Agilent Technologies, Inc. (A) Earnings Call Transcript & Summary

[Audio Gap] These statements are subject to risks and uncertainties and are only valid as of today. The company assumes no obligation to update them. Please look at the company's recent SEC filings for a more complete picture of our risks and other factors. Today's presentation will refer to non-GAAP financial measures. You'll find the most directly comparable GAAP financial metrics and reconciliations on our website. Let me also remind you that we will be sharing financial results and our outlook based on our new organizational structure that we detailed during our Q4 earnings call in November and that we have provided a recast of selected financial information for the past 3 years related to these changes on our website. As a final reminder, these changes have no impact on our company's consolidated financial statements. With those reminders out of the way, let's get started. We have a full and exciting program for you today. So let me cover our agenda briefly. Starting us off will be our President and CEO, Padraig McDonnell, with an overview of Agilent, including our strong fundamentals, our evolved market and customer-focused strategy, exciting details on our Ignite transformation program, which is already underway and our longer-term financial goals. Following Padraig will be Simon May, Senior Vice President and President of our Life Sciences and Diagnostics Markets Group, who will present an overview of LDG and the strong portfolio of innovative technologies and workflows to support our customers in the pharma, biopharma, diagnostics and life science research space. After Simon is finished, we will take a short break. And then Mike Zhang, Senior Vice President and President of our Applied Markets Group, will present an overview of AMG and how we will grow our leadership position within the applied markets. Following Mike, you will hear from Angelica Riemann, Senior Vice President and President of the Agilent CrossLab Group on how we intend to further deepen customer lifetime value through services, consumables, software and automation. Finally, you will hear from Bob McMahon, Senior Vice President and Chief Financial Officer, who will discuss our excellent financial track record and attractive long-term outlook. We will then take questions from the audience and expect to wrap up around 12:30. So without further ado, let's get started.

