that will take time.

Even when we come out with the high throughput one, most of these contracts with reference labs are in reagent rentals. These are long-term contracts that labs generally don't break. So it will take us some time to get commercial traction. But at least where we've seen some head-to-head competition, we've had some nice wins, because of the automation.

Perfect. I know it's a hard one to answer, but latest and greatest thinking on tariffs given some of the moving parts?

Yes, look, it clearly continues to be very volatile. Tariffs are still in place. We'll have to see what happens over the next 140, 150 days or so and what ultimately gets put in place. But I think if you look at the sort of response to tariffs from a revenue perspective, when that came out last year, we were very quick to mitigate, I would say, a good chunk of what we had from an exposure standpoint.

The only real remaining exposure we have is a lot of our diagnostics manufacturing is in Europe. So for those sales in the U.S., that has been a little bit of a tariff burden for us. We'll probably continue to wait and see if there's going to be a more permanent change from a tariff perspective and if we need to sort of put the investment dollars to work in terms of having an FDA manufacturing site in the U.S. But we're going to have to see how the next couple of months play out and whether this is really a permanent thing or a temporary thing.

Perfect. Operating margins, I think 4Q, you flagged, you stepped up some -- essentially some benefits for a lot of the employee base. Can you just offer a little bit of kind of magnitude there? And more importantly, as you think about the trends from here, the volume side in '26 that's driving revenue. How do we think about the drivers of what has to happen to get to 28% and then beyond that to drive you to another outsized year in '27, like you said?

Yes. So a couple of things from a margin standpoint. One, I just address the tactical question in Q4. Yes, it has been, I'd say, a couple of years of very challenging incentive payments to our employees. We finished 2025 on a strong note in Q4, so we did invest some of that back into our people. It's probably about 20 basis points for the full year. So outside of that, we would have been right at the upper end of our guidance expectation of 27.3% OM. And so that's probably the rough magnitude there.

I think when you look at really 2026, right, we are stepping up to 28% operating margin. That is really a factor of the productivity initiatives that we're driving that will be completed in the first half of the year.

And the main areas there are, one, taking some actions related to what's happening in China and reducing both our commercial and manufacturing footprint for our immunodiagnostics business.

Second is around continued integration and delayering. Then the third one is really rooftop consolidations across our supply chain. And so those are the big three factors. And I'd say from a margin perspective, we're really excited about the outsized LRP expansion in '26. I think we'll be above our LRP in '27 as you get that annualization of the cost productivity. And so I think you'll continue to see strong margin momentum for us over the next couple of years.

Perfect. We're about out of time, so I'm just going to sneak the last one in the classic. What are folks missing? What are folks getting wrong? Or what do you want to leave us with?

Yes. I mean, I think probably three things. One, we talked about on the misconception of AI versus how we think it's going to impact our Life Sciences business.

The second is, I think as you look at the organic growth of 2% to 3%, we mentioned on the earnings call, I think we have a decent amount of prudence baked into it. One to allow for some flexibility if things continue to remain volatile and maintain our guidance. But two, in the event things get better, we should have the opportunity to deliver some upside.

And then the third is on margins. I mentioned it, '26 and '27 will be years where we have margin expansion above our LRP, because of our productivity initiatives. I think folks recognize it in '26. I'm not sure if that's maybe connected to '27. And the fact that over -- really over the next 4 to 5 years, we believe we will have industry-leading margins for the Life Sciences tools industry.

Great. Well, we're out of time. We'll head downstairs for a breakout in Amarante 1. Thank you so much. Appreciate it.

Ladies and gentlemen, thank you for joining us, and welcome to the Q4 2025 Revvity Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Steve Willoughby, SVP, Investor Relations. Steve, please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Revvity's Fourth Quarter 2025 Earnings Conference Call. On the call with me today are Prahlad Singh, our President and Chief Executive Officer; and Max Krakowiak, our Senior Vice President and Chief Financial Officer.

I would like to remind you of the safe harbor statements in our press release issued earlier this morning and those in our SEC filings. Statements or comments made on this call may be forward-looking statements which may include, but may not be limited to, financial projections or other statements of the company's plans, objectives, expectations or intentions. The company's actual results may differ significantly from those projected or suggested due to a variety of factors, which are discussed in detail in our SEC filings. Any forward-looking statements made today represent our views as of today. We disclaim any obligation to update these forward-looking statements in the future, even if our estimates change. So you should not rely on any of today's statements as representing our views as of any day after today.

During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of the measures we plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release.

I'll now turn it over to our President and Chief Executive Officer, Prahlad Singh. Prahlad?

Thank you, Steve, and good morning, everyone. I'm glad you're able to join us to discuss our fourth quarter results and our initial outlook for 2026.

Overall, 2025 proved to be a dynamic year filled with both new challenges and significant opportunities for both our company and our customers. I'm pleased to share that in spite of the evolving circumstances we faced, we closed the year on a high note, with our fourth quarter revenue, organic growth and adjusted EPS, all surpassing our expectations. This strong fourth quarter performance enabled us to exceed our adjusted EPS guidance for the entire year.

It's especially impressive that even with the factors such as changes in NIH funding, evolving tariffs, pharma policy uncertainty, the extended U.S. government shutdown, foreign exchange movements and shifts in DRG-related volumes affecting our Diagnostics business in China, we were still able to deliver $5.06 in adjusted EPS, surpassing the initial guidance we provided a year ago. Additionally, our 3% organic growth for the year was also within our original guidance range we outlined last January despite all the unexpected challenges we encountered throughout the year. Our ability to achieve our initial organic growth guidance and exceed our EPS guidance in spite of these hurdles speaks to Revvity's resilience, our agility and our overall ability to execute in those areas that are more fully within our control.

We were able to accomplish all of this while still delivering strong outcomes for our customers, our employees and our shareholders. In the fourth quarter, we saw positive momentum continue across our diagnostic businesses with both reproductive health and immunodiagnostics performing better than anticipated. This strength led to our Diagnostics segment organic growth being up 7% in the quarter overall.

In our Life Sciences segment, we also continued to see trends gradually move in the right direction across our end markets as our organic growth was flat year-over-year with positive low single-digit growth from our pharma customers and a low single-digit year-over-year decline in sales from our academic and government customers, which included a modest headwind from the U.S. government shutdown. Importantly, our sales of life sciences reagents and consumables were a bit better than we had expected and were flat year-over-year overall.

We also saw continued improvements in demand for our Life Sciences instruments during the fourth quarter as they were also roughly flat on a year-over-year basis. This performance for our instruments represented a strong double-digit sequential increase in total revenue as compared to the third quarter and marked a meaningful organic growth improvement compared to the more significant declines we've seen with these products fairly consistently over the past 3 years.

Given the strong finish to 2025 and the progress we've made over the past few years, we chose to reinvest a portion of this operating upside back into the company during the fourth quarter with a particular focus on supporting our employees who have remained highly dedicated and productive throughout the year. This resulted in our adjusted operating margins in the quarter being 29.7%. When combined with some below-the-line favorability, this led to our adjusted earnings per share in the fourth quarter to be $1.70, which was $0.11 above the midpoint of our guidance and $0.06 above the high end. In addition to the meaningful progress we've made operationally in 2025, I'm very proud of what we've been able to opportunistically accomplish from a capital deployment perspective as well.

