Revvity, Inc. (RVTY) Earnings Call Transcript & Summary

Great. Thanks, everyone, for joining this morning. My name is Matt Sykes. I'm the life science tools and diagnostics analyst at Goldman Sachs. I have the pleasure of welcoming Max Krakowiak, the CFO of Revvity. Thank you very much, Max, for being here.

Absolutely.

Maybe it would be great for you to start out kind of set the stage first to talk about the most recent results, trends you're seeing in your business. And also, there was a slight name change and everything. Maybe talk a little bit about that.

Yes, sure. So I think if we go back to the commentary we had on the first quarter call. Q1 came in, I would say, probably at the upper end of our expectations. And then for the full year outlook, we did tweak our range for the year. So we moved our organic growth target from 9% for the full year to a 7% to 9% range. And then we opened up EPS from a solid $5.05, and we moved it to a range of $4.85 to $5.05. And I think what really caused us to create the range was really what we're seeing from a market environment perspective, particularly in the pharma biotech space. I'm sure we'll talk more about that here and some further questions, but that was really the main driver of the change. I think as you mentioned in your second question around Revvity and the brand launch, this has been, I would say, a massive undertaking really for the past 12, 18 months. And it all started with the announcement of the divestiture of our AES business. And this has taken, I would say, an extreme amount of time for myself, from the rest of the leadership across the company. I think we're excited about where we are as a company now. The big heavy lifting is mostly done with us completing the divestiture, launching the new brand name. There's some trail on activities we have to do, but it should be a much smaller scope and I think we're just really excited about being able to now focus more so on the business that we have remaining.

And how are customers reacting to the rebranding? I mean it's obviously a transition for everybody. Certainly, you've put a lot of hard work into doing that. But what sort of -- what are customers saying? And how are they kind of reacting to that?

Yes. I think customers are probably equally as excited, truthfully. I think we are those who take a lot of pride in what we've done from a brand launch perspective, and I think the customers feel that as well. I think they're excited about what the new company represents and the value that it can bring to them as a partner.

Got it. And maybe let's talk a little bit about sort of the financial profile transformation the company has undergone. I mean if you kind of look at the last couple of years, you've divested an instrument business that was about $1.3 billion revenue, sort of mid-teens margins. And then based on how we've modeled that out, we think the acquired companies over the past couple of years can probably get to about $1 billion in sales over the next 5 years, that's sort of a 30-ish percent margin. So that's a pretty significant transformation in terms of financial profile of the company. Maybe talk a little bit about where you see the Revvity today in terms of financial profile and where you can kind of take it to in terms of growth and margins?

For sure. And by no means are we confirming 28 numbers for the recent acquisition. But those are -- I would say those are directionally correct. And I think when you look at the transformation of the company, I think financial is one aspect, and I'll talk a little bit more about that. But there's also been a huge transformation in terms of our technology capabilities and then also culturally. So I'll touch upon those as well. I think from a financial perspective, I think maybe the easiest way to look at it is actually kind of where we were pre pandemic, right? When we had Life Sciences and Diagnostics and the AES business. And if you look at that time, we were roughly $2.8 billion in sales. Our operating margins were low 20s. We had, I would say, more of a challenged free cash flow conversion sort of in the upper 70s. Reoccurring revenue was only about 60% of our revenue base, and EPS growth was normally high single digits on a given year. Now if you look to where we are today in terms of our midterm outlook, our organic growth is essentially -- target is essentially double from mid-single digits to 10%. Our operating margin has expanded almost 1,000 basis points from low 20s to 30 plus. You've got reoccurring revenue going from 60% to 80%. And for those who don't know, the reoccurring revenue is what we consider for our reagents, assays, services and software businesses or more so the sticky revenue. And then from an EPS perspective, that high single-digit growth should be a mid-teens percent growth year-over-year in the midterm outlook. And then lastly, on cash, we should be up closer to upper 80s from free cash flow conversion standpoint. So from the time when I joined sort of pre-pandemic to where we are now, I would say it's quite a dramatic shift in the financial profile. But as I mentioned at the beginning, the financial profile is just one piece. The other piece from -- if you look from a technology capability standpoint, the majority of our portfolio now is in high-growth end markets, and we have market-leading positions in those domains. That's very sort of different than what we divested with the AES business, and we're excited about that as well. And the last piece is culturally. So I would say now the majority of our company now also given that it's mostly from the acquisitions, operates in much more of like a start-up mentality. Big focus on innovation, being nimble and really, I would say, working much more from a partnership level with our customers. And then it's also allowed us to reenergize our talent bench. And I think that's one area where we've actually had the opportunity to take a lot of leadership roles within the company and fill them with the talent pool from the acquisition. I think a lot of good things all around, and we're excited about the transformation here.

Got it. And just staying on that financial profile for a minute. While the growth outlook is a little bit harder just given the macro dynamics that we're dealing with, we see the 30% operating margin target is highly achievable and maybe a base level to some degree. Could you maybe talk about some of the levers that you have moving forward where you can expand that operating margin level over time?

