PerkinElmer Aktie

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?

Yes, Casey, it hasn't changed. I mean pharma/biotech trends continue to improve, and we feel good about it. We'll provide a whole lot more detail when we provide our fourth quarter earnings call in early February. That gives another 4 weeks of data point for us to continue to assess how the market is doing. But we feel very optimistic about what we are seeing from the trend coming out of pharma/biotech.

Yes. Maybe to elaborate on that, biotech funding is getting better. Revvity is more kind of levered towards early-stage R&D versus some of the other tools players. So how should we think about the puts and takes about the pharma and biotech expectations for next year?

And then maybe on the instrument growth outlook for Life Sciences, you're calling for kind of flattish growth in '26. Would a better-than-expected year in pharma, really drive that number higher?

Yes. I mean we're already seeing that in our reagents portfolio. And as I talked about it, even in the fourth quarter, we saw reagents did better than what we had expected. And that's a precursor for us, and it's a clear indicator that pharma/biotech has started to come back. We are seeing encouraging trends, I would say, on the instrument side. We just need that to continue. Max anything else?

No, look, I think there's a lot of positive signals in the market right now from a pharma/biotech perspective, whether it's around clarity with some of the MFN deals, whether it's around increased levels of biotech funding, pickup in M&A activity, all that is positive indicators. I think for us in our stances, as Prahlad mentioned, we want to just see a consistent trend of multiple quarters here of sort of the benefit of those positive indicators before we start to move numbers. But obviously, there are some positive indicators that are encouraging to see.

Okay. Wanted to focus on Signals here for a little bit, the new product launch, Xynthetica, did I pronounce that right?

Yes.

How is preregistration going there? What's the current level of interest? What does the rollout look like for '26? How do you expect company or customers to integrate this offering into their own workflows?

Yes. I mean we just launched the product. As we said in 2026, we expect some customers to start looking at this and adopting this. But just Casey, if you have to go back and look at the product launches that we've had on the Signals side, whether in -- Signals Synergy, Signals Clinical that was launched it takes a few quarters for it to get used to our customers, get adopted, get familiarized before you start seeing it. So we'll start seeing any material impact from this from 2027 is the best way to look at it.

Okay. And last week, you announced the collaboration with Eli Lilly to make Lilly's TuneLab available through Revvity's Xynthetica platform. Could you just elaborate on the partnership? Will that help accelerate drug development time lines? Anything specific in terms of efficiencies that is expected to create for biotech companies? And then what do you see as the longer-term value of that collaboration?

Yes. I mean, look, I would say of all our product launches, this is the one that excites me the most. If you think about it from a research scientist perspective, not all of them are computer scientists, right? They tend to be bench chemists and bench scientists. They are all familiar with using Signals today. So it is at their fingertips, at their mouse today. And really, Xynthetica is a module that you would look on a Signals suite.

So now if you provide that framework to a research scientist and then they essentially have the ability to drag and adopt AI models, whether it's from TuneLab from Lilly or any other AI models. But what Xynthetica does is it curates those models, does a QA/QC check for authenticity and be able to provide it with the same framework and infrastructure that a research scientist is able to use it. So the hurdle of entry to do AI enabled drug discovery with Xynthetica is significantly reduced for a bench chemist, and that is the true power and potential of what Xynthetica will bring for AI-enabled drug discovery.

Okay. And then maybe sticking with Signals, with BioDesign for large molecule workflows launching in the first quarter of 2026, how much of Signals is expected -- how much of Signals growth, I'm sorry, going forward will come from penetration in the large molecule market where Revvity has really had a limited presence to date?

Yes. I mean I think if you look at our LRP for the Signals business of low double-digit growth, obviously, the NPIs are a big piece of that, right? So whether it's around the large molecule which we're launching here, LabGistics, which we're launching later in '26. You've got the Xynthetica platform that Prahlad just reference too. I mean the NPIs are a significant part of that double-digit growth going forward.

And then I also think from a Signals perspective, we continue to remain extremely excited also about our ability to expand our customer base, whether that's moving further downstream into the Tier 2 and Tier 3 pharma customers, which haven't been a big penetration for us today. And then secondly, also expanding outside of pharma even into the applied markets, where we have a lot of synergy opportunities with our existing workflows with pharmas in what is a fragmented market today in the applied space to start to drive some meaningful penetration.

So I'd say it's really a combination of both the innovation with the NPIs, but also the new customer base that's really going to continue to fuel the Signals growth engine.

Okay. Maybe shifting over to Diagnostics here. So newborn screening has performed well in 2025, outpacing declining global birth rates. Genomics England is kicking into gear, right? So can you just walk us through the latest updates on similar large-scale Genomic screening initiatives globally and the interest Revvity is seeing now that Genomics England is in motion? And could any of those discussions really materialize in 2026?

Yes. I mean, look, I would say that Genomics England in the U.K. was a flagship in that. They are the torchbearers. On the scale that they have announced and what they are doing is really pathbreaking. And I think there are other countries where we've got discussions ongoing that hopefully will materialize. Some of them will materialize in 2026, but until they are not -- obviously, we can't talk about until they are signed and publicly announced. But we see a lot of potential and promise and a lot of interest on similar populations of the Genomic screening program by many other countries.

And just to clarify, too, we have no assumption of future contracts in 2% to 3% framework. So the only thing that's embedded in there is the annualization of the gel contract.

Okay. Revvity's 2026 framework embeds mid-single-digit growth in Diagnostics, including similar performance for reproductive health and immunodiagnostics. Can you just walk us through the puts and takes around the moving parts of these businesses? Immunodiagnostics growth ex-China has been particularly a nice growth driver for you guys, particularly in the U.S., and then newborn screening really across different geographies outside of even Genomics England. So maybe just walk us through how you're thinking about that.

Yes. I would say, as you look at the '26 framework, let's start with the immunodiagnostics side. Obviously, we've talked about some of the headwinds we have in China that we have to overlap in the first half of 2026. But I think when you look at, again, the majority of our IDX business is outside of China. And I think -- even if you looked at how they finished the year, I think in the fourth quarter, they grew mid-teens year-over-year, which is a really strong finish for them. And I think for the full year, that put them right around the high single, low double digits for the full year for IDX growth outside of China. And that's a trend that we expect to continue. A big piece of that is obviously the contributions from the accelerated U.S. growth, but we're excited about the road map we have there and being able to sustain that growth rate over the next couple of years.

I think when you look on the reproductive health side, again, also I'll point out that it was a really encouraging year for newborn screening business. I think it was the fifth straight year of mid- or high single-digit growth for that business despite what's been a declining birth rate environment. So that business continues to well exceed the sort of global birth rates, and that's a dynamic that we would expect continue. But I would say that at least in the 2% to 3% framework, we're probably more assuming the LRP growth for the newborn screening business of 3% to 5% versus what we've seen over the past couple of years. And I think that just points again to some of the prudence we have in the initial framework for '26.

Okay. That's helpful. Revvity has highlighted some of its partnerships with pharma around newborn screening, including the recently announced type 1 diabetes partnership with Sanofi. Can you Just walk us through the timing of some of these partnerships and the potential tailwinds to the newborn screening business over the longer term we could maybe see from them?

Yes. I mean the partnership really is an example of how we are able to leverage our capabilities from newborn screening to other pediatric screening -- disease screening. This has just kicked off in some markets, the Middle East and the U.S., Canada, but there are still no opportunities as to how we leverage our Omics capabilities around the globe to be able to start screening patients. So I would say this is -- this will start seeing material impact from 2027 onwards as we start deploying these programs, but also as countries are adopting this as I use the -- I gave you the example of Italy, where now there is a mandate for pediatric screening for type 1 diabetes.

So this is, again, one example of how you could take something. Till now, mostly the focus were around newborn screening disorders, inborn errors of metabolism or genetic disorders at birth. This is now expanding beyond newborn to pediatric and juvenile diseases. So this is an example of how we could expand and the addressable market that it brings forth to us.

Okay. Sticking with Diagnostics, it wouldn't be -- we'd be remiss to not talk about China DRG, right? So I think you said on the 3Q call that you expect China immunodiagnostics to grow low singles in the back half of 2026 after lapping the tough comps -- or the comps in 2025. What sort of visibility do you have on that second half growth rate in China Diagnostics? And maybe just walk us through the latest and greatest from -- on the ground there.

Yes, sure. So look, I think as you think about China immunodiagnostics, again, you mentioned DRG, which the policy change that impacted us really in June of 2025. At that point in time, we had said it was going to take us a year to sort of reset at the new volume levels for that business. But then coming out of that, we did expect it to return to growth in the second half of '26. I'd say nothing's really changed from that thesis. Again, it's been mostly playing out as we had anticipated. We continue to actively stay close with our commercial team, key opinion leaders to try and influence policy change, and we continue to remain confident at least in that outlook that we set back 5, 6 months ago.