In 2025 alone, we've repurchased over $800 million worth of our shares, reducing our share count by 8.5 million shares overall. This brings our repurchase activity since becoming Revvity in the middle of 2023 to over $1.5 billion, representing nearly 15 million repurchased shares or about 12% of our total share count at the time. This robust repurchase activity during a period of elevated end market uncertainty demonstrates not only our continued confidence in our transformation and our medium- and longer-term potential, but also our continued disciplined stewardship of shareholder capital. We will continue to be both opportunistic and disciplined as we evaluate all capital deployment opportunities going forward, both organically and inorganically. While we began to see some encouraging signs during the fourth quarter and take note of a few different promising market tailwinds of late, such as stronger biopharma funding and M&A activity and greater clarity on future NIH funding.

We also want to remain cognizant in our initial outlook for 2026 that the signs of modest improvement we have seen to date have been only recent, and we continue to operate in what is a fluid end market and policy environment. Consequently, while Max will provide more details in a bit, we are reiterating for our organic growth this year to be in the 2% to 3% range as we are assuming recent end market trends continue over the course of the year. If these potentially favorable market conditions do result in customer demand recovering more than we currently anticipate in this outlook, we will look to appropriately update you on future quarterly earnings calls.

I'm happy to report that in mid-January, we closed on our previously announced acquisition of the software company, ACD/Labs. We are already in the process of integrating ACD into our Signals business and initial steps are underway to integrate its core product offerings into our main Signals One platform as well. We expect ACD to contribute a little over $20 million in total revenue this year, which adds another roughly 75 basis points to our overall revenue growth for the year. So taking into account our 2% to 3% organic growth outlook and the expected tailwinds from FX and the ACD acquisition, it brings our total expected revenue this year to be in a range of $2.96 billion to $2.99 billion.

As we've highlighted in the past, we are making good progress with our various cost efficiency initiatives and remain on pace for them to be fully completed by the end of the second quarter. These programs include significant footprint consolidations, deeper commercial and operational integrations and greater supply chain and logistical synergies. While the impact will increase as the year goes on, especially in the second half of the year, we continue to expect these initiatives to result in our adjusted operating margins this year being 28% overall. We expect this all to result in our 2026 adjusted earnings per share to be in the range of $5.35 to $5.45, representing high single-digit adjusted EPS growth for the year. So overall, we are positioned well as we enter 2026, and I'm optimistic that our end markets should begin to recover as we go through the year, which would provide even greater opportunities for us and our shareholders.

Another item we are extremely excited about as we move into 2026 is our recent introduction and upcoming launch of our AI models as a service platform, Signals Xynthetica. Our Signals Software business is perfectly positioned to capitalize on the potential of AI as it is the central repository and workflow engine for nearly all major pharma preclinical R&D activity across the globe and increasingly for many biotechs and small to midsized pharma companies as well. Preclinical scientists work within Signals One every day to create new data, analyze results and seamlessly share it with colleagues. With the introduction of Xynthetica, we are providing a platform where bench scientists will be able to seamlessly leverage industry-leading AI and ML models that are both publicly and privately available directly within their existing workflows.

The insights gained by leveraging these AI models will be used by scientists to more quickly iterate and improve their drug candidates in development, both in the wet lab and virtually, enabling a lab-in-the-loop approach to drug development. We expect this repeating loop of faster and more frequent refinement and advancements of drugs in development will ultimately accelerate drug development time lines versus previous methods.

As part of our Xynthetica launch, we also announced our important collaboration with Lilly and its TuneLab initiative. Lilly TuneLab's AI models are built on knowledge and insights from over $1 billion of R&D investment by the company over the last decade. Lilly is not only making these models available to smaller biotechs in exchange for them sharing data back into the platform, but they are also co-funding with us access to our signals platform and providing Xynthetica modeling credits to biotech users, exemplifying our shared commitment to driving adoption and engagement of both platforms. Signals is embedded in nearly all major pharma companies around the world already. And now with Xynthetica and our collaboration with Lilly TuneLab, we can uniquely deliver functional AI capabilities directly to scientists in a completely transformative way.

So in closing, I'm excited that the power, differentiation and momentum that we have built at Revvity over the last several years is increasingly garnering more and more appreciation amongst our customers, our investors and even our competitors. Driven by leading innovation, coupled with strong and consistent operational and commercial execution, Revvity is on a strong path with a bright future, especially as key end markets likely continue to recover over the coming months and quarters.

With that, I will now turn the call over to Max.

Thanks, Prahlad, and good morning, everyone. As Prahlad highlighted, we navigated and overcame many obstacles during 2025, and we're able to finish the year on a strong note in the fourth quarter as both our organic growth and adjusted earnings per share came in better than we expected. With the stronger finish, we were also able to take the opportunity to further reinvest back into our people while keeping our adjusted operating margins consistent with our expectations overall. I am proud of what we were able to accomplish last year as we were able to achieve both our organic growth and adjusted EPS expectations that were either in line to above our guidance coming into the year despite significant headwinds versus our initial assumptions.

From an innovation perspective, we introduced several very exciting new offerings and collaborations during the quarter, particularly in the areas of software and AI, and we remain opportunistically disciplined with our capital deployment by announcing the acquisition of the software firm, ACD/Labs, which closed a few weeks ago as well as by repurchasing another $168 million of our shares. As we continue to remain extremely confident in the medium- and longer-term potential of Revvity, we use this opportunity to dramatically reduce our share count. I think this will bode extremely well for our shareholders once end markets more fully normalize and our overall financial performance moves back towards our long-range plan in the upcoming years. Our ability to opportunistically deploy capital like we have is a direct result of our strong free cash flow generation and conversion over the last several years since becoming Revvity, combined with our strong balance sheet, both of which I expect to continue.

As we look to the future, we will continue to take a balanced and disciplined approach to deploying capital with a focus on pursuing the highest potential return opportunities in front of us. As we have shown in the past, I expect this will continue to represent an appropriate and balanced mix of buybacks, M&A and internal investments. While I will provide more specifics on our guidance for 2026 in a bit, as we look ahead to the future, I'm optimistic that our key end markets, which have been under pressure are beginning to show some signs of potential initial recovery, which would compare favorably to our current expectations that our end market demand trends continue to remain fairly similar to what they have been over the last 3 years.

Now turning to the specifics of our fourth quarter performance. Overall, the company generated revenue of $772 million in the quarter, resulting in 4% organic growth. FX was an approximate 2% tailwind to growth, and we again had no incremental contribution from acquisitions. For the full year, we generated $2.86 billion of revenue, which was comprised of 3% organic growth, a 1% tailwind from FX and no impact from M&A. As it relates to our P&L, we generated 29.7% adjusted operating margins in the quarter, which were down 60 basis points year-over-year, but in line with our expectations. For the full year, our adjusted operating margins were 27.1%, which were down 120 basis points year-over-year as margins were pressured from tariffs, FX and lower volume leverage. This was partially offset by an increasing contribution from recently implemented cost containment initiatives.