Good morning, everybody. Delighted to be here today with the rest of the Agilent team. It's our 25th anniversary. We rang the bell this morning, and we're 25 years as an independent company. So it was a very important day for us. I remember 25 years ago, I was an engineer in Europe when the company split and -- from HP at the time. And so it's a really proud moment for the team to be here today. So I'm Padraig McDonnell, and it's a privilege to talk to you today about Agilent's Ignite strategy and transformation, about our growth ambitions and about how we're building an enduring company that's going to set standard of excellence for our customers and shareholders. So today, we'll provide more explanations on Agilent's business markets and more importantly, the intensity we're bringing to accelerate innovation, expand and to grow. You'll hear directly from the presidents of our new market-focused businesses. First of all, Simon May, President of the Life Sciences and Diagnostics Group; Mike Zhang, President of the Applied Markets Group; and Angelica Riemann, President of the Agilent CrossLab Group. You'll also hear from our Chief Financial Officer, Bob McMahon. And here's what you can expect today. What we've accomplished, what the team has accomplished and what I've accomplished in my first 7 months as CEO, the leadership team driving Agilent's evolution, you're going to meet them all today. And a really important topic, our Ignite strategy and transformation focused on quarterly expansion and growth. So I'm a 27-year veteran with the company, started in my career as an engineer and of course, culminating leading the CrossLab Group, but also leading the commercial organization into one commercial organization. And you're going to hear a lot about commercial today. You're going to hear a lot about services, and we believe it's a really important differentiator as we go forward. So immediately after I became Agilent's fourth CEO in February, I went on a listening tour. I talked to employees, I talked to customers, and I talked to many of you in the room today. Customers said our service is second to none. Employees said our culture is outstanding and investors said the trust that we'll do what we say we will. But of course, there's room for improvement, an improvement that could unleash potential and unlock possibilities for this company. On day 1, I announced to employees that Agilent will become a nimble company, so we could increase our customer focus and capitalize on growth opportunities. Since then, we've streamlined our organizational structure to support faster decisions and priorities and increased investment to our Customer First programs in high-growth areas. By the end of our fiscal year in October, we generated $100 million of incremental annualized savings while reinvesting $50 million of that back into the business to support high-growth opportunities, for example, in our digital ecosystem. Since February, I built a formidable leadership team. You're going to hear from this team from -- today from all of the team and launched the Ignite strategy that -- and the transformation that now includes our new market-focused organizational structure we announced last month. Over the past 2 years, we've seen our growth decline because of slow market recovery. While we can't control the pace of the market recovery, we can control about what we're going to do about it. And our answer is Agilent's Ignite strategy and transformation. We have evolved our strategy to focus more on customers and markets, not products and launched an ambitious transformation to deliver growth every quarter. To be clear, we're not changing what makes Agilent great. We're evolving to thrive in an ever-changing environment. This transformation work continues the work we started 3 years ago to really transform our commercial operations, something that I led. And during my time as ACG President and Chief Commercial Officer, we led this transformation to make sure our commercial organizations continue to be second to none in customer service and seen over 90% plus customer satisfaction scores. This experience, of course, shaped my perspective on transformation. What's really important when you hear about transformation today is transformation is not only about creating value by changing how we do business, but it's also about creating a culture that has higher growth ambitions. It is about identifying internal value drivers to optimize, external value opportunities to realize and developing a strategy that creates excitement and for what's possible. And of course, ensuring a foundational structure and processes that are disciplined and aligned with strategic objectives. To ensure the success, the process must include a really proven team that are excited. You're going to see that excitement today, and I'm really delighted to have the team here. And if done right, a transformation enables our team to act decisively and boldly but also with measured speed. So some of the key takeaways from today, I'd like to leave you with. Agilent is an established leader in $80 billion markets driven by secular growth. We have leading market share, and we have sustainable competitive advantage through our intense customer focus. We're reaccelerating our growth through innovation and market share gains. You're going to hear a lot about innovation today. And through our Ignite strategy and transformation, we are driving productivity and reinvestment. We've created both a short-term and long-term incentives tied to hitting these goals for our executive team. For operating margin expansion, we've added a modifier to the executive team's long-term incentive plan that is directly linked to achieving this margin expansion ambition. We're also creating a culture -- cultivating a strong leadership team and a strong company culture. And of course, the outcome delivering 5% to 7% long-term growth and double-digit EPS. So let's start with the company's mission and vision. The mission hasn't changed, which is to deliver trusted answers and insights to advance the quality of life. This remains unchanged. But what we spent a lot of work on is our vision. What we've updated to intensify our focus on customers and innovation. Now our vision is to deliver -- is to innovate and deliver seamless solutions for our customers to expand the frontier of science. What we do is a really important work in our tools, and we're really going to continue to expand that frontier of science. Now let me talk about the team. I'm absolutely thrilled with the caliber of Agilent's leadership team, not only the speakers you'll hear today, but also the leaders in the organization that will enable us to do great things. Our journey at Agilent requires a team that will execute our unified enterprise strategy, be passionate about our customers and has a proven track record of delivering results. and also coupled with that, a visionary perspective on growth. The speakers you're going to hear from today are Simon May, President of our Life Science and Diagnostics Group. We're absolutely delighted to have Simon on board. Before this, he worked at Bio-Rad for 2 years and spent over a decade at Thermo. And Simon has brought amazing energy to the team. Mike Zhang, our President of Applied Markets Group, a 20-year veteran of Agilent with experience in operations and most recently Vice President and General Manager of our GC and GC/MS businesses; Angelica Riemann, President of the expanded CrossLab Group, has worked in multiple roles, sales, leader of the consumables and services business and culminating leading the CrossLab Group at service over the last few years; and Bob McMahon, Chief Financial Officer that brings 20 years of senior level financial experience. I don't want to leave out the people on the right, though. We have Bret DiMarco with 16 years Chief Legal Officer experience; Jonah Kirkwood, who's in the room today, who leads our one commercial organization, which is unique in the marketplace. We have Tom Callahan, who's leading our transformation as Chief Transformation Officer, an experienced finance executive; Fred Schwarz, who's leading our strategy group; and Jenipher Dalton, who's leading our quality group. So very excited about all that. So let's talk about our capabilities and where we're coming from a position of strength. We're in 285,000 labs. In those 285,000 labs, we have 0.5 million assets installed. 0.5 billion assets installed, 500 million assets installed. Think about that. With 500,000 assets installed, we can do a lot with these assets with our capabilities as we move forward. And as you can see from the map, we're actually very globally arranged, 40% in Americas, 27% in Europe and 33% in Asia Pacific. We have -- in these labs, we're 110 countries. We have $6.5 billion in revenue, 26.4% operating margin and $5.29 earnings per share. We have evolving product mix, a very important graph. You see that 36% of our FY '24 revenues in instrumentation and 64% of our FY '24 recurring revenue is in services and of course, consumables. In 5 years, we've seen our recurring revenue increase by 600 basis points, and we're not done yet. As you see our strategy today and as you see what we're lining out as a company, whether it's organic or inorganic, recurring revenue is going to be an increasingly large part of the story. Agilent is a strong company with strong fundamentals, ones that consistently have driven year-long high value. And more importantly, these fundamentals create a strong foundation to drive growth for the future. First of all, we have a leading portfolio. We're #1 in a lot of key platforms. On my left-hand side, you see our Infinity III system. I'm going to talk a little bit about that. I do encourage everybody to have a look at that system. It's a groundbreaking system, and we've got incredible response from our customers, and that's one of our key platforms moving forward. We have loyal customers with a robust annual retention rate of more than 90%. We have a record level of digital orders, which has surpassed $1 billion. When I started in the chemistries and supplies business in 2017, the online orders were about 35%. Over 3 years, we've moved that to 50%. Now currently, online orders for our chemistries and supplies business is past 60%. So that continued investment in digital and how we can interact with our customers is going to be really important. Agilent has a differentiator of unparalleled customer support. I talked about that with industry-leading customer satisfaction rating of over 90%. And we can post a really strong cash flow conversion of 84%, which along with our extremely strong balance sheet will allow us to fund strategic growth opportunities, and we're going to discuss those today. So this is our strategy slide. When we worked on our strategy over a number of months, we looked at our end markets, and we really linked out where our strategic priorities were going to be. Our evolved strategy was built with the customer and market in its heart. It brings together the elements of where we play and our strategic priorities across all end markets. We started with a customer and market back view with our focus on end markets on biopharma, pharma, clinical and diagnostics and applied markets. And our strategic priorities are really clear as a company. First of all, expanding our portfolio and increasing our innovation. That's both organic and inorganic, of course, expanding internally being the priority. High-growth segments. When I talk about markets, we have lots of opportunities in our markets. So attaching to faster-growing segments is going to be critical as we move forward, and that will be a key part of our plan. Lab productivity. Many of you in the room would probably say that lab productivity is part of services where we do enterprise services. It's way beyond that. When I visit customers around the world, the #1 thing they talk about with their fleets is how can we make these fleets more productive? How do we know what our assets are doing and how do we know when to change our assets at the right time. Also, automation is going to be really critical here. We have an automation business. We're now moving that strategy to the company level to make sure that we can increase our capabilities in that area. Last but not least, software and informatics. This is an area that was fragmented in different parts of the company. You're going to see it in one part of the company now in the CrossLab Group, and it's a really important enabler as we go forward. But none of these are really possible without having a strong leadership team that will propel Agilent and reaccelerate growth across the markets. Of course, we have key enablers. Commercial, we believe our one commercial organization is a true differentiator, service and sales under one leader, making changes and making sure we can evolve very quickly. On digital, we've invested quite a lot. We've acquired Sigsense that's got AI capability. Digital and AI will become an increasingly, of course, part of the story for Agilent. And of course, we're going to continue to invest. Ignite, you're going to hear Bob talk about it in detail today. I'll kick off on the broad side what Ignite is. Many of you in the room will remember Agile Agilent maybe at the start of 2015. Ignite brings that as a far more accelerated program. And top talent. We're going to talk about our talent. We're talking about how we're attracting top talent, but also how we're bringing in new capabilities and, of course, retaining our top talent. So our strategy enhances our unique positioning to drive value. First of all, we've established a new org structure, which is really important to support our customers and market-centric strategy. We want to make sure that we're addressing customer needs versus product launches, innovation and most importantly, investment. Secondly, we want to target high-growth segments and bring our legacy of strong innovation to bear in those segments. We want to focus on profitable growth, which is really important and drive a really strong cash flow as we move forward. So all of these really enhance our position as we move forward. So our serving our growing market opportunities. We have an $80 billion TAM. You can see pharma and biopharma, $25 billion, growing at 5% to 7%. Lots of really interesting drivers within that, including GLP-1, but also cell and gene therapies, et cetera, academia and government growing 3% to 4%. Clinical diagnostics for us has a $20 billion TAM. It's growing 5% to 7%. It's an extremely durable business for us. high recurring revenue, and it's really important that we continue to focus there. And the applied markets, as we break it out between chemical and advanced materials, lots of exciting things happening there. You're going to hear it from Mike talking about our semiconductor business in that and our battery business. Environmental and forensics, we're going to do a double-click on PFAS, really important, which is now, of course, moving into food and the food business growing at 2% to 4%. But this slide, looking at the markets shows that we're in the golden age of biology. And I would say the golden age of biology, most of that is ahead of us. So our biopharma and pharma opportunity is really enormous as is across all of these areas. So growth of the underlying markets. First, there's an increase in R&D spend, more than 6% annual growth through '26. Pharma pipeline accelerated with novel modalities. We see more than 7% growth through '28. Specifically, we see molecules in development in small molecules, continually biologics and of course, in cell and gene therapy. We're also seeing an uptick in cancer testing with increased test of more than 40% from 2020 to 2023. And our applied markets, PFAS testing is increasing globally and across all end markets. This is a $300 million-plus market that is growing 15% to 20% a year, an incredibly important market that we believe there's a long runway. For example, last quarter, our highest growing region in PFAS was China, and they're only at the early innings of looking at where PFAS can go going forward. And semiconductor growth is driven by our supply chain -- of course, by supply chain reshoring, next-generation computing and EVs, of course, which is really important. There's another $500 million-plus market that is growing between high single digits and double digits each year, and that's going to be an incredible very strong focus going forward. These strong markets, combined with our Ignite transformation provide us with the flexibility to fund continued leadership in our innovation. And we're projecting our long-term revenue growth of more than 5% to 7% in our new market-focused organization structure. So leveraging our technology foundation to meet customer needs. By shifting to a customer and a market and focus, we are leveraging our technology foundation to address customer needs. In pharma and biopharma, we're providing trusted solutions to leading innovators who provide life-advancing therapies. In clinical and diagnostics space, we are supplying proven solutions to researchers and practitioners to advance medical diagnostics. And across the applied markets, we are delivering unmatched end-to-end workflows, and this is how we're fulfilling our vision to help customers bring great science to life. So our new structure, you've all heard about the new structure and the restatement. Let me talk about it from left to right. The Life Science and Diagnostics Group has our LC platforms and portfolio, which, of course, you see the Infinity tree in the room, our LC/MS portfolios. NASD and BIOVECTRA now becomes really a central part of this group with our CDMO capabilities with really specific capabilities that customers have been asking for and cell analysis and genomics. And you see that whole space, it really overlays our pharma and biopharma markets and pathology and companion diagnostics, which is an important part of our business. Applied markets under Mike, we have our GC platforms, our GC/MS platforms, our spectroscopy platforms, vacuum and certified pre-owned. These are areas where we're #1 in market share, and we're continuing to evolve that market share to be even more important. The Agilent CrossLab Group. This is something, of course, that's really important strategically for the customer with analytical consumables, services, software and lab automation. We have recurring revenue in one place here, and this enables the whole company. So chemistries and solutions, not for all platforms, but for all labs is going to be really important. And automation, coupled with software is going to be really the future trajectory of the market. Of course, underpinned with our customer service organization, best-in-class service across markets. So we're very excited about the structure. When we thought of structure, always follows strategy. When you become CEO, everybody wants to see the new structure, everybody wants to see the new changes. But we started with a very deliberate work on strategy, which is continuing and ongoing, and we're building on for the next year. So differentiated innovation. We're also investing in innovation. We have leading scientific expertise across all end markets. We have -- we provide valuable insights, of course, to our customers with true products. But our innovation is not only our R&D teams. You're going to hear me talk about our qualifications of our technical specialists and field advisory specialists and our field application specialists. This means that we have an ecosystem of innovation of Agilent that is really important. We've refreshed the portfolio, but we're also continuing to refresh and accelerate this. So our road maps and where we're placing our portfolio over time is going to be accelerated. We have 270 collaborators across the globe. At Agilent, we believe that the world is our laboratory that we have a lot of connection with universities, technical groups that keep at the cutting edge working with our R&D teams. We're driving innovation with $450 million of investment in R&D and increasing lab efficiency with AI and advanced analytics. Sometimes that is left out of innovation. You can hear it only from a product point of view, but we believe that our AI capabilities, particularly around asset management in our enterprise service business is going to make a big difference to our customers. So here are some examples by market of how we're launching innovative solutions to meet customer needs. With the 1290 and 1260 Infinity III system, which is in the room here, and the Revident LC/Q-TOF, we're upgrading our solutions to drive higher throughput efficiency in the pharma and biopharma market. The Infinity III, for example, brings unique capabilities that ensures lab maximize their investment in Agilent technologies. For example, it offers built-in system assistance capabilities, nearly 30% more productive time each day based on customer feedback. When we designed this system, we did extensive voice of customer. HPLC has been around for many decades as a technology. But what is on top of mind for each customer is the increase in productivity this system can get, and that's going to be really important. For example, we now have precise tracking and matching of samples under associated data, plus it's the first system to receive the My Green Lab Act 2.0 label and environmental label. Meanwhile, in clinical and diagnostics, we're delivering superior patient outcomes with our Dako Omnis platform. And our implied markets, we have the 8850GC, which was recently launched and our new 7010D triple quadruple GC/MS. This is an example of how we're enhancing sensitivity and speed of our instruments for high-growth applications. We solve our customer problems through workflows, combining instruments with consumables and services. I'll give you a really good example. In a PFAS lab that's been set up in any geography. What's first of all is you get the system that's sensitive. But what is really paramount around that is how quickly you get your testing up and running, the workflows against the regulations and how successful that testing lab is moving forward. And we believe we have unparalleled capability through our technical teams in doing this. And of course, as a result of that, we're expanding customer value. You can see we're increasing lab productivity and our offerings. We've seen 14% revenue growth in our Enterprise Services business in the last 5 years. I was there in CrossLab when that business started. It was a nascent business, and it's grown over time. And what we're seeing now is actually vertically really important to our companies and of course, our customers. And of course, Angelica will talk about this. In the last 2 years, our service contract business has grown double digit over the last few years, and that's going to continue to grow. We're also investing in software at the enterprise level in our Agilent CrossLab group so we can serve all customers. This is critical because 85% of our customers need additional cloud-based software in the applied markets. Sometimes Applied markets is not seen as a key kernel on software. It's actually becoming increasingly important. Additionally, we are focusing on fast-growing geographies, and we're capturing customer lifetime value with a customer contract renewal rate of 80%. Think about how sticky that is on a large contract business. Increasingly, our customers, of course, are looking at their sustainability goals. And we had a customer-first approach to our sustainability goals. We have environmental product labels. We have our certified pre-owned instruments, which is really a circular economy of where we bring instruments back, refurbish them and get them back into service in our labs. Agilent was among the first life science companies to get this capability moving. We -- in that sector, we believe that over time, in the projected in the next decade, our certified pre-owned business will be $500 million. Our sustainable product design like the Infinity III system means our products are designed with sustainability to use less energy and our sustainable products packaging means streamlined recycling and greener packaging, producing less waste. So meeting our customers with industry-leading services. We have 400,000 service engineers globally, 800 service partners. And when I started as an engineer many years ago, we always started with chemistry and biochemistry as one of the key factors for our teams. 75% of our team have degrees in chemistry and biochemistry and 25% of our teams have advanced degrees. Why is that important? No longer is it just that we set up a system or we fix it when it breaks down, but we become trusted partners around the science with the system, with our technical teams. You can see, of course, on our 2,500 on-site service calls for [ fill dailies ]. These are 2,500 touch points with customers. When our engineers interact with customers, they see about what assets they want to replace. They get technical information that can lead to the sales teams. And in fact, our #1 marketing program in the company comes from our service engineers to our sales organization. Our customer support rating is over 90%, and that directly leads to $1.6 billion in services with a revenue CAGR of 10%. We have a deep scientific expertise that makes us true partners and collaborators, and we see by enabling our new AI offerings, we can help them bring great science to life. So increasing investments in the portfolio. About $450 million invested in 2024. We've launched the Infinity III series, of course. We've launched the 8850 and we launched Revident and Q-TOF. But also in our capital allocation and M&A, we're building capacity for growth in NASD. We acquired BIOVECTRA in September to expand our CDMO capabilities, and we also acquired Sigsense to expand our AI and software capabilities in July. All told, that represents $1 billion in investment in FY '24. And Bob is going to talk more detail about our capital allocation strategy going forward. So one of the great examples of how we're focusing on high-growth value chain segment is our September acquisition of BIOVECTRA. This acquisition strengthens our position as partner of choice for the CDMO services. It deepens our engagement with pharma customers, and it adds expertise in rapidly growing segments such as GLP-1. It provides customers with a single source of gene editing technologies, and it expands our portfolio of end-to-end services, including sterile fill/finish. In fact, we've seen already increased cross-selling and interest across our analytical customers and our CDMO capabilities. We had an Agilent executive meeting a few months ago. We brought a customer panel in. Two of those customers asked -- pharma customers asked about our BIOVECTRA capabilities and wanted to place orders in terms of their supply chain. Plus increased outsourcing is moving the share of installed mammalian capacity from pharma to CDMO. We see that as a real trend, and that means CDMO market growth. With BIOVECTRA it brings more than half a century of CDMO knowledge and expertise and over 100 new customers. We expect in '24, $140 million to $150 million in revenue. BIOVECTRA is part of our NASD business. And together, we are a $1 billion revenue opportunity by 2030. So nothing is possible at Agilent without having an amazing team, and we have an outstanding culture that attracts top talent. Here, you can see our most recent awards, including being ranked #11 on Fortune's World's Best Workplaces. We now are going to continue to make our culture even better by increasing -- by our focus on prioritization and accountability. When you look at our strategy going forward with the team, it's all about strategic choices into our highest growth segments. It's all about making speed of decisions in those areas, and this is the team to make sure that we can drive it forward. So a little bit about regional opportunities. This is a rearview mirror view from '20 to '24 of our CAGR. But I do want to call out a few geographies. I know from many of you in this room, China is top of mind. What is going to happen in China? What are we seeing with stimulus? What are we seeing with the effects of tariffs? What are we seeing with customer preferences in there. I came back this week. Last week, I was in China with the team. And what I will say is a number of things. It is the second largest tools market in the world. It's really important that we have the largest installed base in China of any vendor. We also have the highest technical expertise. Almost every Agilent product that's in China is now made in China for China. So you're going to hear about our made in China capabilities. We also expect that China over time will be a mid-single, high single-digit growth region for us. Asia Pacific, a lot of new emerging economies. We're seeing that, of course, with Vietnam and Indonesia. We're really bolstering our service capabilities in these areas to support the business going forward. And of course, India. We have a long track record in India with a 13% CAGR. We're investing in our bio capabilities there with an investment in our Hyderabad COE, but also making sure that we have -- we're very much aligned with the domestic pharma manufacturing and expanding CRO, CDMO capabilities. So all in all, I think we're going to see India grow in the double digits as we move forward, and we'll continue to be prepared for that. So let me talk at a high level about Ignite transformation. I started my comments at the start of this, I mentioned that we wanted to build an enduring company. That's the intent of the Ignite transformation, to build an enduring company for our customers and employees and our shareholders. For our customers, we want to create a seamless experience across Agilent's products, software and services. For our employees, we want to reduce bureaucracy and complexity to enhance our ability to serve those customers. And for our shareholders, we want to deliver industry-leading shareholder value through differentiated growth. It's something that we're extremely excited about. Three themes really emerged when we started talking about Ignite. First and foremost, growth acceleration, better combining our product offerings and expanding our portfolio and accelerating innovation. What we're going to see in that is more portfolio management, higher investment in key NPIs and faster reallocation of resource across our R&D pipelines. Simplicity and customer centricity. We're operating with a customer-first mindset and reducing complexity and processes. Over time, processes can grow. We can add complexity. We're getting at that to make sure that we continue to evolve. Productivity and scalability. We're looking at our manufacturing footprint. Bob is going to talk about that. We're looking at our reducing overlapping activities within the company. And below those teams in the blue box, you can see examples when Bob talks about it, about how we're going to do that. So what's our road map for success? Experienced team driving customer-focused and market-driven strategy. We're taking advantage as the market recovers. And it is recovering, by the way. We were out with our sales team last night, and you are seeing more momentum in orders, particularly around this system. It's creating a lot of energy within it. And Eamon Evans, our sales leader there, is doing a fantastic job. We're refocusing our innovation pipeline and NPI process for simplicity and customer centricity. We're talking about simplification and customer-centric alignment organization. And of course, as we move forward, strategic pricing is going to be a critical part of the IGNITE program, improving productivity and sourcing and manufacturing network and optimizing our data and IT infrastructure, very important in the evolvement of AI. And of course, we're investing as we move forward. So out of all this strategy we're talking about all of the Ignite, what is the outcome? It's to deliver above-market growth and margin expansion. Across the 3-year, we're going to build momentum, 5% to 7% growth -- core growth. Our operating margin expansion is from 50 to 100 basis points plus. That 100 basis points plus is important per year. And Bob is going to talk about how we're going to do that, particularly about reinvestment and of course, double-digit EPS growth. Our new market-centric strategy and of course, our Ignite transformation are going to drive these results and increase our connection with customers. So we're really excited about it. Hopefully, you hear the excitement in this strategy in the team and of course, in the future of Agilent. But now I'd like to hand over to Simon May to talk about the LDG Group.