Okay. Just maybe a couple on the model. I guess, what's your line of sight into the baseline 28% operating margin that you're expecting in 2026? How sensitive is that to top line growth? And just where are you seeing the most leverage in the business?

Yes. Look, obviously, your margin is going to be sensitive to top line growth in any environment. But I think, again, at least for us in the 28% baseline, the 2% to 3% organic growth is what sort of required to hit that 28%. We have said that if we see a little bit stronger organic growth north of 2% to 3%, we would expect to see incremental margin expansion off the 28% baseline.

And then just in terms of the visibility, I would say we've pretty high level of visibility into that 28%. We've already identified the necessary cost restructuring as you heard from Prahlad today, all the activities going on from a sourcing standpoint, headcount, rooftops, et cetera. So we've got the pipeline action. And I think we've also mentioned that you'll kind of see a flurry of that activity completed in the first half. It won't all necessary be on 1/1.

And then on capital allocation, given some of the share repurchase activity, how do you plan on balancing near-term capital returns with M&A opportunities? And then on that second piece, are there areas in the portfolio you'd look to be interested in filling through M&A? What's the criteria that makes M&A compelling versus buybacks?

Yes, Casey, I mean, we continue to be acquisitive and continue to have a very active pipeline. We are just being diligent on ensuring that we do acquisitions, which are strategically aligned and make the right financial sense. I mean ACD/Labs was a good example as to the areas of interest that we have primarily around software or reagents. I mean I think those are the areas where you would look us to be active in. But again, we are going to be diligent and we are going to be sensible on any acquisition that we make.

Okay. Helpful. And then we've seen recent reports that OpenAI, Anthropic, Google, these companies are actively seeking specialized data for AI model training and have approached companies like Revvity about potential data licensing or partnership opportunities, particularly in genomics and related fields. Can you provide any additional context on some of these discussions? Can you touch on your longer-term strategy regarding AI? Any kind of details you can share on that would be interesting.

Yes. I mean we talk to a lot of companies, like all our peers and everyone else talks to. I mean if there is anything that is specific and worth publishing, we will announce those partnerships. But this is part of the business. It's part -- you have discussions and you explore opportunities for partnerships and collaborations with a lot of companies.

I think what is important to note that on the Signals side, we have the portfolio already. We tried to talk -- we started talking about AI when we were ready to launch Xynthetica rather than 1 year or 2 years ago. And when we were ready to announce partnerships that will bear fruit and will accelerate AI-enabled drug discovery. So sort of from an approach perspective, we are going to come out and talk about it when they are either materialized or will start paying dividends, which is what you saw over the last few weeks.

Okay. That's helpful. Bouncing around a little bit, but going back to Life Science and sort of the underlying pharma/biotech end market growth. Recently, we've seen an uptick in M&A appetite for biotech over the last few months. How does or doesn't an increase in biotech M&A benefit early-stage R&D? Could M&A signal that pharma is filling pipelines inorganically rather than bringing targets up organically and using Revvity products in preclinical? Or are we reading too much into that?

No. I mean I think -- and look, I mentioned a little bit, too, but at least for us, a positive indicator is when there is M&A activity and really any continued flows of money into both pharma and the biotech industry. So for us, we're kind of agnostic, whether pharma fills their preclinical budget with M&A activity or whether they funded organically. For us, it's just a positive indicator that more money and more funds are being flowed into the preclinical R&D space. And so for us, again, it's an important indicator for us. And hopefully, we start to see the benefit of that in the end markets here over the coming months as that activity has really started to pick up at the tail end of 2025.

Yes. And to some extent, Casey, it enhances the probability of technical success of a drug candidate or a compound, because the reason primarily early biotech companies get acquired is for their pipeline compounds. And now once big pharma/biotech make those acquisitions, they are going to fund those programs. So to some extent, it further enhances the probability of technical success. And for us, it actually is a positive tailwind.

Okay. Looks like we have about a minute left here. I would like to pose this question to each of you. We're early on in the year. What's the -- what are you most excited about for 2026 for Revvity?

Yes. I mean our Signals portfolio continues to do well. We are optimistic and happy to see the trend that pharma/biotech is taking, especially in early drug discovery. It's about time. It's been a couple of years where we've seen that downturn. And I think just seeing that coming back up is really a positive sign.

Okay. Well, it looks like we'll leave it there. Thank you, everybody, for joining us today. Thank you for Revvity for coming here joining me on stage. Enjoy the rest of the conference, everybody.

Thank you.

Thanks, everybody, for joining us. Excited to kick off the Citi Healthcare Conference here with Revvity. I'm Patrick Donnelly, the tools and diagnostics analyst here at Citi. Happy to have Prahlad Singh, the CEO of Revvity with us. Prahlad, thanks for being here.

I guess maybe we can start just high level. You guys just reported last month. There's been a lot of noise in tools land on the positive side, which is nice in terms of some of the pharma conversation. Maybe just give us a lay of the land in terms of how you're feeling at the moment coming out of 3Q. Again, what the right way to think about some of the pharma news is and then what it might mean to you?

Sure, Patrick. Thanks for the invite. It's always good to kick this off with you in the morning. Look, I think just starting with 3Q, it pretty much played out the way we thought it would. And just breaking down between the businesses, Life Sciences was flat. Diagnostics was slightly up. We were up 1% on OG. We did slightly better on margin. And obviously, we beat our EPS because of below-the-line items. From an end market perspective, as we had said in our earnings call, we've started seeing more activity on the Life Sciences side, which is great to see. Especially as we look on the Life Sciences instrumentation, there was more activity there. And while it was still down, it was better than -- it did better than what we had anticipated.

On the reagent side, it was slightly softer and some of it might be the summer or government shutdown, but it wasn't far off from where we are. On the Diagnostics side, reproductive health did well. It was up mid-single digits. Newborn screening was up high single digits, close to double digit. And immunodiagnostics ex China continues to do very well. 85% -- 80%, 85% of our immunodiagnostics business is ex China. And those geographies are doing very well, especially the United States. And software, of course, was up 20-plus percent in the quarter, and it continues to do very well.

So overall, I would say that the dynamics of the market played out as anticipated with the positive around pharma biotech activity picking up, especially on the instrument side. And the dynamic in the market environment as we look from then on, it's pretty much similar. It hasn't changed, right? On the Life Sciences side, we continue to see more activity, especially around instrumentation. On the Diagnostics side, ex China, we continue to see great performance from our businesses and product lines. If you look at it, what we have seen is from 3Q to 4Q, there's an uplift of about $60 million, right? And there are 3 primary drivers for it.

One, on the Diagnostics side, you've got the gel contract coming through, right? It contributed around $2 million in the third quarter, and it's around $7 million in the fourth quarter -- is more mid-single digits higher in the fourth quarter, and that's where you see one uplift coming from. On the scientific instrumentation. On the Life Sciences platforms instrumentation side, we continue to see activity. I think that's similar to what it was in September, October. So that performance has stayed as on. Overall, again, on the immunodiagnostic side, ex China, it continues to do very well, and it has also a much easier comp from fourth quarter of last year. So those are the 3 drivers that sort of gives us the uplift.

Seasonal uplift that you see on the Life Sciences instrument, what we are assuming and what we are seeing is more of the normal seasonality you see rather than any big budget flush that you have typically seen in the normal market environment. So it has played out pretty much as we've seen in the third quarter and the trends are similar in the fourth quarter. With the one difference being on the FX side, right? Even though there is a tailwind from the FX, it's lesser than what we had predicted because we typically pick up the FX which is at the end of the third quarter. Since then, the FX has been a drag. And while it does not impact obviously growth and has very minimal impact on EPS, it does impact the absolute dollar amount by $5 million to $7 million, or 1% lesser of a tailwind than you would have had otherwise. So sort of that's more of detailed view of what we think of end markets.

Yes. That's a great start. So maybe we can start on Life Sciences, we'll do Diagnostics, and then we'll certainly talk to guide as well. I guess in Life Sciences on the reagent side, to your point, maybe a little softer. Can you talk through, I guess, government piece and then obviously, a little more biotech sensitive piece. What are you seeing there? Is it -- again, what happened with the shutdown? Maybe we can start on the reagents and kind of work our way around.

Sure. So as you know, BioLegend is about half our reagents business. And then I think that's where on the academia and government side, you have seen some impact and a modest impact from the shutdown. But the pharma biotech has continued to do very well. And I think that is going -- I would say this is sort of the first -- last quarter and this quarter, it's the first time, as I've said that pharma biotech is starting to show signs of what would look like normal and coming back.

And then I guess with the pharma biotech piece, obviously, we see biotech is doing quite well. I mean how long -- how quickly does that kind of react to you guys in terms of flowing through in terms of at least seeing funding pick up a little bit? How quickly can biotech recover for you guys and start to become this area of really nice growth again?