Looking below the line, our adjusted net interest and other expenses were $23 million in the quarter. This brought the full year adjusted net interest and other expense to $84 million. Our adjusted tax rate was 6.5% in the quarter, which benefited from the timing of discrete items, which happened to primarily fall within the fourth quarter. This resulted in a full year adjusted tax rate of 14.5%. As we've previously mentioned, we continue to remain active with our share repurchase program as we averaged 113.2 million diluted shares in the quarter, which was down over 2 million shares sequentially and resulted in our adjusted EPS in the fourth quarter being $1.70, which exceeded the high end of our expectations. For the full year, our adjusted EPS was $5.06, which is above the high end of our initial guidance at the beginning of the year and represented 3% growth year-over-year.

Moving beyond the P&L, we generated free cash flow of $162 million in the quarter, resulting in 84% conversion of our adjusted net income. This brought our full year free cash flow to $515 million, equating to 87% conversion of our adjusted net income. Our balance sheet remains strong as we finished the year with a net debt to adjusted EBITDA leverage ratio of 2.7x with 100% of our debt being fixed rate with a weighted average interest rate of 2.6% and weighted average maturity out another 6 years. As we evaluate capital deployment, we will continue to remain both flexible and disciplined in order to capitalize on the highest return opportunities while ensuring we maintain our investment-grade credit rating.

I will now provide some commentary on our fourth quarter and full year business trends, which are also highlighted in the quarterly slide presentation on our Investor Relations website. The 4% growth in organic revenue in the quarter was comprised of flat performance in our Life Sciences segment and 7% growth in Diagnostics. Geographically, we had flat performance in both the Americas and APAC, and we grew double digits in Europe. For the full year, we achieved 3% organic growth with 4% growth in Diagnostics and 2% growth in Life Sciences. The Americas grew low single digits, Europe grew high single digits and APAC declined in the low single digits.

From a segment perspective, our Life Sciences business generated revenue of $382 million in the quarter. This was up 2% on a reported basis and flat on an organic basis. For the full year, our Life Sciences business was up 2% organically. From a customer perspective, sales in the pharma biotech rose in the low single digits in both the quarter and for the year, while sales into academic and government declined in the low single digits, both in the quarter and for the year.

Our Signals software business was flat year-over-year organically in the quarter, driven by the timing of renewals and difficult year ago comps when the business grew in the mid-30s. For the full year, our Signals business grew in the high teens organically. As it pertains to some of the software industry-specific metrics, our SaaS pipeline continues to grow with nearly 40% ARR growth as compared to last year, with SaaS now representing approximately 35% of the overall business. Signals again had double-digit APV growth versus the prior year and maintained net retention rate of more than 110%.

In our Diagnostics segment, we generated $390 million of revenue in the quarter, which was up 10% on a reported basis and 7% on an organic basis. For the full year, our Diagnostics business grew 4% organically. From a business perspective, our immunodiagnostics business grew in the high single digits organically in the quarter and in the mid-single digits for the full year. Strong performance outside of China was partially offset by double-digit declines for the business in China for the full year as we've continued to face DRG-related volume pressures, which we expect will continue until we anniversary them around the end of the second quarter this year. Our reproductive health business grew mid-single digits organically in the quarter and for the full year. Newborn screening continued to perform well and grew in the mid-single digits in the quarter and in the high single digits for the full year. Our reproductive health business has continued to meaningfully outperform underlying birth rate trends through fantastic operational and commercial execution and an increasing contribution from our work with Genomics England.

Now turning to our initial outlook for 2026. As we recently highlighted at a sell-side conference just a few weeks ago, while we may be starting to see some modest improvements in pharma and biotech customer sentiment, for the time being, we are expecting a continuation of the major end market trends that we've been experiencing over the last 2 to 3 years to continue as we move into 2026. Should demand trends sustainably improve more than this initial outlook, we would look to update you at an appropriate time. With this backdrop, we are reiterating our outlook for 2% to 3% total company organic growth in 2026. Using FX rates as of the end of December, we expect the impact from exchange rates to be an approximate 1% tailwind to our revenue given the weaker dollar.

With us closing the ACD/Lab software acquisition in mid-January, we expect this acquisition to add approximately 75 basis points to our overall company revenue growth this year. We expect this all to result in our 2026 total revenue to be in a range of $2.96 billion to $2.99 billion overall. As we've discussed at length over the past few quarters, given some of the unexpected headwinds we faced last year, such as tariffs, diagnostic volume pressures and FX, we chose to implement and accelerate additional cost efficiency measures in the second half of the year, which we anticipate will take until close to the end of the second quarter of this year to be fully implemented. It is because of these actions that we expect to be able to generate 28% adjusted operating margins this year, up from the 27.1% we reported for 2025. As we've also highlighted in the past, if we are able to generate upside to our organic revenue growth outlook this year above our initial 2% to 3% expectation, we would anticipate some additional leverage and margin expansion above this initial outlook as well.

We had another strong cash generation and conversion year in 2025, which I anticipate will continue going forward. As a reminder, we do have a low-cost EUR 500 million bond that is maturing this July, which we will look to retire. Because we will lose this currently favorable spread on our cash versus this low-cost debt and also have lower average cash balances as a result of our 2025 share repurchases, we anticipate our net interest expense and other to be approximately $95 million this year, up from $84 million in 2025. We clearly had some strong performance from our tax planning initiatives as we moved into the second half of 2025. While we could again see some benefit from our tax planning programs as we move throughout 2026, we are not going to assume any benefit from them in our initial outlook. Consequently, we are assuming an 18% adjusted tax rate in our initial 2026 guidance, up from the 14.5% we ultimately generated last year.

While the timing and impact from discrete tax items can vary year-to-year, I am still very proud of the progress we have been making as it pertains to our overall tax structure over the last few years. Given our progress, our normal annual tax rate has now been lowered to approximately 18%, down from our previous 20% level just a year or 2 ago. Lastly, given our significant share repurchase activity throughout 2025, we expect our diluted average share count to be approximately 112 million in 2026. We expect all of this to result in our full year 2026 adjusted earnings per share to be in a range of $5.35 to $5.45. Here in the first quarter, we expect our organic growth to be in line with our full year 2% to 3% outlook and a sizable 3% tailwind from FX given the weaker dollar year-over-year. While movements in FX do not typically have a meaningful impact on our adjusted EPS, they can have an impact on both our revenue as well as our adjusted operating margins.

Consequently, between FX, our first quarter this year having 14 operating weeks, tariffs and not all of our cost efficiency projects yet being fully complete, we expect our adjusted operating margins here in the first quarter to be approximately 23% before stepping up in the second quarter and then further stepping up in the back half of the year. Our margin expansion will improve as we go throughout 2026 as we will increasingly benefit from the cost programs currently underway -- will anniversary tariff impacts and will not have as large of a headwind from FX beyond 1Q, assuming current rates continue. This all results in our first quarter adjusted earnings per share expected to represent approximately 19% of our full year earnings.