Thank you, Padraig. Good morning, everybody. I'm Simon May. I'm President of Agilent's newly formed Life Sciences and Diagnostics Group, or LDG for short. Joined Agilent around 8 months ago now, and I bring to the table 25 years of experience in the life science diagnostics -- life science and diagnostics tools industries, having served in a variety of roles and functional disciplines over that time. I came to Agilent because I believe the company has the vision and the means to make an impact, and I'm very excited to be leading Agilent's LDG organization. Okay. So kicking us off here with an overview of LDG's market positioning. As you can see, the group contributes around $2.5 billion of revenue and operating margin of around 20%. Looking at the chart on the left, you can see the LDG revenue by end market. And as you can see, around 2/3 is in pharma, biopharma and clinical and diagnostics. Important to note here, too, that there is some overlap in applied markets and specifically in areas like PFAS monitoring and food testing, and Mike is going to cover that in his presentation. And then on the right-hand side of the slide, it gives you a sense for the product category distribution across LDG. And so reading plotwise from the top, LC/MS, that's our liquid chromatography and mass spectrometry businesses. One of Agilent's foundational product lines and plays mainly in the pharma space, but also in some key applied segments, as we mentioned already. Then our genomics and cell analysis businesses. They play multiple segments, so it's fair to say that genomics leans more towards the diagnostics side, while cell analysis leans much more towards biopharma and translational research. So moving on to pathology and companion diagnostics. These are our IVD immunohistochemistry products and obviously fits squarely in the clinical end market segment. And then lastly, CDMO is our advanced therapeutic manufacturing business. That's our oligosynthesis operation in Colorado. And together with our recent BIOVECTRA acquisition, that's obviously a pure play in the biopharma segment here. And the key takeaway from this slide at a macro level is that we occupy leadership positions in large markets with durable growth. We see an aggregate addressable market of around $59 billion in a mid-single-digit growth profile. And despite the turbulence of the last few years, we do anticipate a gradual recovery in 2025 and then a return to more stable growth in 2026 and beyond. So here, we're taking a closer look at some of the market fundamentals underpinning the LDG portfolio. And there are several key driving forces here to call out. Reading from left to right, we see higher demand for specialized CDMO services. That's been fueled by new therapeutic modalities like oligos, antibody drug conjugates, GLP-1s, and we fully expect the acceleration of commercial approvals that we've seen in the last few years to continue here. And in addition to that, we're also expecting to see a steady increase in biopharma outsourcing and for that to help compound the overall market growth. In the second column, a similar rationale applies here across the biopharma value chain, and in particular, in manufacturing in QC where customers need ever more sophisticated analytical methods and we're clearly very well positioned here with our LC/MS and cell analysis products. And then over in the diagnostics space, we're really focused in oncology. Very strong secular trends here with aging populations, increasing rates of disease occurrence and more emerging therapies, all driving testing volumes and a particular shout out here actually for antibody conjugates which are helping drive demand in our pathology and companion diagnostics businesses. And then across all of these segments, we see a growing emphasis on productivity, lab productivity, whether we're talking about budget and time to market pressures in pharma or skill shortages in clinical labs, we hear loud and clear from our customers the desire for simpler and more automated workflows. And so again, these are all strong and durable market trends, and they underpin our portfolio as it exists today as well as the strategic that we'll be placing going forward. So why do we think Agilent is well positioned to win in these markets? Well, if you look at across our LDG portfolio, we've got a unique position in biopharma. We're leaders in LC/MS, in cell analysis, in biomolecular analysis. So we're very well placed to capitalize on these high-growth segments such as oligos, GLP-1s and cell and gene therapy. We're also at the forefront of innovation in advanced therapeutics across the biopharma value chain. And in particular, as a trusted manufacturing partner behind a growing list of commercialized therapies. And in diagnostics, we're one of only a small handful of cancer diagnostics providers that can really lay claim to being a leading partner. Agilent's pathology products are used in over half of pathology diagnostic labs. And we have a long history of innovation here going right back to PD-L1 testing for immune checkpoint inhibitor therapies, which Agilent pioneered leading right up to the first approval for an engineered T cell therapy diagnostic earlier this year. And so overall, there's no doubt, we're very well positioned to win in Life Sciences and Diagnostics with our strong capabilities, our expertise and our breadth of portfolio. Okay. So now let's take a closer look at our LDG portfolio and some of the reasons why we think we've got a sustainable right to win in these key end markets. Looking first at LC/MS, Agilent is a household name here. Massive installed base, renowned and trusted for robustness and reliability and deeply embedded in multiple key applications spanning the globe. We've recently launched a new flagship cytometry lifestyle analysis with our Seahorse products as well as our biotech microplate readers and images. It's a very strong portfolio, renounced for reliability and user experience and it enables us to serve a broad array of applications right across the biopharma value chain. And we've got a great innovation here, too, by the way. Our recently launched NovoCyte Opteon Spectral Flow Cytometer being a perfect case in point, and one where we're seeing really positive market traction already. And then in CDMO services, we're #1 in RNA oligo therapeutics. We think our technical capabilities here are unmatched. The modality is very well proven at this point. And for reasons we talked about earlier, we've seen a steady acceleration of commercial approvals over the last few years and the pipeline here looks very promising. And now with the addition of BIOVECTRA, we've complemented that capability, and we're adding more than 100 new customers to our revenue base while we're at it. And then last but not least here, in pathology and our Dako Omnis platform and the ecosystem of products surround it, they are cornerstone in advanced staining, north of 100 million patient samples per year a process on our platform. That really speaks volumes. I actually happen to visit one of our leading pathology customers very recently. And the lab techs there were telling me how much they prefer the omni system through our competition because of its throughput, automation and minimum downtime. And so again, we're deeply embedded here with the right to win in an attractive and durable market segment. So as we think about our growth vision and where we'll be channeling our energy over the next few years, we see 3 primary areas or growth vectors, if you will, where we'll be focusing that effort. Firstly, driving portfolio innovation for advanced therapeutic modalities. That's building on the foundational strengths that we've discussed here and leveraging our right to win in LC/MS and cell analysis with a firm focus on innovation, and productivity in biopharma workflows. And we'll go into that in a bit more detail on the next slide. Secondly, expanding into high-growth adjacencies. And I'd say here, we've got a particularly close eye on our CDMO business, where we're in the process of significantly expanding our production capacity in Colorado. And now with the acquisition of BIOVECTRA. We're enabling complete solutions for gene editing therapeutics as well as microbial fermentation, which gives us access to GLP-1s and other high-growth adjacent modalities. And when we think about these capabilities, together with our competitive advantage and the market fundamentals we see in this space, we see a path to sustained double-digit growth in our CDMO business over the coming years. And then thirdly, we're focused on driving deeper market penetration in our pathology business. And we're aiming to do this through extending our Omnis platform and its lab productivity advantages into lower throughput lab settings while also investing in assay menu and capabilities expansion, once again, intersecting with the demand drivers we highlighted when we talked about market fundamentals in cancer testing. And given all of the above, we're envisioning a ramp to higher single-digit growth in this area of the business. So now let me come back to what we consider to be one of our most powerful growth vectors in LDG, and that's driving portfolio innovation for advanced therapeutic modalities. You've heard us say a few times throughout this presentation already, our large installed base is a significant competitive advantage, and we fully intend to double down on our position as the go-to partner for analytical development and QA/QC in biopharma. And to be specific, we're seeing growing demand for specialized QA/QC workflow solutions in emerging therapeutic modalities like oligos and peptides and a corresponding rise in demand for more sophisticated analytical methods such as multi-attribute monitoring or MAM for short. Suffice to say, we're committed to providing these advanced analytical tools, workflows and software solutions. It's a theme you'll also hear from Mike and Angelica when they present, and we see this as a mid- to high single-digit growth opportunity. And just to emphasize the point, our new Infinity III LC series really sets the bar and it exemplifies how we're thinking about innovation, software and lab productivity. I was out in China a couple of weeks ago, and I asked the teams there, what's the thing that excites our customers the most about Infinity III. And without skipping a beat, it's not the hardware technical space. It's the Lab Assist software and user experience that's really resonating. And direct feedback we're getting from our customers is that they're seeing time savings approaching 30%, which is really quite remarkable. And so although Infinity III has only recently been launched, we're seeing very strong early traction here and the feedback from our customers has been extremely positive. And final point to make here. The opportunity we see in this new LDG group structure and why we think it makes so much sense is it gives us a unique ability with our combined offerings in LC/MS together with cell and biomolecular analysis and our CDMO business across the biopharma value chain. And we're confident that these approaches for advanced therapeutic modalities are going to prove to be a winning formula. So in conclusion, it's exciting times for Agilent's Life Sciences and Diagnostics Group. We're positioned in attractive markets with sustainable long-term growth prospects, underpinned by strong market fundamentals. Our strategy is built on a foundation of trusted innovation and a customer-first mindset. And with our leading portfolio offerings in areas such as LC/MS, cell analysis, biopharma manufacturing and pathology, we have the growth vectors, the capabilities and the vision to succeed. So as we look to the future, we're projecting our long-term growth to be in the mid- to high single-digit range. In closing then, we have a clear path forward to winning LDG, and I'm confident that we'll sustain strong growth and create long-term value for our shareholders. And with that, thanks for your attention, everybody. We're now going to take a 10-minute break. Thank you. [Break]