I don't think there's one particular event, Patrick. I think it's more around calming down of the chaos and the uncertainty in the marketplace. I think pharma biotech is now seeing more of a sense of -- we know what the future is going to look like -- future operating environment is going to look like. And I think once there is a little bit more certainty to it, you start seeing more M&A activity. And M&A activity in biotech, I think, is a great initial sign of markets getting back to normalization. And it will take a quarter or 2 quarters. I don't think there is any prediction by any form here that this is going to get back to normal or what historical normals would be. But I think we are starting to see the path to getting back to what normal would look like in pharma biotech over the next couple of quarters.

Yes. And then the academic government side, to your point, I mean, the shutdown, you guys had baked in a certain impact. We're now past it. Any surprises from the shutdown in terms of the length of it? Are you guys relatively comfortable with how it shook out in terms of what you guys guided for it?

Yes. Look, academia and government is 5% of our total revenue. It's 12% of our revenue in the United States. But I think we had sort of already predicted that it would be there. It was a couple of weeks more than what the shutdown was. I mean it will have some modest impact, but it's nothing to write home about.

Okay. And then yes, I mean, reagents going forward, I guess when you look at -- obviously, you guys gave some preliminary '26 commentary, which we can get into. But what's the right way to think about reagents, just that path back to normal to your point? I mean, what are the key things you're looking for? And what's the right way to think about expectations about reagents as we head into '26?

I think every sign that gives a certainty into what the operating environment would be for pharma biotech is, I would call a green shoot or more of a certainty as to getting back to what normal growth looks like. The announcement yesterday of the trade tariff deal for pharma between the U.K. and the U.S., that's a sign, right? M&A activity of biotech, that's another sign. I think the more certainty that the market has and the lesser chaos there is the more you start seeing uplift in business for us tools providers to pharma biotech.

And across the reagent side, I mean, it seems like even the peers are seeing similar trends. I mean has there been any, in your view, share shift, any changes on the reagent side in terms of the competition? Obviously, there's been some acquisitions here and there over the last couple of years in the space. Have you seen the market dynamics changed at all on the reagent side?

No. I think our reagents business has been doing very well. If you go back and look at the past 5 quarters, we've been talking about single digits or low single-digit organic growth in a very depressed market environment. And I think that should be, if anything, a real sign of not only have been doing well, but I believe that we've been taking some shares. And look, if there is uncertainty in the market from acquisitions, et cetera, it gives us an opportunity to gain share and be more competitive, and that's what our focus will be.

And then the other side of Life Sciences, obviously, the instrumentation piece that pressured for the entire industry for some time here. What are you guys seeing on the instrumentation side? You talked a little bit about the year-end. We'll see what the budget flush looks like. I think there's some optimism that with some level of certainty on pricing and things like that on the pharma side, policy risk easing up a little bit, maybe you see those budgets loosen up a little bit. What's about the instrument side and just the budget expectations as we go year-end and into '26?

I would say that it's more of a normal seasonality uplift that you have from 3Q to 4Q rather than a budget flush. And that's sort of the assumption that we have in our forecast. But the key really is that there is more increased activity around the instruments, which was not there. And I don't think it was because of any one factor. It is just, again, it was a depressed market environment and pharma biotech is coming out of it. So we are starting to see that activity taking place and then sort of resulting in more orders and more quotes being placed. And I think that's the first sign that we have seen in a while on the instrument side, especially to see that uplift. And I think what's more heartening is more on the high content screening side, things that pharma biotech use a lot for screening their drugs. And that is more -- that is, I would say, another indicator that pharma biotech is sort of getting back into the sub end markets where we play an important role.

And in terms of the biopharma, as we talked about the policy risk easing up a little bit, have your conversations, has the tone from biopharma changed over the course, I guess, it's been about 2 months. Are you sensing more optimism? Are you sensing those folks willing to loosen up a little bit, not only on instrumentation, but just broadly on the biopharma side. Obviously, reshoring is a multiyear opportunity. But in the meantime, is that environment a little healthier on the back of some of the policy risk overhangs?

I would say the discussions are more active and there is a lot more conversation. I mean, at the end of the day, it's not immediately going to flip to and result in an order and a quote and a sale, right? But I think the fact that there is a lot more activity and a lot more discussions happening with customers is an indicator that there is signs of life coming back into the pharma biotech, especially on the instrument side because they tend to be, as you know, high CapEx item. And in most of what we sell or the areas that we play in are generally non-commoditized, specialized high-priced instrumentation. And then I think if you start seeing signs of activity there, that's a clear indicator that CapEx purse strings are getting loosened up.

Yes. And then maybe staying in Life Science on China, obviously, we'll touch on China Diagnostics. But China Life Sciences, what's -- you guys have actually held in relatively well there, certainly relative to peers. What's the right way to think about China Life Sci going forward? Because that's been a pretty good market for you guys.

Yes. I mean, I think we were the only ones in our sector over the last 3 years in Life Sciences that have done well. And I think that is a major -- that continues to be a growth driver for our Life Sciences business on the reagent side, especially. And I think that's also an indicator that the CRO activity continues to be fertile and active in the China market. And that's where we -- both on the reagent side and on the instrumentation side, play an important role. And we have continued to see that activity either be getting closer to normal or after the whole reshoring thing that had happened on the CRO side, getting back to what normal would look like on the CRO side.

And you guys obviously aren't the most sensitive to the stimulus piece. Are you seeing any activity there? And anything to call out on the China stimulus side?

Post our divestiture of PerkinElmer, stimulus doesn't really play that an important needle mover for us.

Yes. And then maybe on the software side, you touched on it a little bit. I think it's grown over 20% every quarter this year, well exceeding the guidance. It's been a great spot for you guys. Maybe just at the core, how has that done so well? I think you guys guided 10% low double digits -- incredibly well relative to that. What have you seen in that business in terms of driving that significant outperformance on the software side?

I think it's diligent investment, our focus on our customers, the way we interact with our customers. As you know, we've talked about this before, right? We have 3 to 4 user group with our customers on an annual basis. We talk to them what our pipeline is. And we've got the largest installed base in every pharma biotech on the software side in their research labs. And then I think as this shift that we will see over a multiyear period where you're going from being a wet lab first and then modeling to what machine learning and AI is going to do, they are going to play an integral role in molecule discovery and development. This is where being in every lab on every benchtop is going to play a critical role for Revvity as we look into the future of drug discovery and development.

And that is sort of the whole genesis and the basis on where we are continuing to overinvest on the Signals business because we strongly believe that in half a decade or so, drug discovery is going to move more and more towards leveraging machine learning and AI. And that's why you are starting to see now the uplift on the reagents and assays and instrumentations on life sciences now, which is going to be used by CROs for data gathering. And that data is going to be eventually used for drug discovery and development using machine learning and AI. And I think of this, Patrick, if Signal software is on every benchtop and you don't need to be a computer scientist to use that, and that becomes the marketplace or the platform that you use for drug discovery, Revvity is very well positioned with its Signal business. And that's what has been one of the growth trajectories that we've seen for the software business with its current pipeline and the future pipeline that's coming through.

Yes. And I guess to that point, I know the business historically we've had the renewal piece and then the new signings piece. I guess remind us what percent is each? And then has the new signings piece been the real upside where you've seen just broader adoption and kind of that greenfield opportunity pick up a little bit for you guys?

I think it's been both because even now, despite the SaaS piece growing at a faster rate, it is still only 33%, 35% of our total business. And that's why sometimes when you look at it through from a lens of an organic growth perspective, you tend to see more of a lumpiness. But the true way to look at these software businesses is APV, the annualized portfolio value that normalizes for this. And this is where I would say it's not one or the other, but it's the renewal component that allows us to upsell the new NPIs that we launched into the marketplace. It takes a few quarters before you get the upselling opportunities on the contract renewal. So for example, we had launched Signals Clinical, Signals Synergy. I think towards the beginning of last year or late '23. And it takes about 4 to 6 quarters for it to start selling. And then you are seeing the impact of that now coming into the renewals in 2025, where you do the upsell, and that brings up sort of the APV or even organic growth, whichever one you want to look at.

Yes. And obviously, the software, I mean, it's been a big growth driver this year. Next year, you're going to come up against these massive comps in terms of the numbers you put up this year. What's the right way to think about the trajectory? I think the LRP is 9% to 11%, obviously, well exceeded that this year. Is it just thinking about this comp dynamic as we model out the software for next year? Obviously, the trend is very healthy, comps get challenging. How do we balance those two as we get into '26?

That's a good question. I think you've got to look at it which lens are you looking for from, right? If you're looking at it from an organic growth perspective, there will be lumpiness until the SaaS component goes from what is 34%, 35% to 60%, 65%. And I think that is where it's going to eventually settle down. But if you look at how you are to -- you should be looking at a software business, which is from an annualized portfolio value, as I said, right? This has grown, I would say, 13% to 14%, right? This year, it's more like 19%. So yes, it is slightly higher than what we would have said. But the way I would look at the software business is more from an APV perspective, and that's a metric now that we've started sharing. But if you look at our LRP, we've said that, that will be more of a 9% to 11% grower, and I think it's more -- has been more of a 12% to 13% growth. So yes, there is some level of prudence built in it, but that business whichever lens you look at, it is going to continue to do very well for the future.