Overall, we finished off 2025 on a strong note with momentum into 2026. We are well positioned to capitalize as end market trends recover while still also being appropriately prudent with our initial outlook for this year, given continued market uncertainties and the dynamic environment we've experienced over the last 3 years. We have positioned the business well for the future, given our dedication to innovation and our ability to consistently deliver for our customers. When combined with our ongoing cost efficiency programs and robust share repurchase activity, we are well situated to see outsized performance should end markets recover more than we are currently anticipating.

With that, operator, we would now like to open up the call for questions.

[Operator Instructions] Your first question comes from the line of Dan Brennan with TD Cowen.

Congrats on the quarter, Prahlad and Max. Maybe just on the 2% to 3% organic guide, I know you started talking about it back, I think, early September. And this was prior to the first MFN deal meeting struck by Pfizer. I think we've had 13 other signs since then. So there are definitely signs the biotech market is improving as well. So just -- I know you've talked about it throughout this call about the arguable conservative nature to start here and you're leaving room for upside. But nonetheless, given you had that anchored back then and things haven't improved, I'm just wondering if you could provide more color on this 2% to 3% framework and kind of what the potential upside could be as the year unfolds?

Yes. Thanks, Dan. Look, so I think as we think about our 2026 guidance, to your point, it is consistent with the framework that we provided back in September. And yes, there have been some positive signs in our end markets since September. Therefore, I think as we look at the guidance for 2026, we do believe that there are multiple paths to potential upside across both revenue and EPS.

When you look at things from a revenue organic growth perspective, some of those paths, starting first on the Life Sciences side, so one, we aren't really modeling any improvement in the preclinical markets across both pharma biotech and academic and government. I think we continue to see positive trends in pharma biotech, whether that's around the MFN deals and the certainty that brings our customers, the biotech funding environment, the M&A environment, there's definitely been some positive indicators over the past couple of months. And look, it's tough to believe that academic and government is going to be as challenged as it was last year.

The second thing, from a software perspective, we have the launch of some new products at the end of '25, early '26. We are not embedding any material benefit from those software launches in 2026, but obviously, there's a potential that those could accelerate quicker.

And then I think when you look at things from a Diagnostic side, on the newborn screening side, in particular, we're assuming more LRP-type performance for that business as opposed to the outperformance that it's driven over the past couple of years. There's nothing fundamentally changing there other than just a more prudent assumption to start off the year.

And then secondly, from an immunodiagnostics side, we are taking a little bit more, I would say, of a conservative and prudent approach on some of the expectations for our China IDX business, which at the end of 2026, will be less than 5% of total company revenue, but we are taking, I would say, a more prudent assumption there.

So then from an EPS perspective, right, a couple of potential opportunities for upside. One, as it relates to from a margin perspective, I just talked about multiple paths from a organic growth upside. If those were to come through, we've previously mentioned that we would expect that to come with incremental margin expansion above the 28% baseline that's embedded in our guidance.

And then secondly, from an EPS perspective, I'd say there's opportunity from upside from a below-the-line perspective. Obviously, we finished 2025 with a lot of momentum in terms of some of our tax planning initiatives. And as we've mentioned in the prepared remarks, we're not really embedding any further upside or execution from a tax planning perspective or any benefits from any discrete items from the year, which we generally have a track record of being able to execute on. So I think that's how I think about it in terms of the upside, both from an organic growth perspective and also from an EPS perspective.

Great. And then maybe just as a follow-up, just on the Life Science side. Is it really just preclinical spending recovering that's going to drive the strength in instruments and reagents? Are there any share potential there? And what can we be watching to get ahead of like when those businesses could start to turn up?

Yes. Look, so I think from a preclinical perspective, I think one -- a big part of that is just continued momentum in the end market. I talked about some of the positive signs we're seeing there. And so really just a continuation of the demand development of those positive indicators.

In terms of your comment on share, I would argue we've been taking share over the past couple of years, continuously in the preclinical market, particularly within the reagents business. And so I think that's something that we look to continue to execute upon.

Your next question comes from the line of Dan Arias with Stifel. [Operator Instructions]

Max, on software, to your point, you have a handful of new products that you're launching here. Can you just sort of refresh us on the timing of coming to market and then what your uptake trajectory might be? I mean it doesn't sound like you have much baked in for this year, but what should we think about the curve looking like? And then how quickly do you think that gets you back to the 9% to, I believe, 11% range that you've laid out as an LRP for software?

Yes. Let me take that, Dan. As you saw in our results for last year, in our Signals business, obviously, overall, is doing extremely well. And as you pointed out, with the upcoming launch of BioDesign, the introduction of Xynthetica and the launch later this year of LabGistics, our Signals business actually is in the midst of the most significant new product introduction phase in its history.

Despite historically it being focused primarily on small molecule workflows, its revenue CAGR is solidly in the double digits. And as you pointed out, above our LRP assumption of 9% to 11%. So even before all these new product launches, the advent of AI or how we might participate there, the business is already performing better than we expect from it over the coming years.

I would say, as you pointed out to these new product launches and our new focus to also start gaining traction in other end markets such as material sciences, there is good potential for our growth rates in this business to accelerate even further despite having to grow off a larger base of revenue. So obviously, while we are not going to revise our LRP assumption of a particular business on an earnings call, I would reiterate, as I've said in the past, but we would be really disappointed if this business does not at least double in revenue over the next 4 to 5 years, which would imply something closer to a 15% organic growth, right?

Okay. Helpful. And then maybe just on biopharma, Prahlad. You referenced biotech funding improvements as something that can help the recovery here. You're not alone, several of your peers have done that, too. I'm just curious, if you dig into the order book, are you finding that some of the early uptick signals that you're talking about, are they coming from the companies that have successfully raised money, and so that makes you kind of feel okay about the thesis? Or is that a trend at all that you're seeing in the discovery space? I'm just trying to understand whether better biotech funding is actually something that we can count on for 2026?

Yes. Then I would say it's a combination of both. Obviously, we started seeing some modest improvement in the fourth quarter from these customers. I think it's a lot more clarity and confidence in the policy and regulatory environment that we saw compared to the earlier part of '25, which is allowing more action and more meaningful decisions.

And on the behavior that we see with the uptick in biotech M&A improvement in the funding, I think all of these are contributing. So I wouldn't say that there is one lever, but definitely, there's just the confidence that you are seeing and consistency. But we've got to see this for a longer period of time before we make a call on a true durable uptick. But I'm optimistic that these customers are starting to move on the right path.

Your next question comes from the line of Vijay Kumar with Evercore ISI.

My first on,e, maybe on the guidance 2% to 3%. How are you thinking about Life Science versus Diagnostics relative to that 2% to 3% corporate? Your exit rate was 4%, diagnostics 7%. Anything one-off in the diagnostics 7% in the Q4?

Yes, Vijay, look, so I think as you think about the framework of the 2% to 3% organic growth for 2026, right, I would say Life Sciences is embedded in sort of a low single digit as well as Diagnostics.