Hello, everyone. Welcome back to our program. It is such a great pleasure to be here today. I am Mike Zhang, President of Agent's New Applied Markets Group, or AMG. I stepped into this role just last month, but my journey with Agilent spans more than 20 years, primarily focusing on the applied markets. I began as a manufacturing engineer at our Shanghai site. And later on, I had the privilege to lead our global manufacturing operation for the GC business and then become the Vice President and the General Manager for our GC business in 2020. This experience gave me firsthand insights into the excellence -- in Agilent, the innovation, the deep customer relationship really defines Agilent as a leader in the powerhouse in the applied markets. Most recently, I served as Vice President and General Manager for the combined GC and the GC/MS business. In these capacities, I have gained extensive experience building relationship, deep relations with our customers in applied markets and then working with them and also my team to drive continuous innovation to address the ever-evolving needs, test needs in these markets. Now standing here today, I'm very excited to tell you about Applied Markets Group and how we will build on the strong foundation we have and continue to work with our customers around the world to accelerate the highly impactful new innovations to really drive sustainable growth, market share expansions and winning in this emerging opportunity that I'm going to talk about later. So with that, now let's take a closer look at the new Applied Markets Group. We have built a very strong legacy, serving chemical energy, advanced materials, environmental, food and the forensics market. This legacy -- strong legacy is grounded in 2 key pillars: first, a culture of innovation, long and deep customer relationship with our gas space and mass spectroscopy portfolios. And second, our brand as a trusted partner to our global customer base. Our customers remember in the applied markets solving some of the most critical challenges the world face today, and we are the best trusted partners stood the test of time, as Padraig just highlighted now. And in these segments, we see a large opportunity, a total $21 billion addressable market. And at Agilent, we is leading the way in the market that we choose to compete and play. Our market share in applied market is twice that of our next largest competitor, and this is driven by the strength of our gas space business and also the mass spectrometry business. Another very exciting and unique component we have in our portfolio is our certified pre-owned instrument business. This business exemplifies our commitment to the sustainability and extending the lifetime of our high-performance instrument while delivering the reliable, cost-effective solutions to our customers and also driving sustainable growth. It's just another way that we're providing values and addressing customer needs in today's rapidly evolving markets. The scale and the breadth of our portfolio in applied markets provides us with a durable competitive advantage. Over the years, we have demonstrated a strong track record of leveraging the leadership position to gain market share, outgrow the market, and we remain laser-focused on continuing that momentum, deliver above the market growth in the years to come. So now let me turn to the strong market fundamentals that are driving the growth in applied markets that we're serving. We see exciting opportunities ahead, driven by the secular trends in emerging global industries. First, let's talk about the semiconductors. The rise of high-growth technologies like generative AI, cloud computing, automotive electronics is driving significant demand for the semiconductors, hence, our industry-leading test equipment and workflow solutions. With an estimated market growth rate of 8% and above, this space represents a compelling opportunity for us. Next, the battery market. As the world moves towards clean energies, demand for electric vehicles, energy storage systems and next-generation battery development is accelerating. The battery market is expected to grow at 10% or more in the years to come. Another critical growing area is PFAS testing, as Pork just shared. These chemicals are under increasing regulatory scrutiny and the customer awareness is rising. New regulations are driving somewhere between 15% to 20% growth in the testing market. I'll speak about this significant opportunity for our business later in my presentation. And finally, we have an ongoing shift towards renewable energies. By 2030, over 40% of the world's energy is expected to be from renewable sources, which were creating new testing applications in the advanced materials, chemicals and energy markets. These trends align perfectly with our strength of portfolio and innovation in applied markets. Remember, in all of these 4 emerging markets, we have a very strong foundation in terms of customer relationship and innovation solutions they need, which gives us every right to win from research, development, manufacturing and contrasting and beyond. So through the deep relationship with our customers, we're uniquely positioned to win in this market that we serve. First, we have the largest installed base around the world, and our instruments are trusted in over 100,000 customer labs globally. This broad presence positions us for sustainable growth, particularly as customers refresh their fleets for improvement and productivity gain. Second, our highly differentiated innovation set us apart. With a legacy over 50 years of first-to-market technology innovation, we have consistently provided solutions that meets the growing needs of our customers in this market. Our leading market share, once again, more than double that of our closest biggest competitor is a proof point of that impact we have delivered. And third, I'm very proud to say that we believe we have the broadest and best product portfolio in applied markets that we have chosen to serve. This scale allows us to address the range of the growth opportunity that [ we addressed ] just now from semiconductors to batteries to PFAS and renewable energy applications. These 3 pillars are the foundation of our leadership. Together, they create a very unique competitive advantage that enable us to continue to serve and drive value for our customers and shareholders. So let me now double-click on the strong strength of our portfolio. Over the decades, we have developed a comprehensive range of hardware, software, consumables, enabling us to provide the most complete workflow solutions to our customers. We provide best-in-class solutions for the atomic spectroscopy with market share expansion over 10% since 2010, driven by the growing demand in the semiconductor industries. Agilent has a #1 market share position in the combined GC/MS and LC/MS for applied markets with applications from R&D research development to quality assurance to contract testing. These platforms are trusted across applied markets for their great positions, unmatched quality and reliability. As a global leader in separation technology, we have the broadest combined portfolio of the liquid chromatography and gas chromatography. This unmatched scale enables us to meet a wide range of customer requirements and fortify position as a trusted partner in these markets. As we continue to lead the way by adding more innovations, expanding our portfolios, like the Insight200M, the liquid explosive detection systems, the system performs the job of multiple technologies in half of the time, supporting fast and more efficient liquid detections for the aviation security. So our growing portfolios and our innovation continue to meet the diverse needs of our customers in this market. Now to deliver on Agilent's commitment of growth, we will focus on 3 strategic vectors in AMG. So first, enhancing our market share leadership in PFAS across all testing modalities, which I will speak to in more details in the next slide. We believe our PFAS workflow solutions are the best-in-class and meeting the evolving testing needs for our customers. Most recently, I went to China and talked to a leading research scientist in the leading environmental test labs. And I'm very excited to see the tremendous work he and his team are doing and the tremendous opportunity that we are seeing. I'm also working with multiple leading customers in the environmental testing, and I'm excited about the tremendous performance and tremendous productivity that we bring to the table to support these customers in really driving the PFAS testing business. So second, grow our share in semiconductors and the battery market. These high-growth areas are being driven by strong demand, which I just highlight, AI, cloud computing, electronic vehicles, energy storages and connectivities and beyond. Our leadership in the GC and GC/MS and also spectroscopy positions us exceptionally well to capitalize on this opportunity and expand our presence in these markets. Finally, driving the productivity and lifetime value through our unmatched installed base of more than 100,000 customer labs around the world. As Padraig just highlighted in the new Agilent enterprise strategy, lab productivity is one of the 4 strategic priorities and resonates very strongly with our customers around the world. Now most of the customers I spoke to in the last 12 months are actively looking for support and a solution to transform their lab operations from sample preparation to data processing with a visual to significantly improve their productivity. They're asking us, can we help them to double the efficiency in lab? And we have the best solution and technical expertise to help out. In fact, I can tell you, my team and I already work with them. We have working with them on these transformative endeavors with encouraging progress in improving the lab productivities with our trusted solutions and great innovations. So these 3 strategic focus areas will enable us to outgrow the market and build an enduring leadership in these emerging markets. So as I mentioned just now, we see PFAS as a tremendous opportunity for Agilent and also AMG. Now it is important to note, current PFAS testing and regulation only covers less than 2% of the estimated PFAS compounds. There certainly significant room for growth in testing demand worldwide. We believe we are best positioned to capitalize on this growth opportunity for 3 key reasons. Number one, we have leadership in routine testing labs where our best-in-class instrument, sample prep, automation, data analysis software has enabled us to drive growth over 30% year-over-year on a larger base than our competitors. We also have the broadest and the most comprehensive range of solutions as PFAS testing expands into new modalities. For example, we're seeing a growing interest in the volatile PFAS related to human exposures and remediations. And we all know we are the leader in the GC/MS. And finally, we have the end-to-end workflow solutions, leveraging advanced sample preparation and automation, we enable robust analysis that deliver the productivity efficiency that customer needs. So these solutions support both target and also non-target analysis, ensuring our customers are equipped with the best solution that need for now and future testing needs in the PFAS testing. Our unique strength will allow us to capitalize on this growing opportunity and further solidify our leadership in the environmental market. So I am extremely excited by our positions and the growth opportunities ahead for our apparent markets. We have a very strong foundation and leading position in our chosen markets. We're expecting to low to mid-single-digit growth, underpinned by 2% to 3% growth rate of the core apparel markets. Beyond the foundation growth, we expect future growth driver will allow us to outpace the market, including enhancing our market leadership position in PFAS testing, growing share in our semiconductor and battery markets and drive customer-led productivity and lifetime value. This growth is ground into our strategy to double on core innovations and portfolio expansion, building enduring leadership in the high-growing emerging markets, unlock the lab productivity and driving integrated software informatics solutions, which Angelica will discuss in more details later. So for now, through many years to come, the world and our life will still be powered by all the elements on the periodical table and many, many chemical molecules made up of them. Our innovative and high-quality technologies and solution will continuously play a crucial role as a scientist in our more than 100,000 customer labs in the markets strive to advance the frontier of science to build a better, safer and more sustainable future. Now I just told all of you a lot of information. As I wrap up, if there's one thing that I want you to remember is our technology innovation matters because it positively impacts everyone on the earth, billions of our fellow citizens, including all of you here in the room today. And I can tell you that we are the leader and a trusted partner in serving this mission-critical market for years to come. And for that, I'm extremely confident that we continue to drive sustainable growth and we're going to outgrow the market and the competition. So now I'll pass over to Angelica to talk about Agilent's applied CrossLab Group. Thank you.