Yes. And obviously, you guys -- I think it's been the software side, maybe a little more -- I know you kind of look at small mall, large mall. I mean, where do you see the opportunity on that front in terms of expanding? Is there share opportunities in one versus the other? How do you kind of stack that up?

Yes. I mean unfortunately, there is no industry -- third-party industry data that I can point you to. But look, we feel very good. We are in, I think, every pharma biotech company bar maybe 1 or 2 in the top 50. Patrick, the way I look at the software business is we've launched now Signals Clinical, Signals Synergy. They have started doing well. BioDesign is coming out, I think, first quarter of next year. That is going to be one of the most important launches for the Signals business. As you know, the Signals business predominantly has been more on the small molecule side. And I think with BioDesign, we are entering and we are starting making a foray into more of the large molecules and the biomolecule side, which has been one of -- that our customers have been asking for. And again, the way we've designed BioDesign is based on the input that we get from the user group of our customers.

So it is not something that it is being done in isolation. It is one that has been in sync with our customers. So I think that is going to be an important launch and is going to be the next major growth driver for the Signals business. But the one that I'm really excited about is in a couple of new NPIs that will come out maybe towards the end of '26 or in '27, which has got its sole focus around AI for drug discovery. And the whole idea of building that platform, which as the few quarters goes by, I'll talk about it in a whole lot more detail. It sort of lays out the road map and it makes Revvity the marketplace of how you are going to use AI or machine learning for drug discovery irrespective of what software or what drugs you are developing or what platform you're using. It makes it the marketplace for the development of -- for the discovery of new drug candidates.

Yes. I guess just touching on the AI point there. Obviously, a huge theme across the markets. You guys seem to have a pretty interesting kind of perspective on it and position in the market. Can you maybe just talk about broadly the AI opportunities for you guys, both internally and then to your point on the software side externally?

If you're going to make me talk about Signals, we'll be here all morning. I think the way you -- we have to think of AI. I've talked about AI for signals enough, so I'm going to sort of move to the other aspects of the business. We look at AI from 3 pillars in the company. One is product AI, right? Where are we using and leveraging AI. Second is enterprise AI in the company. And the third is around QA/QC governance.

On the product AI, outside of Signals, think about this, right, microscopes. EUROIMMUN has some of the fastest microscopes that are used in the marketplace for diagnosis of diseases. How can we automate that? How do we use machine learning, all our in vivo imaging instrumentation, high content screening. How do you bring in AI -- Signals AI that we have in the instrumentation side of business. Looking at areas of interest, allowing automation to do more of the work which was manual in terms of both the actual work, but more importantly, the interpretation of data. This is where rather than talking a lot about it, we started incorporating it into our platforms. And that has been one of the growth drivers of the success that we have -- we will start seeing on the instrumentation side.

At the enterprise level, Revvity AI is fully operational as a company, has been used across the board. And it is going to result in a lot more productivity and efficiency in the marketplace. But I think for us, also equally important is the governance QA/QC of how do we monitor, how do we ensure that we are responsible citizens and employees in terms of how we incorporate AI, both within the operations of the company itself, but also as we introduce this into our product. And most of what I talked about was on the Life Sciences side. It's no different on the Diagnostics side for newborn screening. Look at Transcribe AI that we have launched. It sort of takes away all the manual accession and the reading of the cards of the samples that come in for testing. It's all automated now. So there are so many opportunities to leverage machine learning and AI in the company. And I think we are just at the cusp.

Yes. Yes, maybe that's a natural segue to the Diagnostics business. Maybe we can start on ImmunoDx -- maybe we'll do ex China and then we'll go into China. Can you talk about the immunodiagnostics outside of China? That's been a pretty good story, maybe a little bit clouded by the China piece. But what are you seeing on the ImmunoDX side? And where can that go as we work our way towards next year?

Yes. Look, you've heard me say this. I think EUROIMMUN has been one of our best acquisitions and it will continue to be 80%, 85% of our revenue on immunodiagnostics comes out of ex China, and that market continues to grow mid- to high single digits, closer to double digit. U.S., for example, was 5% of total EUROIMMUN revenue when we acquired the company. It is 15% now, 15% to 20%. It should be 40% to 45%. That's the natural share that it should take. As we continue to introduce more assays into the market, as we bring in more automation into the U.S., it will continue to be one of the major growth driver markets for the immunodiagnostics business. And I'm just using U.S. as an example. Autoimmune testing as a whole, I think there was an article in the Wall Street Journal talking about it a week or 2 ago as to how underpenetrated that is. And that's what has been one of the successes of our autoimmune and immunodiagnostics business continue to be so.

And in terms of the U.S., to your point, obviously, a huge opportunity from the get-go when you guys bought it. Is that -- is it a competitive environment? Is it just getting the menu expansion? What are the key opportunities for you guys to drive that, to your point, from 15% of revs today to maybe a little more 40%, 45%? Is it internal development? Is it just chopping wood on the competitive side? What's the right way to think about that?

I mean there are some sub end clinical markets where we've got IP around it. So there's not really much competition, neuroimmune testing. Neuroimmunology, I think we are the only player in the marketplace and have a very strong position there. In nephrology, again, an area in autoimmune testing, which is just at the nascency of being able to even know that there is -- there's a lot of immune, autoimmune diseases related to nephrology. So these are -- our focus is really on esoteric and specialty testing. Our #1 hurdle to continue -- I shouldn't say hurdle, going from 5% to 15% to 20% is no mean task. Of course, we want to be at 40%. It's time, approvals and bringing in continued automation and assays into the marketplace.

And then maybe the China piece, obviously, a lot of noise there this year, not only with you guys, but across China diagnostics. Maybe talk through -- I guess we can start on the reimbursement side, then I would love to talk the multiplex, single-plex side. But maybe just talk through what has happened and then the confidence level that we've reached some level of stability heading into next year? I mean, certainly, from our investor conversations broadly, I mean, there's just worries about China diagnostics as a market. How do you guys frame up what you're seeing there and the visibility into, again, some level of stability?

Yes. Patrick, China is an important market. It's the second largest market, not just for us, for everyone. So I think we should just make -- it's too important to ignore and then to just close your eyes and go under our [ arch ]. I think the key for us has always been is how do we operate and compete in China as a Chinese company. And that is what our focus is. We've had several headwinds last year, right? The whole industry, multinationals have seen this, whether it's around and local companies, by the way. It's not just unique to multinationals, DRG, VBP, Sunshine Act, there have been various policy initiatives by the government that have swung the pendulum from one side to the other.

And I think eventually, as we've talked about this going from multiplexing to singleplexing, it will start to come back into the middle. But really where our focus is, is that how do we innovate in the marketplace as a Chinese company. And that is strategically what our path has been over reproductive health and newborn screening, and we are trying to inculcate that more on the immunodiagnostics side. There will be still a couple of quarters where it will take to calendarize to the whole new DRG impact. But I think overall, as we move away from that calendarization, we will start to see stability in the marketplace in China. It doesn't mean that there won't be noise still, but it's how do you deal with it, how you address it.

Yes. And I think when you guys framed up next year, I think it gets down to 5% or so of revenue, I think China ImmunoDx. Is it, to your point, annualizing the DRG and then the second half, do you start to get back to a level of growth in China diagnostics? Or what's the right way to frame up this onetime impact and then the way to think about this market going forward?

I think going forward, China will probably be in the low teens for us as a company. I think as 15% to 16% is where we had started it. I think we are at 14% now. 7% of that -- 7%, 8% of that is Life Sciences. I think China Diagnostics overall will end up being 5% to 6% of the company revenue and autoimmune a larger component of that. And I think that's where we will be comfortable with China being in the 10% to 12%, 13% range for us as a company. And that's how strategically we are positioning it.

And I guess on the Diagnostics side, is it the right way to think about it that it's just lapping reimbursement and then this market is still a growth market? Or is it, to your point, there could be noise and maybe the visibility is a little challenged right now. What's the right way to frame the Diagnostics piece specifically in China?

I think in the short term, there will be some noise. I think the question really is how do we position ourselves. I think most of what we have seen the impact of that is already in place. There will continue to be some noise, but the question really is that how do you localize? How do you get NMPA approvals faster? What strategic avenues do you pursue that gives you more in China for China opportunity. So sort of that is where our focus has been on the immunodiagnostics side of the business.

And then obviously, the rest of the diagnostics portfolio, relatively stable between newborn screening. Maybe talk about that market. Have you guys -- I think everyone viewed it as kind of mature and track birth rates, but you guys have actually put up a relatively nice growth there. And again, I know it's tests per baby in some of the emerging markets where you're able to expand. Maybe talk about some drivers on the newborn side and the right way to frame that market going forward for you?