Breaking it down further within the Life Sciences business, we've got Life Sciences Solutions at low single digits and then software at mid-single digits. Within that Life Science Solutions bucket, we anticipate low single-digit growth in our reagents business and flattish performance from our instrumentation.

And then as we look at things from a Diagnostics side, we've got, again, low single-digit overall for DX. And then embedded underneath that, you have reproductive health growing at mid-single digits and immunodiagnostics growing at low single digits given the headwinds from China. But outside of China, we still expect our immunodiagnostics business to grow in the high single digits for 2026.

That's helpful, Max. Maybe, Prahlad, one for you on M&A environment. I'm curious how you're thinking about deal size? I know you mentioned returns metrics have to clear the hurdles. What is the potential for a merger of equals? Would that be on the table?

Yes, Vijay, obviously, we continue to evaluate redeploying cash into potential M&A targets. But it has to make a strong strategic addition to the company, not just for size and scale. Our focus is on software and life sciences reagents, primarily. And then as you pointed out, with our multidisciplined criteria, we haven't seen yet any targets that are compelling enough, either from a financial profile or an expected return perspective to move forward with.

Your next question comes from the line of Josh Waldman with Cleveland Research.

Two for you. Prahlad, I wondered if you could provide more detail on what you saw within pharma biotech within the Life Sciences Solutions business. I believe you mentioned no budget flush. Was the improvement in the quarter fairly evenly dispersed over the 3 months. And then were these more like longer-term projects that started to flip to orders? Or did you see the actual new opportunities coming into the pipeline start to ratchet up?

Josh, let me give you an overall color. And again, I think it's very similar to what I've said during Dan's question. I think overall, what we've seen is cautious optimism and consistency in terms of order trending. I wouldn't say that there was a budget flush. I think that's the way I would think of it. But what I would say, a lot more clarity and confidence in policy and regulatory environment enables our pharma biotech customers to plan appropriately and with more degree of confidence as we get into 2026.

Yes. And I would just say from a financial perspective in the fourth quarter, Josh, when you look at the performance of Life Sciences Solutions, it really kind of came in line with our expectation. Reagents were a little bit better than we had anticipated in the fourth quarter, coming in at approximately flattish versus a down low single-digit assumption heading into the fourth.

And then from an instruments perspective, although it was significantly improved from the trends that we saw over the past 12 quarters, it was a little bit lighter than what we had anticipated, but it also came in at around flattish for the fourth quarter, which again was a significant improvement versus the trends we've seen over the past 3 years.

Okay. And then on the Diagnostics business, can you run through the areas that came in better than expected, either from a product angle within the subsegments or geographic? And then how durable do you think this is going into '26? Do you think Diagnostics could also be a source of upside to the 2% to 3%? Or is it more really the Life Science business on the back of pharma biotech that could produce the upside?

Yes. So I think as you look at the Diagnostics performance in the fourth quarter, it did came in better than expectations. We had expected about positive mid-single-digit growth, and it came in at a high single-digit growth. When you really look at the drivers of that, I would say, one, we did have continued strength globally in newborn screening, which was a tailwind to us versus our expectations. And then the second component was immunodiagnostics did a little bit better globally as well. Some of that though was around instrument-related timing, and so there was a little bit of additional tailwind from that.

As you think about how that then dovetails into 2026, as I mentioned in the response, I think it was to Dan's initial question on where is upside, we definitely think we have some upside in the Diagnostics business. The first area, as I mentioned, we have a more prudent assumption around newborn screening versus what we've seen over the past couple of years. Again, nothing is fundamentally changing there. Just a more prudent assumption to start the year that's more in line with our LRP.

And then the second dynamic is around immunodiagnostics. We've mentioned that we've taken, again, a little bit more of a conservative assumption on immunodiagnostics in China, just given some of the uncertainty there that's happened over the past couple of years, but nothing is fundamentally changed. And should it have played out, we could see some potential benefit there as well. So that's how I kind of think about the upside for Diagnostics in '26. It's not just related to the Life Sciences business.

Your next question comes from the line of Luke Sergott with Barclays.

Just wanted to follow up on that last China DX question on the IDX. I understand that you're taking a little bit more prudent outlook here. Does that have anything to do with kind of what peers are talking about from potential increasing of DRG or VBP plans over there to get into cancer or oncology testing? I don't imagine you have a lot of exposure to those types of tests. But just what are you guys hearing over there from that perspective? Is that -- that's what's leading to that prudence?

Luke, look, as I think about China IDX, Again, I think the first thing I want to call is, again, this will represent less than 5% of the total company revenue in 2026. So this continues to just become an overall smaller piece of the portfolio.

I would say from a market perspective, we've not seen anything fundamentally change in the past 90 days. There has been, I think, some noise around potential theoretical new policies that could come in place. But again, those are theoretical and no real details have really been released. And then as you mentioned, some of the policy changes related to oncology, et cetera, it really don't impact our business. So I would say the punchline for us is nothing has really fundamentally changed. This is really just a matter of us taking a more prudent assumption for what's going to happen in China IDX for 2026.

All right. Great. And then on the interest piece, life science instruments, you guys are assuming that flat for '26. Can you just give us a look at like what the -- and what kind of the backlog looks like or the demand is like? Just kind of mirroring, I guess, the last year, any type of pacing or pickup that you guys see throughout the year?

No. Look, I would say from an instruments perspective, nothing particular to call out. Again, most of our projects generally have 4 to 5 months lead time. Most of our instrumentation is customized. And so we have generally good visibility from a funnel perspective. Again, we had talked about the funnel strength we were seeing heading into the fourth quarter. Again, that mostly largely played out as anticipated. It was still a really good performance for our instruments business in the fourth quarter. And so I would say, as you think about the flattish assumption, again, this is assuming a similar CapEx environment that we just faced in 2025, and I think there's been some real indicators that things could be improving, but we need to see it over the course of a couple of quarters before we start rolling that into the numbers.

Your next question comes from the line of Andrew Cooper with Raymond James.

Maybe just to start with margins. Can you just give a little bit more of a breakdown of some of the moving parts for the year, especially the first quarter? I mean, we're used to some drop from 4Q to 1Q, but what would you call normal versus the tariffs, versus FX, versus cost saving program costs? Just help us size some of those moving pieces would be great.

Yes. Absolutely, Andrew. So I think, look, when you think about things from an operating margin perspective, it is, to your point, normal for us to have Q1 be, I would say, several hundred basis points below our full year operating margin. Then normally Q2, Q3 is kind of in line with the full year and the fourth quarter is several hundred basis points above our full year operating margin.

I think as you look at 2026, both the first quarter and the second quarter would be, I would say, lighter than normal, and there's for a couple of reasons for that. First, as you look at the first quarter, you do have the impact of the extra week, which is an operating margin headwind for us. And then secondly, as we mentioned in the prepared remarks, our cost actions are going to continuously be executed throughout the first half of the year without being fully completed until the end of the second quarter. So you will get a little bit of a cost productivity benefit in the second half once those are 100% actioned.