Great. Thank you, Mike. And hello, everyone. I'm Angelica Riemann, President of Agilent CrossLab Group or ACG. I've been with Agilent about 25 years now. And I started my career as a customer in an analytical lab using HP, now Agilent and other vendor instruments. And it was really my experience working with employees at those vendors that motivated me to explore opportunities that were outside of the lab and ultimately, how I landed at Agilent. My experience as a customer was invaluable because it gave me a perspective and insight to the evolving changes in demands in the analytical lab, and it is what continues to fuel my customer-first passion. Combining that with my industry experience and my experience successfully previously leading the consumables and services business, it gives me a keen understanding of leveraging the installed base for recurring revenue streams and delivering solutions that enhance customer outcomes and ultimately generate growth. ACG is a leader across our diverse end markets, and it's well balanced between life sciences and the applied markets. Our products and services are typically end market agnostic, and that means we're able to support all customers across the analytical lab. Our total addressable market is about $80 billion, growing at mid-single digits. And in FY '24, we achieved $2.7 billion of revenue and nearly 34% operating margin. By bringing together automation, consumables, software and services, it uniquely positions the realigned ACG Group to support our customers better, support the Agilent enterprise strategy, support the priorities of productivity and software and informatics by delivering strong recurring revenue growth across the markets. The market fundamentals that Simon and Mike talked about apply to ACG as well. But in addition, ACG has some strong market fundamentals. The global shortages of skilled personnel are amplifying the need for expert services and customers are willing to pay for that expertise because what it does is it helps them with their workforce in increasing productivity. It provides supplemental support to operations. And that can come in the form of training, education, application expertise, method development and consulting. Another is the overall desire for greater efficiency and next level insights, which applies to labs that are fully staffed, but also understaffed. Customers are looking for insights that are delivered to them through easy-to-use software solutions. We've seen this evolve in the life sciences markets for a number of years, and we're beginning to see this accelerate in the applied markets as labs are adapting to high-growth applications. Finally, the shift to personalized medicine with a lot of them being biologics-based, it's creating demand for specialized consumables, consumables that are unique to the demands of those applications and that solve some of the problems that can occur with the typical separation challenges. That demand starts during the development process, but then continues into the high throughput manufacturing QA and QC environment. So ACG is uniquely positioned to win by bringing together our key capabilities. We're a service leader with a full range of industry-leading lab services that are delivered by more than 4,000 highly skilled service delivery professionals around the world. And our customers are happy with the service they receive, evidenced by our support teams continuing to receive customer satisfaction scores of more than 90%. Our services business scale, reach and customer experience is second to none. Next, Agilent's strong installed base is key to driving recurring revenue. That base spans multiple platforms and reaches into more than 285,000 laboratories. The size and breadth gives us the opportunity to connect in multiple ways with a range of products, and those opportunities support continued high single-digit growth annually. We're able to support customers through the life of their applications and instruments, and we're there to guide them for the next best option for their laboratories. Our recent survey indicated that more than 75% of our customers actually consult with their service professionals before they upgrade their instruments, which really highlights the value that we bring to them. And we tap into this broad installed base with a broad portfolio of solutions that span markets, platforms and workflows. It allows for greater adaptability to changes in some of the market dynamics and the technological advancements. It allows us and our customers to quickly adapt and pivot to new opportunities in emerging growth areas and applications that you heard about, things like the high-growth environmental applications such as PFAS, the growing diverse biotherapeutics space and then the demanding food safety applications. Finally, through our enterprise, our digital services and our multi-vendor support, we have a unique access within but also beyond our Agilent installed base. We actually have access to more than 750,000 instruments globally. And what that reach does is it gives us the opportunity to drive recurring revenue and offer comprehensive solutions across a much larger portion of the analytical laboratories. ACG has a strong portfolio and customer base. We're a trusted partner that offers a full range of service solutions to customers where they can choose from on-demand services, contracted options as well as application support, education, consulting and compliance services. Customers can receive on-site support, but they can also contact us at any time through online chat, creating online requests, but also finding self-service information in our online community and resolve issues remotely depending on their preference. And with over 4,000 trained service delivery professionals, every single day, every customer interaction, we're focused on making services better for our customers and improving our ability to deliver highly valued solutions. We have a strong presence in consumables, right? That gives us a strong presence in the customer lab. We offer a wide range of premier high-performance products for customers to meet their various application needs. And we've spent time and invested dollars in making it easy for customers to search, find, select and buy online. And they value that seamless experience as demonstrated by our strong e-commerce growth, more than 800 basis points since 2020. They can choose individual consumables or they can choose from any one of hundreds of complete workflows. They come with guides, instructions, also consulting options to help them seamlessly implement those methods in their laboratory in a shorter amount of time. Finally, solving lab issues and driving productivity is becoming more and more critical for customers across all markets. So expanding software and automation enables us to support customers across the installed base, and it gives them greater consistency and the ability to make decisions with data more effectively. We're not new to this area. We've been actually integrating analytics, AI and machine learning into our solutions for more than 5 years because it helps customers make decisions faster, whether it's about optimizing an application or a method or it's optimizing their lab capacity and operations. Our strong customer partnerships and portfolios are really what keeps us at the forefront of fueling our future growth. Driving future growth is really grounded in these 3 areas: continuing to enhance customer productivity with lab monitoring, not just providing insights one instrument at a time, but providing deep insights across the lab and the operations. We provide this through CrossLab Connect, which is utilized by every enterprise service customer that we support. It enables them to monitor and gain actionable insights to support their instruments, but more than that, it gives them insights across the lab to identify instruments that might be reaching end of life, instruments that aren't being fully utilized. And it gives them the opportunity to proactively manage and optimize their assets. It also allows them to look at bringing new capabilities, new technology and new capacity into their lab when needed. So a couple of examples. I learned from a customer that through CrossLab Connect, they realized retiring an instrument that was nearing end of life, not only allowed them to bring in new technology, but it actually also brought in additional capacity that they needed. Another customer I spoke with discovered that their instrument downtime really wasn't about the instrument itself at all. It was the fact that they didn't have the necessary consumables on hand to keep their application running as expected. So being able to quickly identify those issues, it saves labs valuable time and resources and increases their productivity. Next, focusing on customer lifetime value. That's where consumables, software and services come together to support the throughout the lifespan. It allows us to build a connection with customers that enables us to adapt with their evolving needs and become an indispensable partner as they use, utilize and optimize their assets to deliver their scientific outcomes. Since 2020, we have put a focus on increasing our contract attach rate. We've increased it 400 basis points, which gives us the opportunity to develop deeper relationships with customers and expand their utilization of our broad consumables portfolio. And strengthening our relationships with customers really stands out when you look at how customers continue to choose Agilent for service. Our annual contract renewal rate is more than 80%, which shows the strength of our contract relationships. But more importantly, we have enterprise service engagements with 15 of the top 20 pharma and biopharma accounts that have renewed 15 years or more, and it's consistently growing at double digits. These are long relationships with key customers, and you can only maintain them if you continue to bring value and increase productivity to them, right? So the ability to increase that customer productivity, as I mentioned, is really CrossLab Connect, and it's helped us keep those relationships in strong. So let me dive into CrossLab Connect a little bit because it's the cornerstone of productivity. It provides digital lab insights as well as turnkey solutions for asset management. It's a simple but powerful dashboard. It has AI-assisted sets of insights for assets across the lab so that customers can quickly see the status of the instruments, they can manage their inventory and they can request services. We have information, data and the ability to control thousands of instruments across the enterprise and across the lab. But the most interesting component of CrossLab Connect is business intelligence, where being able to visualize the data helps customers make short-term decisions asset utilization, capacity planning, lab maintenance schedules. But then it also helps them with those longer-term year-over-year decisions, insights that go into planning and optimizing their CapEx and their OpEx budget so that they can scale and manage the evolving needs of their laboratories. And then finally, by delivering full-service support with industry expert guidance. It's really how we support customers achieve their productivity and operational goals through the wide range of services that we can support -- we can use to support customers across the lab, whether it's repair, education, consulting, online and on-demand service options, it gives them the ability to scale the support based on their evolving needs. Finally, CrossLab Connect offers customers across our key end markets, the insights and comprehensive asset management solutions that will drive growth for ACG in and beyond our Agilent installed base. So wrapping up on the ACG business, we're in an attractive market space. That aggregate growth rate is mid-single digits. But by focusing on key growth drivers, ACG will deliver high single-digit long-term growth. The growth drivers are increasing our services and consumables attach rate, where every point improvement equals up to $30 million. And since 2020, we've increased our services attach rate basis points. Next, expanding our leadership in high-growth digital and enterprise services, which consistently grows double digits and has a 5-year CAGR of 14% and delivering new software and workflow solutions for productivity enhancements. In closing, ACG supports customers across all end markets with a focus on customer lifetime value to drive growth, and we share our expertise with customers, both within as well as beyond our installed base to support their long-term success. And with that, I'll hand it over to Bob. Thank you all.