I mean reproductive health has grown for us mid-single digits and newborn screening has grown high single digits to close to low double digit. And I think it's not just something -- an event. It has been something that has been going on for decades where we've continued to bring in more assays into the marketplace. We've continued to have geographic expansion in markets like Egypt, as I have said, it's gone from doing 1 assay on all babies to now 2 to 3 assays on all newborns. And in all markets, obviously, our Omics business is a big catalyst to bring in new opportunities around gel being one example or other countries that we have discussions with. .

But the key really is that how do we partner with governments and with the local entities to bring a sample to result solution. And that's where that partnership has worked since 1976. And then I think that has been one of the major growth drivers. Also, most of the new complex diseases that are rare diseases that are coming out have a requirement or a big need for a screening assay. And I think that is where Revvity has been at the forefront of it, whether it's around Duchenne muscular dystrophy, spinal muscular atrophy and also another example being type 1 diabetes in juveniles.

Our partnership with Sanofi, there is an area of inorganic partnership or growth that is not what we would have referred to as traditional newborn screening. But imagine being able to screen and diagnose a child with juvenile diabetes before an event occurs and being able to put them on therapy so that it sort of prolongs the onset or delays the onset of diabetes. It is such a powerful therapeutic tool, which was screening for a screening assay and being able to partner with Sanofi and provide that, I think, is a big growth driver again for the newborn screening business. And there are many other avenues such as these which we continue to work on, Patrick.

Maybe I'll spend the last few minutes on 4Q and '26. I mean you touched a little bit on 4Q in terms of the gel contract, a little bit of just that typical seasonal pickup. Can you talk about the revenue side, just the confidence level, the visibility you guys had when you provided that guidance? The shutdown was obviously a little bit of a variable that we talked about. But you guys have historically been somewhat conservative in nature. So how do you think about just the visibility into the 4Q guide when you gave it? What were the key variables that we should be thinking about?

Yes. Again, I think there were 3 pillars that we had said to the seasonal uplift from 3Q to 4Q of roughly $60 million. One, as I said, the activity around the scientific and our platforms, Life Sciences platform side, which we had seen in September, October and continued, right? The second one was the gel contract, which was $2 million to $7 million. And the revenue -- absolute revenue for 4Q for the Signals business. It might be lower in OG, but a higher absolute revenue number. And the third one was ex China immunodiagnostics. On 4Q, it had a very low comp that it was coming out. So there were 3 growth drivers. Now again, as I said in the beginning of our conversation, that there is an impact of FX on the absolute number, not on OG and very minimal on EPS, but on absolute number where the tailwind is lesser. And I think one of your peers has actually had a -- something out earlier this week that sort of talked about the same thing. So that might impact the absolute number by $5 million, $6 million, but not OG or EPS, but we feel pretty good about it.

Yes. And then maybe on the margin side, you obviously typically have a 3Q to 4Q step-up. Can you just talk about the margin step-up sequentially? Is that just a lot of revenue flow through? Obviously, you guys are doing a lot on the cost side as well. Maybe we can spend some time there on the margins.

Yes. I mean not focused -- not specifically focused on 4Q, but I mean the margin drivers for us and I think Max and Steve have talked about it over the last several months, whether it's around restructuring, consolidation of rooftops, continued integration activities of the 12, 13 acquisitions that we have made, gross margin improvements around procurement and sourcing. So there are several initiatives from the top of the P&L to the bottom of the P&L that will be continued drivers of margin. And we feel very good about the way we are placed both in '25 and what we've laid out for our '26 plan.

Yes. And then maybe for '26, you guys thankfully gave some initial commentary on it, which was helpful. You're talking about 2% to 3% growth, 28% margins. I guess on the growth side, similar to the way you just broke down 4Q, what are the key things that build into that? Obviously, we talked about software comps, reagents. I guess the confidence level in that 2% to 3%, the visibility, maybe the variables that you guys are thinking about as you laid that out?

Yes. I mean when we laid out, we accounted for obviously a stable market environment, and it has played out as we have said, and we feel good about that. We accounted for the impact of the calendarization on the China drag on IDX for the 2 quarters, which has been accounted for. So our intent really was, Patrick, to go out with a number on the top -- we feel very comfortable with. And on the 28% margin, we've already laid out plans, and we have operationalized it starting in the fourth quarter. So that will sort of lap into it. We feel very comfortable with the numbers we have laid out in 2026.

Okay. And maybe last quick one. Just on the capital allocation side. Obviously, you guys, since you've taken over, have done quite a bit. What's the right way to think about priorities at the current moment, where you are on leverage? Are you guys -- what's the appetite look like for the deal side? Or is it maybe a little more conservative share repurchases? How do we think about the capital allocation piece?

Yes. I mean we did an acquisition last -- was that last quarter or this quarter, ACD. Even for my muscle memory, it was an acquisition after 2.5, 3 years when we had done 13 acquisitions. Look, we are very acquisitive by nature. And we will continue to be so. We just don't want to pay absolute multiples. And our focus is on to be sensible and be strategic in the acquisitions that we make. ACD/Labs is a classic example of how we can leverage our Signals infrastructure, our channel, our R&D and bring in a business which is sort of essentially maps with what we do. So we are going to focus on acquisitions that make strategic and financial sense. Outside of that, our share is the best opportunity, and we are going to continue to be opportunistic in doing that.

Prahlad, thank you so much. Appreciate it.

Thank you, Patrick.

Okay. Thank you. We're going to kick it off here. I'm Tycho Peterson from the life science team. Pleased to have Revvity with us. Welcome, Max. .

Maybe we can jump in right with 3Q and just talk a little bit about some of the gives and takes in the quarter. Diagnostics looked a little bit better, I think. Maybe start by unpacking what you saw and any kind of real surprises relative to expectations?

Yes. Sure. So for the third quarter, and I'm assuming you're talking about from a revenue standpoint, look, things mostly, I would say, played out as anticipated. So we finished the quarter with 1% organic growth. Life Sciences came in at roughly flat and Diagnostics grew in the low single digits. I think when you look at some of the moving pieces you alluded to on the Life Sciences side, I would say reagents were a little bit weaker than what we had anticipated from a run rate perspective heading into the quarter, but that was offset by strength in both instrumentation as well as our software business, which again led to Life Sciences being flat overall. And then from a Diagnostic standpoint, the low single-digit growth was a little bit better than what we had anticipated, really driven by the strength in newborn screening. Immunodiagnostics business played out as anticipated, given some of the China headwinds, which I'm sure we'll get into later here.

And maybe we could just unpack on the reagent side, maybe what you've seen year-to-date in the 2 end markets, academic and biopharma and maybe just touch on the relative exposure to each of those for reagents?

Yes, sure. Maybe just answering the exposure one first. So for our reagents business, roughly $750 million of revenue. About 2/3 of that portfolio is pharma biotech and 1/3 is academic and government. I think when you look at the performance year-to-date, we've got about low single-digit growth year-to-date overall for the reagents business. Pharma has done a little bit better than that. Academic and government has been a little worse, down maybe low single digits so far year-to-date. And so I think the third quarter trends were again relatively consistent with what we had seen where pharma was a little bit better than academic and government.

And maybe just touch on that pharma improvement. Obviously, a lot of investors focus on the downstream side of it, but maybe just touch on what you're kind of seeing across the portfolio and how impactful was the ramp-up of GMP capabilities year-to-date?

Yes. Again, maybe tackling that second piece first. When we look at our reagents portfolio, GMP is definitely something that we're very excited about for the medium to long term of the business. It's not something that's a material revenue contributor for us today. But over the next, call it, 3-plus years, we do expect it to be a meaningful contributor. It just won't be a gradual ramp. You'll sort of see a step change once that comes online just based on the nature of how GMP sort of unfolds. We finished our GMP build in about halfway through 2024. So we've been up and running for about a year now.

We've seen really good traction from a commercial and customer perspective. It just takes time. It takes time from going of -- using your antibody from an RUO to the early stages, then to GMP into Phase I, Phase II. And you don't really see -- start to see sort of meaningful contributions until you get later into the clinical trials. So it's again, something we remain excited about. We're actively engaged with our customers and what their needs are, and we think it will be a meaningful contributor. We're just not seeing it maybe not as of today.

And then A&G, obviously, government shutdown here in the fourth quarter. Can you maybe just touch a little bit more on how you're thinking about next year and consumables have continued to flow here in the meantime. So touch on that, too.