Okay. Helpful. And then maybe just as a follow-up. High-level launching products sometimes into what we'd all admit is still a challenging kind of end market is always a little bit tricky. I mean how have you guys calibrated some of the software launch expectations? And is it different given, I think all the new launches are more SaaS-oriented versus kind of on-prem upfront license fee. But how does this constrained capital environment impact the way you go to market with these newer products, if at all?

Yes. Andrew, I mean, the way our software business is set up, is you just -- essentially, you have an installed base and most of these product launches go into the Signals suite. So it is more of an upsell opportunity that comes in. And then that rolls over, in some cases, when the contracts come up for renewal, in some cases, based on the customers' needs that they might have an immediate need for it.

And as we've talked about earlier, right, most of what you -- our product launches, whether it's around BioDesign or LabGistics, are based on customers' demand and asks from the user group that the team puts in place. So there has been more of a pull for these than a push of a new NPI. So we expect them to start gaining traction earlier as we move from small molecules to larger molecules with BioDesign, but generally, it takes a few quarters for them to start gaining traction.

Your next question comes from the line of Dan Leonard with UBS.

I've got another China diagnostic question. Fully appreciate that China immunodiagnostics is less than 5% of your revenue. But how confident are you that this returns to growth in the second half of the year?

Yes. Dan, thanks for the question. Again, it's on China IDX, I would say that as we have taken a more prudent assumption, I would say we are no longer forecasting a return to low single-digit growth in the second half of the year. We expect it to now be, I would say, down slightly in the second half of the year. And again, that just goes to what we're calling a more prudent and conservative assumption as we head into 2026, nothing has fundamentally changed about the underlying market conditions.

And an unrelated follow-up, I could just use some help better understanding how you're framing the economic opportunity for that AI drug discovery offering in software.

Yes, Dan. I mean, look, the fact is that as we talked about at a health care conference earlier during the year, and we went through what Xynthetica does. We really feel it's a very exciting area for us as a company. And I think -- I would be bold enough to say for the industry as a whole.

Xynthetica for me is not an AI. It's even more potentially important in the near term as it is in the longer term because what it does is it brings to action how drug discovery happens. When you think of it today, you move from only being a wet lab to doing in silico modeling and being able to then link it back to what happens in the wet lab, bring it back on to the Xynthetica platform.

The Signals suite provides a platform or a marketplace where all of this can happen in one place without you having to being a software expert. I think that's the value of Xynthetica. It provides a federated model where you are able to curate, put AI modules on one platform that are validated, and be able to use them and enable drug discovery to happen in an accelerated form. I think in the longer term, the benefit of what you will see from that is not just on productivity and efficiency, but also acceleration of drug discovery. So we really are, needless to say, very excited about Xynthetica. And then the first one of, hopefully, a few, is the partnership that we have announced with Lilly on that initiative.

Your next question comes from the line of Brandon Couillard with Wells Fargo.

Just one for me. Max, free cash flow conversion has improved for the last 2 years. I didn't hear you talk about a target for this year, but just kind of give us a little more color on kind of the levers to improvement there and kind of where you're seeing free cash flow shake out for '26?

Brandon, yes, look, I think from a free cash flow conversion standpoint, we've continued to execute, I would say, incredibly well over the past couple of years. I think if you look on average over the past couple of years, it's been close to a 90% free cash flow conversion for us, which is obviously, again, a dramatic change from where we were. If you go back a handful of years ago, we were hovering kind of around 70% conversion. And I think there's really been a couple of drivers of that. One, we continue to execute on some of the working capital initiatives that we have across the company. Two, I would say it's a benefit of the portfolio we have now with the higher reoccurring mix of product. And then three, we really made sure that everyone across the company is incentivized and has targets from a cash flow perspective, which is really starting to pay a lot of dividends.

I think as you look at 2026 and the expectation, we do expect to have continued momentum. Our LRP kind of calls for 85% conversion or greater on a given year. And I think that's the expectation we have for 2026 as well.

Your next question comes from the line of Catherine Schulte with Baird.

Just one for me as well. Can you just size how much benefit 1Q organic growth has from the extra week? And any other pacing commentary on how to think about organic growth for the rest of the year, maybe what's implied in the guide for a 4Q exit rate?

Yes. Catherine, look, so I'll actually answer the second part there first. From an organic growth cadence over the course of the year, we're calling for 2% to 3% here in the first quarter, which is in line with the full year. I would say we're expecting relatively consistent performance around that 2% to 3% for each quarter of the year. So it's relatively consistent there.

And then I think as you look at the extra week financials, just to talk through some of the different moving pieces across the entire P&L. From an organic growth perspective, we expect it to be about 100 bps tailwind to OG in the first quarter. That's roughly 20 basis points for the full year. The benefit from a revenue perspective, the majority of that tailwind is really from our life sciences reagents business as we pick up a couple of extra selling days. And then there's a little bit of service and software contract amortization. We are not expecting an impact across our DX or CapEx purchases from our customers.

I think then when you look at it from a margin perspective, it is a headwind for us as you do have an extra week of cost, which is predominantly labor driven. Obviously, you have to pay your employees for that extra week. And so that ends up actually being a margin headwind for us, which is again leading to the lighter than normal Q1 margins.

And then from an EPS perspective, it's roughly about a $0.06 headwind that we're facing for the first quarter related to that extra week due to the margin, and then there's a little bit of extra net interest expense below the line as well.

Your final question will come from the line of Tycho Peterson with Jefferies.

I wanted to just touch on reagents. I appreciate all the color in 4Q a little bit better. But just curious, last quarter, there was noise on margins, discounting, promotional activity by some of your peers. Can you just talk a little bit about competitive dynamics on the reagent side, how you're thinking about pricing and margins there on consumables, if the top line does come back a bit?

Yes. Tycho, I think as Max pointed out, we feel very good about the way the business has been playing out. And I think we've taken some share. So we've not seen any margin dilution per se on the reagents business, and it continues to do well for us and bodes well for the way we are looking at how it is positioned in 2026. So I wouldn't say that from our perspective, there was any noise either in terms of margins or share. I think we did well on both.

Okay. And then the second question and last one is just on instruments. Curious if we can get a little more color just on the various buckets, how you're thinking about liquid handling in vivo, high-content screening, obviously, some GLP benefit there. Maybe just talk about the 4 buckets on the instrument side and what's baked in for each of those this year.

Yes, Tycho. Look, from an instruments perspective, we're not going to guide by subproduct line. But I think as you think about the trends, right, particularly around high content screening, high-content screening for us, we had mentioned, was looking at a strong fourth quarter. It did end up being strong, I would say, double-digit growth in the fourth quarter as we continue to see momentum there, which again, really is sold into the pharma biotech environment. And so from that perspective, we expect the high content screening momentum to continue in 2026. And I would say the rest of the portfolio, again, we expect it to be, I would say, relatively flattish as we kind of come off the lower baselines here exiting 2025.

There are no further questions at this time. I will now turn the call back to Steve for closing remarks.

Thank you, Nicole. Thanks, everyone. We look forward to catching up with you over the remainder of this week, and hopefully see you in person at upcoming conferences in the next month or so. Have a good day.