Thanks, Angelica, and it's really great to be here in this pretty impressive building and having an opportunity to ring the bell this morning. I think I know pretty much everyone in this room, but let me introduce myself nonetheless. I'm Bob McMahon. I've been the Agilent CFO for the last 6 years. And I just added IT and supply chain to my responsibilities to help with the Agilent transformation that you heard Padraig talk about and I'll talk about as well. I've been a public company CFO for 10-plus years, and I've got 30-plus years in the health care area along multiple companies. So as you heard from Padraig and the 3 group presidents, we have a great story to tell. And I'm looking forward to talking to you today about Agilent's financial performance as well as our outlook. So let's start by talking about our shareholder value creation model. This is how we think about delivering differentiated performance and there are 3 main components. Our value creation model starts with growing the top line faster than the market. We do this by investing in faster growth segments, segments like biopharma and PFAS, driving innovation like you've seen today with the Infinity III. And as Angelica mentioned, increasing our customer lifetime value through workflows and solutions and through a strategic pricing approach. Growing faster than the market helps us expand our operating margins, which is our second pillar. And we also look to expand our operating margins through productivity measures, simplifying our processes and driving digital opportunities across the company. Just as a quick example, we run on one ERP system across the company, which enables us to leverage our G&A spend. And we're looking at driving savings through sourcing and continuing to optimize our supply chain network and the Ignite transformation that I'll talk to you in a second. These 2 elements help us drive double-digit earnings per share. And our third pillar is around capital deployment. Our first priority around capital deployment is deploy that capital around growth, both organically and inorganically. Now this is done by investing 7% of our revenue in R&D. That was over $450 million in FY '24, but we're also using our balance sheet to drive growth businesses such as NASD. We are investing $725 million to double our NASD capacity to take advantage of our growing market and continue our leadership. And inorganically, we're focused on adding adjacent businesses that are growth and profit accretive to our strong portfolio, businesses like BIOVECTRA that Padraig mentioned, and they build on our leadership and increase our exposure to faster-growing segments. Now while deploying capital for growth, we're also focused on continuing to increase our dividend and repurchasing our shares. So we have a strong history of performance and a road map for the future to reaccelerate our returns going forward. So let's take a quick look on how Agilent has performed over the current cycle. As we all know, the last 2 years have been pretty challenging. And now we've seen steady improvement in the second half of this year and expect that improvement to continue into 2025. And we plan to take advantage of that recovery and accelerate our growth throughout 2025. Now that being said, if you look at the last 4 years, Agilent has performed well over the full cycle, showing our strong business. Since 2020, we've grown our business by $1.2 billion, delivering 6% core revenue growth. We've increased our margins to 26.4%, an increase of almost 300 basis points. And these combined with below-the-line improvements has delivered double-digit earnings per share averaging 13% per year. This performance shows the strength of Agilent's businesses and that we can deliver over the cycle. And I'm confident that the strategies we have in place and the transformation we're undergoing, we will continue to deliver over the long term. Now one of the key elements of our strategy has been to increase our non-instrument revenue. And you heard us talking about this, Padraig talked about it earlier. Over the past decade, 80% of our growth has come from non-instrument revenue. It has increased a full 10 percentage points and now represents 64% of our total last year in fiscal 2024. And we expect that number to increase going forward. So if you look just more recently at some proof points, we continue to make progress on this. As Angelica said, we continue to drive our services attach rate, up 400 basis points in the past 4 years. This, along with consumables and our combined attach rate now stands in the mid-30s. And we've seen best-in-class to be in the upper 40s and 50s. So we have plenty of room to grow for this going forward. And also, if we look at that non-instrument business, that's 64%, that's been growing faster than the overall company, 3 businesses represent 2/3 of that revenue. Our services business is $1.6 billion, growing 10% annually over the last 4 years. Our consumables business is $900 million and has grown 8%. And our NASD business is roughly $300 million and has grown 19% annually on average over the last 4 years. These businesses have grown several points faster than the overall company and have significant room to grow. And what else is also very exciting is they're very accretive to our profitability. If you look at these 3 businesses and combine them, the profitability is almost 10 points higher than the total company average. So as these businesses grow faster than the company on the top line, we also get an operating profit tailwind. This is a real opportunity for us going forward. These are big businesses growing faster and driving our profitability. Now let's talk about how we think about our future-looking growth. Driven by the market-centric strategies you heard earlier today from Padraig and the 3 group presidents, we expect to grow faster than the market, translating to 5% to 7% annually as a company. This is led by our largest business, ACG, growing high single digits. This is due to the strong market fundamentals that Angelica just talked about, driving more solutions and services, continuing to increase our connect rates and driving the enterprise solutions. And as you look at LDG, the work that Simon and team are doing, we expect that to grow high to mid-single digits, mid- to high single digits. And we'll be doing this by maximizing the Infinity III launch. In biopharma and other markets, it's going very well right now. And with tens of thousands of Agilent systems identified for replacement in the next several years, we expect very nice growth. And in addition, we're looking to build out our CDMO capabilities and drive growth in the pathology business. And with AMG, we expect to grow low to mid-single-digit growth, capitalizing on our strong market shares in fast-growing segments like PFAS, semiconductors and batteries. And it's important to note that our large installed base in AMG helps us drive actually increased services in ACG as well. So it's a very strategic business for us. So let's look now at how we've delivered that 13% earnings per share annually. We'll start first with revenue and margin expansion. Over the last 4 years, that's delivered 8 points of growth, while improved cash flow and tax planning has driven another 3%. So combined, these have provided us with double-digit growth at 11%. And on top of that, we've added another 2% growth added through reducing our share count. This is high-quality earnings growth and is a hallmark of Agilent. And we have a road map for the next several years with the Ignite transformation. And looking forward, I expect double-digit EPS growth with revenue and margin expansion driving an even higher proportion of that EPS growth. So let's talk about Ignite. As Padraig mentioned, we're extremely optimistic and excited about these efforts. It's a 3-year program to drive growth and aim to make us an even more nimble and customer-focused company. It's really focused on 3 key areas. The first one is growth acceleration. Ignite will help us drive more impactful new product introductions like the Infinity III and dynamic R&D capital allocation. In addition to meaningful platform innovations, we'll be increasing our efforts around software and informatics across the portfolio. You heard Angelica talk about the importance of this. And we will also look to expand our digital offerings. And lastly, we're looking at a more strategic approach to pricing to capture the value of the products and services that we provide. The next 2 areas are around simplifying our operating model, driving productivity and scalability. We have several work streams that looking at simplifying our business, aligning the company to be more customer-centric and making us more nimble. As an example, we're looking to optimize our IT and data infrastructure to make full use of AI. And we're also looking to improve our productivity through better sourcing and looking at our manufacturing and logistics network. The Ignite program provides us with the plan to accelerate our growth and continue to expand our margins. Now maybe switching gears a little. With all the discussion around tariffs, we thought we wanted to highlight our global manufacturing footprint. We've actually spent the last several years increasing our supply chain flexibility, and we believe it is a competitive advantage. We're not -- we've got a different slide. So I'll jump into our margin expansion. When I look at margin expansion, we have a plan to generate 50 to 100 basis points or more annually in margin expansion. So let's look how we're going to do that. We expect to get 50 basis points annually as we accelerate our growth to 5 to 7 basis points -- 5% to 7%. And we have the benefit of mix as the faster-growing segments of our business are also some of the most profitable. This is a tailwind I talked about earlier. This benefit is spread across these 2 elements, roughly 2/3, 1/3. And with Ignite, we're targeting 50 to 100 basis points plus annually. That's a new number. So it's actually 50 to 100 basis points plus. This allows us some margin flexibility to take advantage of about 50 basis points of improvement to reinvest back in the business. These are reinvestment opportunities like digital programs and additional demand-driven opportunities. These are a great flywheel to drive our growth. All told, we expect 50 to 100 more basis points of margin improvement annually. This, coupled with the revenue growth, gives us confidence in double-digit earnings per share growth. And so while we're driving strong performance on the P&L, we also have been working on the balance sheet and our cashflow. Since 2020, our operating cash flow has grown faster than income, and we've doubled our operating cash flow during that period. This has enabled us to continue to invest in the business while also returning cash to shareholders. From a balance sheet perspective, we are committed to maintaining our investment-grade credit rating. Our net leverage ratio stands at 1.1, a slight increase from 2020, and we have no material repayments until 2026. And even that's only $300 million. So we have a lot of runway and opportunities for growth. We're well positioned to continue to invest in the business. Now let's look at another source of value to our shareholders, which is the return of capital. We have 2 components. We've increased our dividend every year since it was first initiated in 2012 and have a class dividend yield at 0.8%. And we've also reduced by almost 10% our share count over the last 4 years. So let's look ahead about how we think about capital allocation. We're looking to put our capital to work in a growth-oriented and balanced way. This page shows our priority of investments from top to bottom. At the top of the page is our first priority, allocating capital focused on growth. Including R&D and CapEx, along with inorganic investments, over the last 4 years, we've invested roughly 50% of our investment. And looking forward, we expect roughly 50% to 70% of our total in this bucket. Next, we're committed to continuing to grow our dividend, as I mentioned before, and that's followed by offsetting share count dilution along with opportunistic share repurchases. Combined, this has represented roughly 50%. And looking forward, we expect it to be 30% to 50% of the total allocation. So here's the manufacturing footprint that I'll talk about in just a second. As I was saying before, we have a global manufacturing footprint, and we were talking about tariffs. As you can see across this slide, we truly do have a global manufacturing footprint. And we've been working on this through the last several years of providing flexibility in our supply chain across all 3 of these groups. We are not dependent on any one manufacturing region or geography to support our business. As an example, we have a very robust in China for China program with a large majority of our instrumentation being able to be produced in China. And what we do export out of China, we have that ability to produce that product in other countries. So the team has done a great job of building flexibility into the supply chain, which builds resiliency. In addition, the large services business that Angelica talked about is delivered locally. So we feel we're well positioned moving forward. So let's go back to that slide, what I call the money slide. Putting it all together, as the market normalizes, we're committed to 5% to 7% long-term growth, which is faster than the market. We're looking to expand our margins 50 to 100 basis points or more per year. And combined, this translates into double-digit earnings per share. All of this is based on the current business, providing those differentiated results. And on top of that, inorganic capital deployment is upside to this long-range plan. We're very excited about the future, and it's bright. Now before I turn it back to Padraig, I want to remind you of our current Q1 and FY '25 guidance. Thank you very much. And now I'll turn it back over to Padraig for some closing comments.

Very exciting financials being laid out. So I really want to talk about the takeaway slide again or the equity slide that we're talking. As I close my comments today, I hope you come away with a deeper understanding of how the Agilent Ignite strategy and transformation, our growth ambitions and how we're building an enduring company that sets the standard for our customers and excellence for our shareholders. Again, Agilent is an established leader in $80 billion markets, driven by key secular growth drivers. We have leading market share position, a sustainable competitive advantage through our intense customer focus, and we're accelerating our growth through innovation. We're very excited about Ignite and the transformation that we're going to drive productivity in the company and most importantly, reinvestment for growth for the future. We're cultivating a strong leadership team, as you've seen, and our intent is delivering 5% to 7% long-term growth and double-digit EPS growth. So this is the last Investor Day for the NYSE. It's my first Investor Day. It's my first Teams Investor Day. We're 25 years old this year as a company. So there's a lot of auspicious dates and of course, time frames in that. But now we'd like to take a robust Q&A. Thank you.

All right. Thank you guys for putting this on. Probably one for Padraig and Bob as well. The margins, clearly an emphasis here. You guys talked about the 50 to 100 plus. As you noted, Bob, a new number. Padraig, you talked about incentive comp being additionally tied to that. Can you guys just talk about how realistic the upper end is? Again, to put the plus on, clearly, you feel like there's a path to it. Bob, you ran through a few of the levers, but what could get you above that 100 bps? Is it just you need revenue growth at the top end and then mix and some other things? I'm just curious how realistic it is and what gets you there. And then I had a quick follow-up, if that's all right.

Look, the markets are recovering, and we're seeing them steadily recovering. And of course, the revenue growth rate is going to be important. But what's unique about Ignite, we've planned out each of the numbers on those 13 tracks that you saw from Bob. We see a run rate to that. We've actually saw an initial successes in that area. So we're very optimistic about it. And you're going to see also what we're doing over time is not only that from the margin expansion point of view in the 100-plus range, but also we're working on growth bridges back into the business that are very linked with our strategy. But Bob, I don't know if you want to add.

Yes, it's a great question and one that we feel very confident about, Patrick. As we think about kind of the margin expansion, certainly, we benefit from reaccelerating the top line growth, and that's going to be driven by some of our highest margin businesses. So not only do we get the nice fall-through of that, which also helps us with mix. But I think just as importantly is the opportunity around the Ignite transformation that is allowing us to drive more simplification and faster nimble decision-making in the company. We talked about some of the reinvestment areas around digital and some of the IT areas. Those are not only going to help our customers, they're going to help our sales teams, as an example, be more efficient. It's going to help us internally to also be more efficient. So we're going to be able to take advantage of not only a market upswing and a market recovery, but really drive this efficiency through the company. As I think about just FY '25, if you looked at where we're expecting '25, obviously, not back up to those long-term growth rates, but we're expecting margin expansion. And the Ignite program is just getting started. And so as we think about some of these efforts, we feel very confident about being able to do that and are shooting for higher, obviously, to reinvest to actually drive some of that growth as well.

Yes, that's helpful. And then maybe just on the growth side, China, always a focus for you guys as well as the industry. I know last quarter, you talked about seeing some of those stimulus orders start to trickle in. How are you thinking about China both near term and then inside that LRP? What's the right way to think about China growth and what goes into that?