Yes. Sure. So again, from an academic and government standpoint, 75%, 80% of what we sell into academic and government is reagents. So our performance is much more predicated on just general research activity as opposed to CapEx or some of the, I would say, the more budget flush-type dynamics that others talk about. That's not really an indicator for us. It's really just about underlying research activity. I think when you look at 2025, there's been, I would say, several body blows that the A&G market has had to absorb, whether it's at the beginning of the year and the talk of 40% budget cuts or the indirect caps and even some of the lawsuits with specific universities and now with the longest government shutdown. And our academic and government is still down low single digits for the year, which I think is a testament to our portfolio and the ability to weather that storm. And I think we'll, again, continue to see it relatively muted until some of these, I would say, overhangs from a policy standpoint really get ironed out.

And then I guess, pharma more broadly, I think you've talked about an uptick in activity late in the quarter and into October, still concentrated on larger customers. Maybe how has that activity been kind of playing out? And any incremental movement or a tone change from biotech?

Yes. Look, I think if you go refer back to the calls, the commentary we made on our third quarter earnings call, we had mentioned that we did see an uptick in customer activity as it relates to our instrumentation pipeline and funnel, particularly in September and the first couple of weeks of October. I would say that was predominantly with large pharma, to your point in your question, and really focused on our high content screening instrumentation portfolio. That generally has a 3- to 4-month lead time.

And so for us, we started seeing, again, that pickup of activity in September and October, and that kind of gave us the, I would say, proof points of what we needed to see for our fourth quarter expectations where we do expect instrumentations to potentially return to growth here in the fourth quarter of this year, which will be the first time in a couple of years and it's definitely a good data point, but it is just 1 quarter, and we'll have to see how that sort of plays out where if it's a new trend or just sort of a one-off dynamic within the fourth quarter.

And then to your second point on biotech, just in terms of framing up the exposure to biotech or what we consider sort of pre-revenue biotech for us, it's less than 5% of our total company revenue. It is coming off significantly easier comps, so it doesn't take a lot to move the needle there. But at least from what we've seen in the months of September and October, it looks like there's been some improvement from a funding perspective. That's obviously a positive sign for us, and we'll need to see if, again, if that's just a blip here, if that's a new continued trend, but investment in biotech is definitely a positive for us and where we're indexed to the industry.

And is that what the biggest swing factor, what we should be watching kind of biotech funding for the next year for that part of the business?

Yes, I think for that part of the business, I would say there's a couple of different things right, whether it's around the biotech funding discretely, whether it's around pharma returning to, I would say, more normal levels of M&A activity, which we've seen a couple of announcements here in the past couple of weeks, which is, I would say, a positive sign for us. We're agnostic to whether pharma does the investments in R&D on an organic basis or on an inorganic basis. Investment in R&D is a good thing for us. And then also with the M&A activity, you just get the recycling of funds back into biotech and the VCs, MPs, et cetera. So from that standpoint, any M&A activity, we generally do view as a positive sign for us.

And then how about geographically for pharma? And obviously, there's been a whole trend of kind of out-licensing compounds from China. Is that a tailwind, headwind? How do you think about that dynamic? And maybe just touch on kind of Europe pharma as well.

Yes, sure. Well, I think we've said we're kind of agnostic to where the work gets done, and we'll follow the molecule "around the globe" in terms of where the innovative work is being done. And I think you raised China specifically. If you look at our China Life Sciences business, we've grown on China and Life Sciences over the past 2 years. I don't think there's many in the industry that are able to say that. And I think that's really a testament, one, to our portfolio and that we're focused on innovative science and preclinical R&D, but also where the industry is kind of going, particularly as it relates to China and that big focus on innovation.

And so for us, that has been a discrete tailwind for us. And I think, look, I think the rest of world, our thesis is that it will snap back here at some point in terms of the preclinical R&D. Obviously, that's been a little bit of a headwind over the past couple of years. But we are excited, I think, over the medium term here that there will be continued investments from a preclinical R&D perspective.

And then maybe just thinking about instruments because you are expecting a return to growth here in the fourth quarter. Maybe just talk about what you're seeing in the order book that gives you confidence in a stronger fourth quarter. And then anywhere in particular, is it sample prep? Is it in vivo imaging where you're seeing kind of a stronger incremental demand?

Yes, sure. So I think from an instrumentation standpoint, again, really the pickup in activity that we saw in September and October was really from large pharma and related to our high-content screening business. High content screening is roughly 25% of our instrumentation portfolio. You mentioned the other pieces of it, 25% is also in vivo imaging. You've got about 25% is in liquid handling or workflow automation and then 25% is in sort of detection and plate readers. And so where we're seeing, I would say, the largest shift right now from customer activity, again, is on the high content screening side. These are generally larger ticket instrumentations that's made to order or custom instruments. ASPs can range from anywhere from about $0.5 million to $1.5 million. And again, it has a 3- to 4-month lead time. So the fact that we saw that increased commercial activity in September, October, historically, based on funnel conversion rates would lead to a stronger performance within the fourth quarter.

And is this all greenfield or is a replacement cycle dynamic here, too?

I would say, for the most part, our instruments aren't on a huge replacement cycle. Generally, you'll have 1 or 2 of our either high-content screening or in vivo imaging systems within a lab. And generally, what drives the replacement is when we come out with a new innovative suite of instrumentation or an upgrade to the fleet. And I think you saw that a couple of years ago with our in vivo imaging. Generally, we do an upgrade, I would say, every 5 or 6 years. The last time we upgraded high-content screening was actually in 2020. So that would be the next piece of the portfolio that's due for an upgrade.

That's not what's driving, I would say, the short-term demand here, but I would say that there's probably going to be some announcements in the near term on an upgrade to the high content screening portfolio. I'd also say from an instrumentation standpoint, we've been very focused on AI applications. If you think about what we do from an imaging perspective in Life Sciences, it is a very, I would say, a good fit from a use case perspective with AI and the ability to interpret and analyze those images for scientists. And so I think we -- over the past year, we've launched now 3 different AI applications for our instrumentation and are seeing good commercial uptick there.

I want to shift over to software, up 25% year-to-date. It really kind of has been going on a year now. So talk a little bit about the strength there. How much of that is share gains versus your 2 big competitors? Is this more of a market uptick in software spending? And how durable is this acceleration you're seeing?

Yes. Look, I think we're incredibly excited about our software business. I think, again, this is a true differentiator for us versus the broader peer group in Life Sciences and tools. And I think it goes a little bit to just what our software business is. It is a true ERP for the scientists in their preclinical R&D work and really has everything from designing their experiment and the molecule to executing the experiment and then running analytics on it. And so it's incredibly sticky. And I think when you look at the long-term growth algorithm of our software business, the LRP assumes 9% to 11% growth. I would say over the past 4 or 5 years, it's been growing above that. And we are now about to enter into the largest new product cycle that, that business has ever had since its existence.

And when you look at what's going to drive that growth in the future, I would say about 6% to 7% of it is based on our retention rate with our -- net retention rate with our customers. And then as you grow above that 6% or 7%, it's really driven by 2 things. One is expanding our customer base. So it's moving both further downstream in pharma biotech versus historically being focused on Tier 1 and Tier 2 pharma. And then secondly, getting into material sciences, which we've spent a lot of time talking about externally and how a lot of our products and software offering we have on pharma is very synergistic with what is needed from a material science standpoint. And so we've been building out our commercial team to take advantage of that market and have seen really good orders performance there, both in '24 and in '25.

And then I think the third leg of your sort of growth algorithm is the new products. And we've come out with 2 recently in 2024 that moved us a little bit further downstream with Signals Synergy and Signals Clinical. And now in 2026, we will have 2 additional launches in the large molecule workflow, so BioDesign and then also LabGistics, which is helping just run the operations of a lab with inventory management, et cetera. So I think we believe this business has a tremendous amount of runway in front of it, and we're really excited about its current prospects with both its product innovation, but also expanding its customer base.

And I know obviously, you've got the difficult comp dynamic, but mid-single-digit range for next year for that business in light of the new products, material science, just underlying momentum. Why is that the right neighborhood?

Yes. I mean organic growth is a tough metric for a software business. I think we generally like to talk about APV or the annualized portfolio value, which sort of normalizes for rev rec, which is the biggest reason why we're calling for mid-single digits. It's just the timing of rev rec and contract renewals. But when you look at things from an annualized portfolio value perspective, we still expect the business in 2026 underlying to be growing low double digits if you were to normalize from a rev rec perspective. So I would just say it's more timing rev rec dynamics than anything else going on with the business. The underlying performance is still very strong.

And do you maybe just want to touch on where you are in the SaaS journey with that business, too?

Yes, sure. So I think we've made tremendous progress from SaaS. I think we are ahead of the 2 competitors in the space from a SaaS perspective. We have about 1/3 of our portfolio with SaaS now. Entitlement, we believe, is probably 65%, 70%. So with that, you can say we're about halfway through the journey, and we'll probably look to complete it over the next 3 to 5 years. I'd say why is it not 100%?