All right. Great. Thank you, everybody, for joining us today. I'm Casey Woodring from the Life Science Tools and Diagnostics team here at JPMorgan. Welcome to our conference. Pleasure to be joined today by the management team of Revvity. I'll pass it off to CEO, Prahlad Singh, for some prepared remarks and go through the presentation, then we'll do Q&A afterwards. So Prahlad, how about it?

Thank you, Casey. Good morning. Welcome. We are excited to share with you our story and the progress that we've made over the past 12 months since you heard the conference last.

Before I begin, I wanted to invite your attention to our safe harbor statement and encourage you to visit the Investors section on our website, revvity.com, for additional financial disclosures and the latest SEC filings.

All the figures and financials that you'll hear today are all estimated future results and growth rates presented and what we'll talk about today are based from our 3Q earnings call guidance that was provided as of October 27, 2025.

For those of you who have been part of our portfolio transformation journey and have followed us will recall, we, a few years ago, we started primarily as an industrial company that was around 1/3 analytical and 1/3 of the business was in primarily small molecule preclinical life sciences and 1/3 of it in diagnostics, which was essentially a mother and child company at that point of time.

Since then and through COVID, we've gone on our portfolio transformation journey and acquired significant capabilities and competencies. On the Life Sciences side, that was focused on building out a large molecule capability with the acquisitions of BioLegend, Horizon, Nexcelom, SIRION Biotech amongst others. And on the Diagnostic side, we expanded our addressable market from reproductive health in autoimmune, allergy and emerging infectious diseases with the acquisition of EUROIMMUN, Oxford Immunotec, IDS, amongst others.

At that point, if you recall, we were a company which was 2/3 in high-growth, high-margin businesses and 1/3, primarily a legacy PerkinElmer company in analytical food and applied markets was lower growth and lower margin -- slower growth and lower margin. At that point, we made the decision to divest the legacy business in that arena along with the PerkinElmer brand name, which gave the birth of Revvity, which we feel strongly is a company with a category of one, more of a partner for our customers than a vendor with significantly enhanced scientific expertise, a very high recurring revenue mix and leading market position in the end markets that we participate in.

So Revvity today is essentially a $2.8 billion company, roughly divided equally between Life Sciences and Diagnostics market segments with still nearly half the revenue coming in from the Americas, about 1/3 of it in EMEA and 1/4 of the businesses from the APAC region. From a product portfolio perspective, now nearly 85% of our revenue is on a recurring basis from consumables, assays, services -- software and services. And 15% of the business is CapEx focused around nonroutine specialized Life Sciences instrumentation. This is powered by 11,000 employees globally.

From a Life Sciences perspective, the business is essentially now a reagents, instrument and software offering that enables all stages of R&D with about 85% of it comprised of Life Sciences Solutions that is highly innovative reagents and instruments and 15% of the business is our Signals software business, which is essentially providing comprehensive SaaS solutions that support research informatics and clinical analytics workflows on the research -- primarily still on the preclinical research side of the business. Historically, this has a 5-year average growth -- organic growth rate of high single digits with operating margins north of 30%.

From an end market perspective, nearly 75% of our customers are in pharma/biotech and 25% comprised of academia and government. On the Life Sciences Solutions side, we continue to pursue adjacent opportunities for incremental growth through our technology and licensing portfolio.

Similarly, the Diagnostics business comprises about $1.4 billion in revenue and provides comprehensive solution in specialized clinical markets where our focus really is how to be differentiated from an offering perspective, so we are not running into the routine clinical competitors or large clinical competitors. Towards that 60% of the business is in immunodiagnostics and 40% is comprised of reproductive health. This segment too has seen a 5-year historical average organic growth rate of high single digits and has operating margins around 25%, with significant opportunities for incremental margin expansion.

Our key customers here comprise of public health labs, primarily in the U.S. with the newborn screening business, large and small reference labs and hospitals and clinics around the world. This business is essentially a high-growth specialty diagnostic portfolio that offers end-to-end solution from sample collection to the software that provides the reports back to our customers and patients for screening and diagnostics. But more importantly, it is also supported and surrounded with our Omics capabilities around the globe that provides not just screening, but also companion diagnostics and partnerships with our customers for -- with our pharma and biotech customers as they continue their drug development journey.

From a strategic perspective, when you look at our portfolio, our goal really is to be a key player in the high-value areas of the drug development life cycle. Starting from early drug discovery where we provide not just reagents and instrumentation but also license technology to our customers, and be part of the journey of the therapeutic candidate from early discovery as it moves on to development, clinical and eventually commercialization by wrapping it around with our reagents, instrumentation, Signals software and services capabilities. And as it enters into the clinic, our focus is to reduce the chasm between discovery to cure by providing companion diagnostics capability, identification of patients, monitoring of patients as they go through the therapeutic journey, leveraging our Omics capabilities around the world, essentially focusing on specialized areas that require innovation and leverage our capabilities throughout the portfolio, helping customers for whatever they need.

Today, what I want to do is focus and provide you an update on our key strategic priorities and give you examples as to what we are doing on each one of them. Talking about AI, which is now pervasive in all our professional and personal lives as to how we are capitalizing on the potential of that. Give you some examples of our expansion and how we are reaching into the market through our scientific capabilities and an update on the operational excellence initiatives that we have ongoing.

Starting with AI. To give you an example of how we are unlocking new frontiers with AI, we recently launched Transcribe AI for our clinical lab customers that significantly reduces the amount of time that it requires for workflow. So instead of manual data entry when the samples comes in, putting in this portfolio has improved the workflow speed by 40% for our customers that have adopted this. Internally, we have deployed AI for all our 11,000 employees and already started seeing improvement efficiency, productivity and new commercial opportunities coming out through that. To give you an example, the deployment has resulted in nearly a 10% reduction in software development time lines for our product portfolio.

We recently announced our partnership to deliver AI-enabling drug discovery with Lilly. But more importantly for us is the Signals Xynthetica platform, which essentially is a framework that is going to accelerate AI-enabled drug discovery. And we strongly feel about the capabilities that it will bring to our research customers.

The partnership with Lilly essentially creates a scalable federated framework that will accelerate AI-enabled drug discovery. If you look at it today, traditionally, the Signals One platform, which is present in pretty much every pharma and biotech customer provides the ability and the capability to our research scientists to design, develop, test and make decisions around which drug candidates move forward.

But as we look at the Xynthetica platform, it provides a framework for AI-enabled drug discovery to be able to not only have a platform where you're going to have the AI tools like Lilly's TuneLab and their models or access to them but more importantly, the ability to curate QA/QC these models and provide these to all our biotech customers and partners as a models as a service framework. Both Eli Lilly and Revvity are going to initially co-fund access to Signals One and Xynthetica for biotech customers. And this is something we are really excited about what it could do in terms of how drug discovery happens into the future.

From a scientific and a market reach perspective, to give you a few tidbits on the GMP reagents expansion, which we have talked about for a bit now, we continue to build manufacturing and regulatory capabilities. And in the last 12 months, this has really driven downstream expansion with our customers and seen nearly 2.5x increase in how many products and projects are moving into the GMP bioprocessing effort. As you know, this takes time before it moves into this journey from discovery into development and commercialization and clinical. But this is an exciting data point which I think is going to pay off in the long run.