Yes. Look, from the high level, we see mid- to high single digits over the long term for China. I was there with the team again a few weeks ago. We're seeing that tranche of stimulus orders. We're seeing ourselves. Our win rates are extremely high and those across a large array of platforms. It's got the indirect benefit, of course, we have momentum in the orders there, through stimulus. But not only stimulus, we actually see the base business coming back steadily. Our growth rate in orders, I would say, is steadily improving. And that added with stimulus, of course, we expect over the rest of the year for it to improve. I think what you're seeing from the stimulus side is both that direct effect and indirect effect more optimism around it. And I visited a number of customers. There's a big investment from the Chinese government, of course, into the secular drivers that are going to drive that economy. No doubt about it, it's challenged with some change in supply chain of pharma companies, et cetera, but we're seeing that steadily improve. And we think strategically, it's super important that we continue our made in China for China, that we secure supply chains in there and of course, that we can move our supply chains around the globe. But the strategic mistake would be to step back in a very big way from China. We want to make sure we have the right technical teams and making sure that this large installed base, we can actually grow faster on that. As I said, we've seen in the last quarter, our highest ever market share gain in China. And that shows in a more compressed market our services with our technical teams can really drive forward.

Yes. Just maybe to add on to that, Padraig. If you think about kind of the stimulus we about this at the order, and that continues to perform very well. One of the things that we have seen in this stimulus is a much broader opportunity. The last one was kind of targeted at high-end academia, and this one is broader, which I think sits really well with our portfolio. And as you know, it's a multiyear program. It's not just a single year. And so we're seeing that first tranche here in the, I'd say, the first half of our fiscal year. We're expecting additional tranches to be rolled out throughout the course of not only the rest of this year, but into '26 and '27 as well.

Thanks, Patrick. We'll take the next question from Brandon Couillard from Wells Fargo.

Brandon Couillard, Wells Fargo. Simon, you did spend a lot of time talking about NASD. Curious if you could just speak to the confidence in the recovery in '25. What the current revenue mix of kind of clinical versus commercial looks like, growth in the program pipeline? And just an update on the timing of the new capacity, the new lines being ramped up.

Yes. When we talked about NASD, I think we're really emphasizing the overall picture there between NASD and BIOVECTRA. I think in the second half of FY '24, we've seen really healthy booking activity in NASD. And I think we've got a really solid basis for FY '25. The timing nature of these programs being as they are that we're expecting to hit in '25. Some of it we're also expecting to spill over into '26. But I think there's been a relative resurgence recently of booking activity in NASD and intersecting that with the capacity expansion that we've got coming in '26, we feel pretty confident about the picture there. And then also just going back to the fundamentals there in clinical programs and commercialization of RNA therapeutics, FY '23 was a record year, and we're seeing that momentum continue with late-stage clinical programs coming into commercialization. Our mix between preclinical and commercialization remains around 50-50 at the present time. And it will be interesting to see how that evolves over time, but I wouldn't want to speculate at this moment there.

Okay. And then a clarification for Bob. I mean you talked about strategic pricing as being a central part of the Ignite program. Do you expect pricing -- net pricing capture to be higher going forward than it has been over the past 4 or 5 years? And what is exactly different about how you approach pricing, be it across the portfolio or by customer?

That's a great question. The short answer is yes. If we -- I'll caveat that, Brandon, by saying we're no longer in the high inflationary environment. So on a normalized market, we do expect more pricing going forward than what we've seen in the past. And I think this is one of the key work streams for the Ignite transformation to really price for value across not only platform, but looking across software and solutions. And so -- as an example, we are looking at centralizing some key capabilities to leverage the insights, the data analytics that we have across our customer base and our end markets to make sure that we're taking advantage of the value that we're bringing to our customers.

Thank you, Brandon. We'll take the next question from Rachel from JPMorgan.

Perfect. This is Rachel Vatnsdal at JPMorgan. So I had a question here just on the Applied Markets Group. You guys talked about that having an underlying market growth of 2% to 4%. But you also touched on a number of the high-growth markets that have come online since your last Analyst Day, like PFAS growing 15% to 20% from a market perspective, semis and batteries growing into that high single and double-digit range. So can you just walk us through how should we think about -- is there any conservatism layered into not only your market growth assumptions, but your growth assumptions for this segment given some of these new higher-growth adjacencies that are coming online? And when could they become more material and kind of move the needle on that business?

Yes, I can start, Rachel. So I think you can see clearly on the PFAS side, as I start with that, a lot of runway in that area. And we're seeing geographic expansion. As I said, China was the largest growing quarter for last quarter for us, and we see that expansion continuing. We see modalities move, of course, from water to food and air. And of course, our platforms are there to pick up that. So we see this as a long range. We are also seeing that regulations is actually continuing to increase. The number of molecules or the number of compounds that are being analyzed and continuing to increase. So staying ahead of that with our technical teams is going to be really important. So we do see a long runway, both in growth and actually in the volume business. On the semiconductor, you can see on that side, it's a very durable business. We're integrally involved in fabs. Our spectroscopy products are used in testing a lot of the materials that go into fabs. We're getting -- actually when fabs are being set up, we're actually sometimes designated at the start of that on the equipment side. So again, we see that growth rate continuing. So what I would say is that we're -- I would say we're prudent in terms of what we're seeing in applied markets, but all indicators would say the momentum of what's happening in these markets is going to continue to improve. I don't know, Mike, do you want to add something?

Yes, Padraig, I think you covered it very well. I just want to remember, when we talk about the semiconductor, it's not just the fab. It's a long, very complex chain and supply chain. And we are extremely well positioned from the wet chemicals, the high-purity gas and all the way to the manufacturing process fab and downstream. So we have built a very, very strong base and with very strong customer relationship. We know the supply chain, and we know what is required to really help the customer to continue to push frontier of the technology to advanced semiconductors. So some additional color on the PFAS as well. As just mentioned, the regulation is only covered 2% of all the PFAS chemicals. We know there are 7,000, 8,000 even more PFAS chemicals. These are very difficult molecules to wrestle. It takes tremendous precision on instrument and sample prep and software separations, and we have everything we can put together to provide the most compelling solution for customers. And we're seeing extremely high potential as the regulation comes out, as the testing modalities continue to expand from the water to the food, to cosmetic to clothing to everything, right? So yes, we're seeing tremendous opportunity in these high-growth markets.

And Rachel, maybe just one last thing to kind of maybe put some numbers to it. We grew our PFAS business in FY '24 in the 20s, and it actually accelerated in Q4. So we're actually seeing accelerated growth. It was approaching $100 million of that $300 million. And so it's a very big business for us. And so we think there's a lot of opportunity for us. And the important thing in addition to everything that was just talked about, because of that sensitivity that's required, it requires new instruments. It requires new workflows. And so it's not -- you can't just run it on an existing system for the most part. And so it has an opportunity to actually replace the fleets that are out there doing these testings.

Helpful. And then just on my follow-up, I want to push on capital deployment. So you've talked about spending 50% to 70% of capital deployment towards organic areas like CapEx spending and R&D, but also then towards inorganic via M&A. So how should we think about the spending split between those 2 different categories? And then are there any gaps in the portfolio that you guys are targeting to prioritize some of your investment?

Maybe I can start and I'll that. So clearly, we set out our capital deployment strategy. And let me speak particularly about M&A. M&A is going to become an increasingly bigger part of the puzzle for us. You're going to see it very much aligned with this market strategy. So no surprising moves into areas are not close to us in that strategy. And there's a lot of fast-growing segments. I did say I want to improve the recurring revenue percentage of this company. M&A will help do that, of course, organic -- we'll do that organically and inorganically. And as you see, we have a balance sheet to use. I will say over time, we've done BIOVECTRA. You're probably likely to see a number of deals come out over the next few years in that range and continuing to broaden out. But we have great capabilities in the company. We also want to bring in great capabilities that we can leverage. And you've seen today as well about the commercial organization and the service organization. As we bring M&A, that scale of service, that scale of digital and that scale of our service organization really allows us to create a lot of sources of value going forward that compounds over time. So we're very excited about that. But I don't know if you want to talk to that.

Yes. I think if you think the various components there, Rachel, we believe we're adequately funding R&D at 7%. Actually, we think we can actually get even more productivity out of the R&D through the measures that we've been talking about and being able to redeploy some of the R&D into faster-growing segments. And then we've been in a higher capital investment area over the last several years. We're -- this -- in 2025, it was probably the highest for the investment in NASD. I would expect that to kind of tail down. So that bigger increase would be really more focused on those growth areas around M&A. It's always hard to project when that's going to happen. But I think the intent is to actually add more of those capabilities, as Padraig mentioned, into our portfolio to drive that top line growth.

Thanks, Rachel. We'll take the next question from Puneet Souda from Leerink.

So first one on GLPs. I mean, you talked about -- touched on that a number of times throughout the presentations. With BIOVECTRA, can you elaborate your position where you are -- what's getting enabled? What's your GLP position today and exposure and where that can potentially be? And you also have a number of LC/MS analytical capabilities across the enterprise. So just tell us about how do you want to position into GLP-1s here.

Yes, I'd start and I hand over to Simon. One of the key reasons that we acquired BIOVECTRA is that they're vertically involved in GLP-1s and peptide production. I can't talk about the details on that, clearly, but you know the companies out there that are leading the way in that. They have unique capabilities that are, I would say, very focused on a particular part of that production of peptides. And actually, part of the companies that are we working with have embedded employees with BIOVECTRA, making sure that we expand over time. So very excited about that. On the analytical side, the first thing I looked in BIOVECTRA was to see was their Agilent equipment in the labs. So that was the first thing testing these GLP-1 precursors. And it was great to see we had Agilent 1290 Infinity IIs there. So on both sides of that there, we have a lot of opportunity. It's not just an instrument, of course, play, but also it's a consumables play where we're going to accelerate a lot of our programs around GLP-1 and peptides so we can get the mappings clearly going forward on it. So very excited about it. And one thing, as I said in the presentation, kind of surprising, we've had a lot of analytical customers. Of course, we see the BIOVECTRA side crossing across on both those areas about the capabilities we can do in ADCs, microbial fermentation and of course, our world-class oligo business on the NASD side. But I don't know, Simon, if you want to add any?

Yes, not too much to add to what Padraig said, only to say that the GLP-1 ability in BIOVECTRA is relatively nascent, but we've got strong demand from market leaders there, and we'll be looking to grow and capitalize that on the next 1 to 2 years. And then whether we're talking about the manufacturing or the analytical side, we see the markets evolving. It's obviously dominated by a few very large players now, but there's an increasing growing tail, which we think is really durable over time. And so we think over time, we're going to see a correspondingly sustained level of demand in both analytical and manufacturing. I think with BIOVECTRA in particular, they've invested ahead of the curve in those capabilities. But again, we're still relatively early days in terms of converting that into large-scale revenue. So I think on both sides, we're very bullish about the prospects through time.

That's great. And for my follow-up, I mean, Padraig, we're past the middle of December, so I have to ask this. And just given what are you hearing from your pharma customers as they close their budgets in terms of overall demand? And just if you could maybe characterize at least qualitatively, the sentiment because you've talked about markets -- you talked about -- touched on a couple of points that markets are recovering, instrumentations are recovering. Maybe just talk to us about the instrumentation growth as what you're seeing right now.