One, some customers will never move over. They've created too much of a customized solution and they prefer to stay on-prem. Or two, some of the products that we have, it would cost too much money to move them over to SaaS and isn't worth the economic trade-off. So I think some piece of the portfolio will always be on-prem, but we do believe that we're about halfway through the entitlement journey getting to 65%, 70% SaaS.

Maybe shifting over to Diagnostics. Reproductive health was strong in the quarter, I think up high single-digit growth in newborn screening. Just even backing out the gel contract, by our math, it still grew mid-single digit in newborn, so nicely above the kind of 3% to 5% LRP. Walking against the delta of declining birth rates, what's the real growth driver of that business as of late? Is it new geographies, adoption of existing assays, any new expansion?

Yes, for sure. Look, I would even say that for our newborn screening business, it wasn't just a phenomenon in the third quarter. I think if you look at newborn over the past 3 years, it's been growing mid- to high single digits consistently over the past 3 years in excess of the LRP, as you called out. And I think when you really think of the drivers there, right, yes, you have the declining birth rates. But the reason why we've been able to grow so far in excess of it is really 3 factors.

One is geographic expansion as there's still 100 million babies born every year that don't get any level of screening. Two is getting states and countries that already have screening programs to adopt new assays. And I would argue that's probably the biggest driver of excess growth. And then the third reason is related to new assays where we're coming up with new disease areas to add to our existing menu. And so I think the combination of those 3 is what's really driving the growth above the birth rates. But if I had to point the biggest one, it's really when we can get an existing program to add an additional market to test.

And maybe just double clicking on Genomics England. How has reception been so far? How is the partnership influencing the strategy in rare disease detection and whole genome sequencing? And maybe just talk about some of the tailwinds?

Yes. Look, I think the program is going fantastically. I think we really appreciate the relationship we have with Genomics England. And I think we've already really started to see the benefit really to society as a result of the program. Prahlad on the third quarter earnings call, talked about Baby Freddie, who, as a result of this program, they were able to identify with no signs that the individual had cancer in their eye and would have lost sight if not for this genomic screening program, and they were able to get Baby Freddie on medication and ultimately save his vision. So it is paying real dividends. Again, we really appreciate the relationship.

And I think about -- as you look forward, one, we're going to continue to work with Genomics England to see how we continue expanding that program for them within the U.K. But then secondly, this was kind of the first country that really moved the needle from a screening program on a genomic standpoint. And I think at least we're in active discussions with other countries and them adopting a similar program. So hopefully, this is just one of many examples of a genomic screening program that, again, can provide real benefits, not only from a diagnostic standpoint, but also tremendous amounts of data that can help the ecosystem from a drug development standpoint.

And what about beyond country level, like in the U.S., you have Florida Sunshine, you have Beacon. Talk about maybe the momentum behind some of those initiatives?

Yes, totally. Again, I think for those 2 specifically, look, we're also in the business of doing things when it makes sense from an economic standpoint. I think those 2 programs, in particular, didn't really necessarily maybe fit that strike zone, although they are aligned to what we want to do strategically. And I think you'll continue to see us involved in different types of genomics programs. But again, at the end of the day, it has to make sense, too, from a financial standpoint.

And anything to call out on the rest of reproductive health? I mean it's a smaller portion of revenues, but you've got cord blood in the U.S., maternal testing. And any kind of notable trends there?

Nothing that I would call out in particular. I think when you look at newborn -- or excuse me, reproductive health, our main 2 focus areas are really on newborn screening and then the larger screening programs or specialty partnerships with pharma, like the one that we just announced with Sanofi around type 1 diabetes, which, again, we're very excited about. But those are probably going to be the 2 bigger areas of focus for us with reproductive health.

And then in immuno, maybe we'll step away from China for a minute and just talk about kind of the high single-digit growth ex China. You've talked about getting to double digits in the LRP. What are the drivers there? How much is autoimmune, infectious disease, allergy?

Yes. Look, I think when you look at immunodiagnostics and the LRP of 9% to 11% growth outside of China, to your point, is a low double digit. I would say, for the most part, over the past 3 or 4 years, it has been executing in the low double digits outside of some quarterly noise. And I think that will be true when you look back on 2025 in total. But I think when you look at the big drivers there, the biggest driver is really the U.S. penetration. And the U.S. penetration for us, if you go back when we first acquired EUROIMMUN, which is the biggest part of our immunodiagnostics franchise, they only had 5% of the revenue in the U.S. Now that is up to closer to 20% of total immunodiagnostics revenue.

We think entitlement is probably closer to 40%, which is in line with where the U.S. market is as a total piece of the pie. And so I think you'll continue to see really big focus in the U.S., and that's across all the areas, whether it's autoimmune, allergy or even TB is a big focus for us in the U.S. And that continued, I would say, sort of mid-teens growth in the U.S. is really what's driving, I would say, the biggest piece of that low double-digit growth outside of China.

And on TB for T-SPOT, you've got the Auto-Pure 2400 launch this year. Talk a little bit about how much that could revitalize that business.

Yes. Look, maybe even just to take a step back, too, I mean, I think as you think about the immunodiagnostics market in the U.S., one of the most important things is reduction in hands-on time or reduction in labor, given the amount of cost of labor in the United States, which is maybe not necessarily true outside the U.S., where we have a really good strong market presence or market share in both autoimmune allergy and TB. And so for the U.S., for us, the big focus has really been on automation and how do we reduce hands-on time.

So when you look at TB, yes, we have a superior clinical assay, but the challenge for us has always been around the required hands-on time to run our workflow. And so we've now come out with the low throughput offering. We've come out with the mid-throughput offering. The high-throughput offering is going to be hopefully announced here in the short term and one that, again, we're excited about. As we've already seen from the medium throughput, we already had some customer displacements as well as some new placements here. I think by the end of the year, we'll be up to maybe 40 placements of our medium throughput equipment in the U.S. And so that's, again, an area that is critical for us if we're going to start, I would say, continuing to take meaningful share in TB in the U.S.

And then on China, 20% of immunodiagnostics, 6% of total, you've been clear you expect a decline in north of 20% through May of next year and then modest growth thereafter. What's your line of sight on that latter assumption? And what metrics should we be tracking?

Yes. Look, I think from a China diagnostics perspective, again, everyone had always kind of talked about VBP. VBP wasn't really a big factor for us. Really, we got hit with the DRG policy that came out here in the second quarter of 2025. And we had mentioned that it's going to take us about a year to sort of anniversary that or reset the baseline for our immunodiagnostics business in China. And then to your point, our assumption is kind of low single-digit growth after that. .

I think the key for us, again, is just working our way through this policy change and having a little bit more stability from a regulatory perspective. I think it was a little bit of a surprise when that came about in 2025. But in order for us to go back to growing in that business, we need a little bit more regulatory stability. And at least from all indications that we're seeing from the local teams, it does appear that once this kind of works its way through over the next 12-month period in terms of annualizing it, we should expect to return to growth.

Maybe just hitting on margins for a minute. The swing factors this year, obviously, were China ImmunoDx, as we talked about in tariffs. As we think about kind of underlying margin expansion next year, well, first of all, what could -- what is the impact of those 2 next year? And then how do you think about kind of core margin expansion or base margin expansion next year?

Yes. So maybe just to frame up the numbers, too. So this year, we should end the full year with operating margins, call it, 27.2%. We've mentioned that for the framework for next year of 2% to 3% organic growth, we anticipate margins being at 28%. And really, the pathway of us getting there is a combination of things. One, taking some specific actions as it relates to the drop in the China volumes. So looking at the China footprint, but also the manufacturing footprint that supports our China volumes. .

Second is, I would say, continued execution on rooftop consolidations. We've announced a new imaging center of excellence in North Carolina, but also that we've gone from 4 rooftops of manufacturing in the Northeast down to 1, which will provide a tailwind. Those are just a couple of examples of some of the rooftop consolidation we're driving. And then the third piece, I would say, is just general M&A synergies from like a delayering of management and continued integration of teams. So those 3 things will drive us to that 28% operating margin baseline. If we -- if growth should be in excess of the 2% to 3%, I would expect to be able to deliver above 28% operating margins. But again, we'll have to see what happens from a market recovery standpoint.

You'd also mentioned how is sort of tariffs and the China headwinds kind of impact that. Look, the reality is we're not necessarily doing something to completely operationally mitigate the tariffs directly. And there's nothing we're really doing to drive excess new volume in China to offset that. I think what we're really doing is addressing it directly where we can, like we talked about with the China footprint actions, but then also finding other areas of the portfolio to help offset or mitigate some of the things we're seeing from a tariff perspective. So those headwinds are still somewhat embedded in that 28% operating margin framework.

Great. We're out of time. I think we'll leave it at that. Thanks.

Good morning, everybody, and thank you all for joining us for 8 a.m. session with Revvity. We're lucky to have with us today, Max Krakowiak and Steve Willoughby. Welcome both of you.

Thank you, Dan. Thanks for having us.