From an immunodiagnostics perspective, when we made the acquisition of EUROIMMUN, only 10% of the revenue that was coming in was comprised of the Americas. This has now nearly doubled to 20%, but we see that the rightful share of revenue coming in from the U.S. for the autoimmune portfolio is around 40%. So there is still a lot of room for expansion of our immunodiagnostics portfolio in the Americas.

Recently, we've announced the strategic partnership with Genomics England and Sanofi. These are, again, examples of how our focus is moving from being more of a vendor to a partner to our customers. The Genomics England partnership is really breakthrough in the sense that it is the first large-scale deployment for sequencing and screening newborns for rare genetic conditions. And we are really proud of being part of this innovative decision made by the United Kingdom.

From a Sanofi partnership perspective, which we've talked about earlier, it gives us an opportunity to move from screening for rare diseases to leveraging the same capability and competency for more common diseases like juvenile or pediatric type 1 diabetes. To give you a bit more detail on that, Sanofi is the first company that has -- had a FDA approval for a therapeutic that delays the onset of juvenile and pediatric diabetes. We leveraged our capabilities internally from antibodies being able to do risk screening for newborns and developed a DBS, dry blood spot card assay for 4 biomarker.

This not only advances the early detection for type 1 globally, but also in progressive countries, for example, in Italy, where there are now mandates to identify asymptomatic early pediatric type 1 diabetes cases, we are working with the government to be able to deploy this from a screening perspective. So to put it from a -- if you think about it, as this gets adopted by more and more countries, it leverages our newborn screening infrastructure to use it for pediatric diseases screening too. So it's a really good example of how we are able to use our infrastructure from newborn screening to other more common diseases.

From an operational excellence perspective, we are laser focused on driving operational and financial improvements in the company. We've already talked about from a free cash flow conversion, we have gone from being a company that used to we have free cash flow conversion of 70% to greater than 85% of adjusted net income.

From a capital allocation perspective, in the down -- when the market had its downturn, we were opportunistic in deploying our capital which has resulted now in nearly $1.4 billion in share repurchases and a 10% reduction in our share count.

I'll now give you a few examples as to what we have been focused on in terms of headcount rationalization, supply chain optimization and footprint consolidation to stay on track to achieve the stated 28% adjusted operating margin target that we have for ourselves for 2026.

There are three primary areas. Around headcount rationalization we are increasing productivity by bringing in and integrating all the acquisitions that we have made and leveraging that for management delayering and commercial synergy, which will result in nearly a 10% headcount reduction. Similarly, as we integrate these businesses, we look at supply chain optimization opportunities for in-sourcing, reengineering, vendor optimization and consolidation. And from a footprint perspective, we are looking at impacting by downsizing co-location and site closure activities nearly 30-plus rooftops over the next 12 to 24 months, which will result in nearly a 20% annual cost reduction and 10% footprint reduction by 2027.

So these are just some examples, concrete examples of what we have already started and deployed to get to a 28% operating margin target by the end -- in 2026.

As we've talked about in the fourth quarter, I wanted to highlight some of the 2026 considerations of 2% to 3% organic growth that we expect to result in high single-digit adjusted EPS growth. Of course, we will provide a lot more detail on this during our fourth quarter earnings call in early February. But our assumption on this is that the current market assumption, which we've started to see improving will continue to exist -- that trend will continue to exist in 2026. We are on track to achieve 28% in operating margin. And from a below-the-line consideration perspective, the increased net interest expense will be offset by the lower share count. Our assumption for this is -- on tax rate is 18%.

From a long-range perspective, we are laser-focused on driving sustained and superior growth and expect the immunodiagnostics and Signals software business to grow in the double digits and the Life Sciences Solution and reproductive health in the mid-single digits. We feel confident that we will deliver 200 bps of above-market growth in normal market conditions resulting in 6% to 8% of an LRP. In addition, we will -- we have not assumed anything in the plan from upside that would come from our technology and licensing initiatives and the Omics partnerships that we are in discussions with.

All of this, while focusing on achieving top-tier margins from 27% in 2025, to the mid-30s in the near future, with 25 bps of that coming from gross margin expansion and 50 bps of it coming from operating leverage and cost efficiencies. All of this while delivering double-digit EPS growth over the long term with capital deployment opportunities providing additional upside.

I'm hopeful and confident that what you've heard together that Revvity is an innovative life sciences and diagnostic company with a unique portfolio that is well positioned with nearly 85% high recurring revenue and provides compelling growth opportunities by being a strategic partner to our customers that now has a transformed portfolio as we are focused on our operational excellence that will result eventually in a differentiated financial profile with attractive margin expansion opportunities for our shareholders.

Thank you for your time today, and I look forward to the Q&A session.

All right. Great. Thank you. We'll loop in Max here, too.

All right. Maybe just to start on the pre-announcement from last night. 4Q organic growth was at 4%, beat the Street. Can you just walk through how the quarter played out relative to your expectations between Life Sciences and Diagnostics and how some of the underlying growth drivers in each segment performed like Signals and Immunodiagnostics?

Sure. I mean I'll start with the Life Sciences Solutions, the reagents did slightly better than what we had expected. On the instrument side, while it improved from the third quarter to the fourth quarter, probably was not as great as we would have wanted it to be, but it did improve. But overall, Life Sciences Solutions did better than what we had. And the Diagnostics, both immunodiagnostics and reproductive health did better than what we had wanted it to be.

Yes. Maybe just elaborate on the instrument piece. So in 3Q, you noted you were seeing an uptick in activity in the instrument pipeline. You just said that instruments may be a little weaker than you would have expected. We've heard from some companies that have presented here about a budget flush that occurred maybe towards the last few weeks of the quarter. So just any sort of further color on the instrument piece in 4Q and between pharma and academic and government, how that...

Well, pharma/biotech did better than academia and government. So I'm talking about the whole instruments portfolio. Pharma/biotech did better than academia and research. I would say that we did not see a lot of budget flush. Our instruments are not as routine. They tend to be more high ticket items, but they did better. I would say that there was continued improving trend towards it, but reagents did a whole lot better.

Okay. And from a margin perspective, you guys were guiding to a low 59% gross margin, expected OpEx to step down about $5 million or $6 million sequentially from some of the cost outs. Any sense of how you executed against those expectations?

Yes. I would say from a margin perspective, we are roughly in line with our expectations. Obviously, we had the stronger revenue beat that led to some additional flow-through from an incremental standpoint. But we did take some opportunity as well to reinvest some of that back into the business. So I would say, from a margin standpoint, it was in line with our expectations overall.

Okay. Maybe shifting over to 2026 expectations you guys earlier in the year in 2025, at least than you normally do gave top line color, 2% to 3% organic. You noted at the time you gave it, it was a prudent approach to the year based on your current view of the end market. A few months later here, from an end market perspective, does that still feel like a prudent number to you guys? Certainly feels like pharma seems -- there seems to be some optimism there with biotech funding and so forth. So maybe just walk through your current view of the 2% to 3%. How prudent really is that?