Yes, I can start and then I can talk about the instrumentation growth. I think we're talking -- and our sales teams, you can see one of them here today. Of course, we're very close to our customers. We're not seeing a huge budget flush. We didn't expect that, by the way, but what we are seeing is increased activity. And what does that mean? We're actually seeing putting in large orders and actually wanting them delivered within 30 days. That is the kind of a change for what we've seen over the last few years where the deal time had expanded, right? So from the first inquiry over in terms of closing that deal had really expanded over time. We're seeing that in pockets really change. The orders, we certainly see a change in the order momentum driven largely around Infinity III, of course, in some of the areas, but also in other areas. So we do see that steadily recovering. And people think about this capacity, of course, that was there a lot of equipment bought during the COVID cycle. One thing that we can say for absolute certainty is the equipment that have been bought over the last number of years and during COVID are being used. We know that through the data. We can see it through our service analytics. We can see it through our consumables usage, and we're expecting this replacement cycle to continue to improve. Now in terms of what you see, I don't think you see a big bolus or some companies are talking about a super cycle. You're not going to see that. But if you look at the amount of installed base we have with 1100s, 1290s and even competitors' equipment, you're going to see this compound over time.

We'll take the next question from Jack Meehan.

I wanted to follow up on Puneet's question around BIOVECTRA. I'm just trying to read the tea leaves here in terms of like where M&A is going to take you, more biopharma, more service. I guess my question is, is CDMO #1 on the list? And then kind of a second question is these are historically pretty capital-intensive businesses. So just how do you think you go down that path and kind of preserve the free cash generation of the business?

Yes. So I wouldn't say it's not #1. We don't look at it in that way. You saw 4 pillars, right? So you saw portfolio expansion. You saw high-growth segments. Clearly, M&A is one of those areas. And of course, BIOVECTRA is a high segment with a long track record. You see automation and you see software. So you're going to see M&A across that continuum on those pillars of strategy. And CDMO, it's an area where we're exploring. I mean we're not, I would say, a basic CDMO company out there, but we're a very specialized CDMO. And I've actually seen some CDMO companies talk about oligo as one of the key areas that they want to move into where we have a very high right to win, and we have a lot of capabilities. In terms of CapEx on that, and then I'll get on to the rest of the capital deployment, the great thing about BIOVECTRA is that the CapEx was already initiated and spent. And of course, on the NASD side, where we've invested over the years from the capital deployment point of view. So again, it's hard to kind of say what's next, but you're going to see it in faster-growing segments, areas where we need capabilities, but also recurring revenue increase in the company.

Great. And then one follow-up, and I don't know if you want to take this offline, Bob, but just now that we have the new segment numbers, I'm here updating my model. I was curious, with earnings, you gave segment forecasts under the old method. I don't know if you have any color under the new method, either upcoming quarter or the year.

Yes, I can give you some high-level numbers. I kind of mentioned this, I think, I believe, on the earnings call that the growth rates won't materially change by segment. So ACG, roughly in line with what we had forecasted for the full year. LDG roughly in line with DGG and then AMG roughly in line with LSAG. All 3 expected to grow with ACG leading the growth rate, driven by the strength in our business followed by the consumables. We are expecting a return to growth in our instrument business, really driven behind the Infinity III and the market recovery, but that's lower single-digit growth and then also recovery in the former genomics business -- former DGG NASD. We talked about that at high single digits, my judgment to the right, stretch to perhaps striving for even a little more than that and then continued strength in our pathology business as well.

We'll take the next question from Dan Leonard, UBS.

I wanted to follow up on Patrick's question on China. I mean if I could observe, I think every executive on stage today, except for maybe you, Bob, mentioned that you were just in China. So clearly taking up a lot of management attention. It wasn't clear to me whether you expect that region though to grow at fleet average or better than fleet average over your long-range planning horizon. And so could you please elaborate and clarify your thinking there?

Yes. So actually, important to mention it just briefly, that we do expect it to be mid to high single digits. Not in '25. We're expecting '25 to be recovery, low single digits, but certainly better than what we've seen. And actually, if you look at us on a quarterly basis, we've seen sequential improvement on a growth rate and relative stability on the dollar amount as well within that. So that will be built on the stimulus that we talked about. But long term, within that guidance, we're thinking mid- to high single-digit growth for China, driven by the things that we talked about.

So fleet average, understood. And I want to clarify as well the go-to-market strategy. I think, Mike, you talked a lot about PFAS, but liquid chromatography, mass spec is an important analytical tool for PFAS testing, but that's not within your domain. So how does that exactly work when you're going to market when you have some analytical instruments that cut across different segments?

Yes. So first of all, we're not changing currently how we're set up in terms of our commercial channels. So commercial channels, we've done a lot of work on that. What that means is centralized account management and then specialization in that account. So this new market structure allows us to have launch excellence across multiple markets with our commercial teams and getting the systems, of course, sold, installed and up and running. When you look at -- there's no structure that's perfect. But we really try to make sure that we have clear overlaps. One thing, as you can see from this team, there's going to be a lot of synchronicity around NPI acceleration and, more importantly, workflow acceleration around PFAS. So it necessarily doesn't need to be embedded in one group, but you're going to see synchronicity across those programs through accelerated funding but also accelerated focus. So -- and I think as you go -- as we go through the year, we'll be able to show you some results on that.

We'll take our next question from Mike Ryskin from BofA.

Bob, you mentioned in your prepared remarks a couple of times, you talked about tariffs and the potential impact. You talked about the global manufacturing base, ability to move things around. I recognize that. But there's still going to be a cost associated with these moves, right? Like you're manufacturing, wherever you're manufacturing, for a reason because it's the best way to be it. So could you talk about, given your experience in the last round of tariffs and during COVID, just what those processes would be, how quickly you could adapt and how you're quantifying the potential impact if you have to move some of these things around, if there is a way to think about it?

Yes, it's a great question. And obviously, we've seen some of the story before back in the '18, '19 time frame when the first round of tariffs were lobbied. And we've since then been able to move that, coupled with COVID, actually moving a lot of our supply chain around, and create a lot more flexibility within the supply chain. That number now, in the previous time, is roughly $4 million to $5 million per quarter on a run rate. It was much higher than that when we initiated it, and we're able to drive that down. We would expect something of similar mindset. It's kind of hard to speculate; the numbers are moving around a lot. But if you look at our business, we think we're well positioned because we actually have more in-country or in-region manufacturing today than we did 6 years ago when these first -- these tariffs first started. And so in particular, the one that has been highlighted is around China. And that one, we think we're very well positioned to be able to minimize that impact. So we're still working through that. We'll see kind of what the numbers are. And we didn't mention Canada, the only thing in Canada that we do have today is BIOVECTRA. And we have nothing in Mexico, as an example. And so we do think that, that will be as well positioned as anyone within the company. We haven't built that into our guidance, and we do expect that we'll be able to mitigate a large piece of that.

Generally, our experience in 2018, we can move supply chains around Asia in 6 weeks as needed. So we can pick up things and move it if it's needed. So speed matters, but also the expertise matters, doing it. And I think a really important fact is that, in the Americas, 60% of every product in America is produced in America -- can be produced in America, 35% from the rest of the world and only 5% from China. So we have a very dynamic supply chain ability.

Okay. And maybe as a follow-up, I'm going to stick with the election theme. It's been a month since the election in the U.S. and since some of the cabinet announcements were being made. When you're talking with your customers, especially in markets like pharma biotech, maybe like some of the academic markets, there's obviously a lot of noise about some of the changes that could happen. Is that leading to any pause in budgets and planning as you get to the end of fiscal year, beginning of next calendar year, people are setting out their budgets for new facilities, new projects, is there any sense that in your customers just want to wait and see who gets confirmed and what the policies are or what the budgets are? Or is that end of your process and beginning of a new calendar year happening at the same pace you'd expect?

Yes. Look, I mean it's a very dynamic time, of course, but we haven't seen that at all. In anything, we've seen some spending increase that I've talked about. So no pause on it. When you look at the administration changes, there's puts and takes with it. You can clearly see that PFAS can be a beneficiary of this with higher regulation in that area around food. We actually think that FDA approvals might increase over time, which, of course, will be a boost to pharma. We're very low -- low percentage were affected by the NIH. So we are low exposure on that side. So we're waiting and seeing. I think everybody is predicting what could happen. I think we're past the, I would say, the IRA Inflation Reduction Act impacts. I know that's normalizing over time, but absolutely no slowdown or people waiting on the fence to see what the new administration will do.

Okay. We'll take a final question from Dan Arias from Stifel.

Just a follow-up question on PFAS for either Mike or Padraig. Curious whether you think that the U.S. test -- the existing U.S. testing market for water sort of has what it needs in terms of equipment or whether you think there's an additional capacity build-out phase that takes us into 2025. And then for 2025, the growth that you're assuming for PFAS, is that overall driven by equipment versus just sort of ramping consumables utilization as your sample volumes presumably increase?

Yes, maybe I can start off. There's been a lot of consolidation in testing laboratories. Everybody knows SGS, Eurofins. There's a lot of consolidation in North America in that area. We believe they're not built out in terms of capacity, just continuing investment. These testing labs invest very much earlier because of capacity that's coming along. So we do see that's going to expand. We do see a lot of growth, exponential growth in consumables and services to make these systems more effective. And again, it's both regional expansion where I say it's like around the globe, Europe, China, but also, I would say, volume expansion through more compounds. And everybody needs to keep up with sensitivity. If you drop behind on sensitivity with triple quads, if you drop behind on the GC/MS where we are waiting for a lot of business to come because it's moving from water, I think there's a pretty long growth rate on it.

Yes. Padraig you said it very well. We are seeing the continuous expansion of the capacity as our customers really take on new modalities and also expanding from, again, like I said, just not from water to food, cosmetic, everything, right? So it's similar definitely, but we're also seeing the consumable service as we work with the customer to provide the most efficient workflow solution, because no longer just 1 run, they're dealing with hundreds of runs every day. So the improvement on the workflows matters, and we are best positioned to do that.

Yes. And the thing that I would add is as those list of compounds expand and the demands of those applications continue, there's going to be expanding need for consumables, but also the services, to keep those labs methods operational to be able to meet the throughput that's required. And linking it back to the CrossLab Connect capability, allowing customers to be able to see where their capacity opportunities are so that they can flex within their existing assets to be able to pick up new application opportunities in PFAS and be able to also expand capacity when they need it.

Yes. Okay. Great. If I could just maybe sneak 1 more in for Padraig. In one of your earlier slides, you had a pharma R&D growth assumption of 6% annually, '24 through '26. That's a little bit above what we see when we roll up industry numbers. Can you just talk to, A, what that pertains to, and B, the extent to which your growth assumptions are sort of underpinned by that?

Yes. I mean it's an aggregate of what we've seen in investment growth in R&D across those markets and modalities. So that's what we're seeing on it. I mean, people might have slightly different changes in the model, but that's what we recognize. That's what we're seeing.

And I would say, Dan, just to build on what Padraig is saying, our market is more than just pharma. And so we're seeing recovery beyond just R&D spend. We have the replacement cycle, obviously, QA/QC that doesn't show up in R&D as well as the other markets that we're seeing. And so you have that opportunity of multiple growth drivers just being dependent on R&D spending for us.

Okay. With that, folks, we close out our 2024 Analyst...

And by the way, before you go, wish you a great holiday. It's been one hell of a year for me, for sure, and it's been one hell of a year for the team. And I'm sure it's been one hell of a year for you guys. So I hope everybody gets a great break with your families over the holidays, and see you in the New Year. It's only 4 weeks till JPMorgan, so we'll be back.

Big round of applause.