And we'll just kick things straight off. Max. This is your first public venue since your earnings call a couple of weeks earlier, I believe. And I was hoping we could start by reflecting back on Q3. What were the highlights? What were the points that needed clarification in your mind?

Yes. So I think if you look at the third quarter results, I would say it was a solid quarter overall. Organic growth and our operating margins were in line with our expectations in the period. It was another strong quarter from a free cash flow perspective.

We generated about 90% conversion from a free cash flow standpoint. I think when you look at things from an organic growth standpoint, the quarter mostly played out as anticipated. I think you continue to see really strong performance in our software business, which grew 20%.

We had really strong performance in our newborn screening business, which grew high single digits globally. And then we continue to see real progress on our U.S. immunodiagnostics franchise, which grew mid-teens in the quarter. So I think some of our key growth pillars over the long term continue to perform well in the third quarter and definitely have us excited for the coming quarters here.

Okay. And I think there was other disclosure on the quarter about month-to-month activity as well and perhaps some green shoots. Could you revisit that?

Yes, sure. So that commentary, I think, was mostly related to our instrumentation business. We did start to see, I would say, some increased commercial activity in the months of September and early first couple of weeks of October. I think from our standpoint, we'll have to see if this is a new market trend or if this is sort of a one-off flurry of commercial activity.

I think just given the past couple of years, it's prudent to take more of a little bit of a wait-and-see approach on how things play out, but we definitely saw a decent uptick, at least in the commercial engagement and pipeline activity with pharma as it relates to instrumentation.

Okay. So it was an instrumentation-specific comment. And that isn't something -- just to clarify at the outset, that's not something that you flowed through into your 2026 framework. Is it?

No, that's correct.

Okay.

I'm sure we'll talk about the '26 framework as we go through today, but...

Yes, that's on the list. But first, maybe we could transition to talking about your business segments. You mentioned a couple of the performance metrics in your opening remarks there. I think the first line of questioning I'd like to address is idiosyncratic growth drivers at Revvity because we spend a lot of time talking about end markets with different tools companies, end markets have been tough. When they get better, it helps everybody, right?

And really, what I'm more interested in is what will help you more than everybody. And so let's start off with the reagents business. How do you think about your ability to grow above market in reagents? And what are the drivers of that?

Yes. Look, I think when you look at our reagents portfolio, I believe that there's a key -- couple of differentiators for us versus our peer group, whether that be around the rate of innovation as we launch thousands of new reagents every year or whether it's around our customer service and delivery model, where 90-plus percent of reagents are shipped within 24, 36 hours, which is a differentiator for us.

I think as you look at it, we're also, I would say, the value-based offering in the market at the lowest price point with what we feel is the highest quality. So I would say those are some real underlying fundamentals of our reagents business that have helped us, I think, perform better than our peers over the past couple of years and continue to take share.

I think if you look at some maybe idiosyncratic stuff specific for Revvity on the reagent side, I think one is around GMP which we can talk further about. And then the second one is really around some of the progress we've made on e-commerce as well as we had been, I think, behind the 8 ball a little bit there for the first couple of years that we really had a reagents franchise, but we've started to make some real meaningful progress there.

Let's start with e-commerce. Where are you in trying to bring the non-BioLegend portion of your reagents portfolio onto the BioLegend e-commerce platform?

Yes. So when we acquired BioLegend, I would say less than 10% of our reagents at that time were sold on e-commerce. After the acquisition of BioLegend, that had gotten up to about maybe 25%, 30% just with their penetration. We recently relaunched our e-commerce platform in early 2024. And so we've been on that new platform now for a couple of years. And I would actually say our reagent channel through e-commerce has almost doubled now in those 2 years. So we've gone from about, again, 25% to closer to 45% now, are going through the e-commerce channel.

And what's the goal?

I think the goal is as close to 100% as we can get it. I don't think we'll ever get to 100%, but north of 65%, 70%.

And what are the benefits of that?

Well, obviously, one is you have less cost, right? A much easier synergistic sales through e-commerce. Customers tend to be a little bit stickier as well as they go through the e-commerce platform and you hook up directly with their procurement system. So I think you see it both from an efficiency side, but also in terms of the amount of customer wallet share you get.

Okay. GMP?

Yes. So from a GMP perspective, we had -- when we had acquired BioLegend, they did not have a GMP offering. They were strictly RUO. And so as part of that, we had heard consistently from their customers, the desire for us to sell GMP reagents and move a little bit further downstream as opposed to being just RUO and on the preclinical side of things.

So we made an investment to build out a GMP facility. I would say it was a modest level of investment, not the hundreds of millions that sometimes you see with the GMP facility. And so that was completed sort of by the end of 2023. That build-out was completed. We had mentioned at that time, we anticipated it probably taking 3 to 5 years for it to really start driving meaningful results in our financials.

I think when you put that in context of what some of our peers have experienced from the time they built out GMP to seeing it through their financials, it's closer to about 7 years. So we do anticipate to be quicker than that. But it will still be, I would say, a couple of years before you start seeing meaningful results. We're excited about the pipeline. We continue to see good commercial traction. But again, it will just take a couple of years before you start seeing that meaningfully in the financials.

How do you frame the revenue capacity of your GMP build-out?

Truthfully, I wouldn't say there's necessarily a huge cap on the capacity that we have in terms of where we're trying to play. From our GMP standpoint, we're moving from preclinical to sort of the early stages of the clinical trial, not all the way downstream into like the contract manufacturing of reagents where you would need a much more significant build-out from a GMP perspective.

Okay. So you're some period of time before there's any lumpiness in GMP orders that would influence your financials?

Correct.

Got it. Well, let's pivot to instruments. You touched on it a moment ago that the trends have improved from an end market perspective. But from a Revvity-specific perspective, what gets you excited about your instrument portfolio?

Yes. I mean I think we're -- look, we're continuing to innovate from an instrumentation standpoint. We just refreshed our in vivo platform in 2023, and we've seen really good traction from that refresh. I think when you look at over the past couple of years, we've also had a decent amount of launches from an AI software perspective and continuing to boost the analytical and interpretation power of our instrumentation and the ease of use for the scientists.

I think as you look out over the next couple of years, I think you'll continue to see launches from an AI perspective and the software on our instruments. And then I also think you could probably expect to see a refresh of the high-content screening portfolio in the near future.

Usually, we do product, I would say, refreshes an instrument family every 5 or 6 years. The last one on high-content screening was in 2020. So I think you'll see, again, in the near term, some real exciting announcements around our high-content screening business.

Okay. And any new launch in high-content screening would be coupled with an AI way to read the image, presumably?

Correct. But I mean, I think even in the interim, you'll continue to see sort of interim software releases as things come available.

Got it. Well, I do have a bunch of AI questions, so we'll get to that. All right. Moving on to the Signals business, which you mentioned has been a standout performer for the company. How are you thinking about the durability of that performance? And I know you have a new product launch coming, so help the audience frame what are the implications of that.

Yes. Look, I think our software business continues to be a really unique asset for us. Again, it's a software business that not many of our -- really any of our peers has and the fact that it is a true stand-alone offering from a preclinical workflow to our pharma customers.

I think as you look at the performance over the past couple of years, it's grown healthily in the double digits. We expect that trend to continue over the long term here. And what you're seeing with our software business is we're kind of in the midst of a significant NPI cycle. And so in end of '23, early '24, we released 2 product offerings that moved us a little bit further downstream outside of the preclinical side, a little bit further downstream into the clinical trial side. Those were our Signal Synergy and Signals Clinical launches.

We've talked about the upcoming launch, particularly as it relates to the large molecule offering, which I'm happy to spend more time talking through, but we think that will be a significant tailwind for us. And then we've also talked about the growth driver of expanding outside of just the Tier 1, Tier 2 pharma, which is where the predominant presence has been.

So one, moving further downstream into the Tier 3 and smaller biotechs, but also expanding into areas like material sciences, where there's a lot of synergistic overlap with our product portfolio that we offer to pharma.

But you framed the forward year for Signals as being more of a mid-single-digit growth year instead of double digits. Can you walk me through why the softening in trend?

Yes. Well, I mean, first, organic growth is not necessarily the best metric to evaluate a software business. And given that we still have on-prem solutions, you are going to see from a rev rec standpoint, some lumpiness from organic growth. And I think when we really look at the performance of the software business, I would say we really analyze more software-specific metrics, one of those being APV or the annualized portfolio value.

And so what that does is basically straight lines your revenue recognition and simulates if everything was done on an apples-to-apples basis. If you look at the APV, even this year where organic growth will be close to 20% for that business, the APV will still be low teens growth.

Next year?

This year. And then even next year, I would expect, although organic growth might be more mid-single digits, the APV would still be in the low double digits, low teens.

Okay. That's a very helpful clarification. And so the difference between organic revenue growth and what you're getting in APV, that's timing of renewals for on-prem.

Correct.