For sure. I actually -- I'm glad you mentioned that. That 10% does require sort of a stable macro outlook, and we'll have to see what the next couple of years look like, but that definitely was our assumption. If you look at that on a margin profile perspective, again, our goal this year is to be at 30%, which we think is in the upper end of best-in-class in the industry. And then I think we have sort of the highest margin expansion targets out there from a midterm outlook perspective. So our midterm outlook is 75 to 100 basis points of operating margin expansion. If you think about the composition of that over the next 3 years per year, it's really probably 2/3 on the SG&A leverage perspective and maybe 1/3 from a gross margin. The SG&A is really driven by the fact that after the divestiture, we were left with some stranded costs, whether that be people, facilities, systems, et cetera. And so we'll have time to grow into that cost base over the next couple of years. And so that will be a big volume leverage play for us. And then on the gross margin front, it will be a combination of net price being greater than inflation and a little bit of volume leverage. But I think the really exciting thing for us is what we're working on for years, I would say, 4-plus. And it's not something that we've come out and given targets for. But these are sort of, I would say, the bigger swings from a margin expansion that we have as a company. And those are really around the synergies that we can now drive with the recent acquisitions. So to give you a couple of examples of those. So one would be on footprint optimization, right? I mean that's something that takes a lot of time, but it's something that we have not started to do yet with the acquisitions. The second one would be like freight lane optimization and making sure our warehousing and distribution networks are set up appropriately for our scale. The third one will be vendor consolidation, right? We buy plastics from -- gosh, I don't know how many vendors today across all our acquisitions. And so leveraging those in our purchasing power. And the fourth one is in-sourcing. And that's one that I think that we're most excited about now with BioLegend and the antibodies on the diagnostic side. We've got stuff that we manufacture on the diagnostics side that fit into our life sciences workflows and reagents. And so I think that the longer-term gross margin plays, I think, is what everyone is really excited about.

Got it. And maybe pivoting to the Life Sciences segment where a lot of changes kind of post the divestiture, what are the most important factors within the segment that you think will determine your ability to -- for growth and improve profitability? I guess what I'm asking is what are you most excited for in this new Life Sciences segment as it stands today?

Yes. Maybe just to start with profitability. I mean, I saw I think in Q1, our Life Sciences operating margin was almost 40%. So I think from a profitability standpoint, on Life Sciences, we're pretty happy with where we are today. I would say from a growth algorithm perspective, if you look at our midterm outlook, our growth algorithm on the Life Sciences side is low-double-digit growth overall in the midterm. And the composition of that is low-double digits to low-teens in our reagents business, which is more than 50% of our Life Sciences portfolio. We've got our instrumentation, which should grow mid- to high-single digits. And then you've got our software business, which should be a low to mid-teens grower. And so that's kind of the algorithm how you get there. I think what we're most excited about is probably 2 things. One is on the large molecule side, really with the recent acquisitions of Horizon, SIRION and BioLegend. And those portfolios really truly have what we think is differentiated technology. So we just came out with a press release here in the second quarter on the first base editing contract that we signed with AstraZeneca. And then I think the second area that we're incredibly excited about is really our software business. And that software business is not one that we've had the chance to come out and talk about externally because previously, it was just such a smaller piece of the overall portfolio, but we think that business has a long runway over the next couple of years, and we're excited to educate everyone about what that business entails.

I wanted to talk about -- you put out a press release this week talking about signals and really expanding that offering and almost rebranding it in a way as a SaaS platform. We've often looked at sort of the software opportunity within life sciences is one of great potential, but the execution has been sort of mixed, whether it's a talent issue or a number of other things that come up. But what you kind of came out with yesterday seems to be not just a rebranding effort of signals, but almost more of a comprehensive platform on the software side. How do you feel you guys can win in that software market with the signals platform you have today, particularly given sort of the regulatory aspects of the business and how sticky that can become? Maybe talk a little bit about what -- one, what you announced and two, what you think signals can actually be for the industry?

Yes. So I mean, you've summarized it pretty well in terms of what we announced in terms of the platform. But I think -- so if you look at that business today, its focus is predominantly in upstream research with pharma customers on the small molecule side. And so we're in like 49 out of the 50 top pharma biotech customers today. And again, it's predominantly on the small molecule side. So where we are taking it is much more now into the large molecule side, which is the same transformation we just did with the reagents business through the acquisitions. And the second piece is moving it a little bit further downstream into, I would say, some of the earlier clinical trials and a little bit maybe in the CRO space, but not all the way downstream until the late-stage clinical trials where the regulatory thing is going to become such a bigger hurdle. We are going to stay, I would say, a little bit further upstream. But that business has a lot of opportunities. And our pharma customers are begging us to come out with more large molecule offerings and to stay with them a little bit further down the process. And so given we're already so entrenched, the ball is really in our court to come out with just continued growth on our Signals platform.

Got it. Shifting to China for a minute. It's been topic of conversation this week for obvious reasons. Maybe talk a little bit about what you're seeing throughout China, specifically ImmunoDx, which came in a little bit softer than we had expected in Q1. But what are you seeing on the ground? And what are your expectations for China? And has this changed?

Yes. So I guess maybe just starting with some overall context. So China now will represent about 17% to 18% of our overall company's revenue. And if you look at that breakdown, about 40% of it is Life Sciences and 60% of it is Diagnostics. So on the Life Sciences side, that business has grown double digits every quarter for, I think, the past 4 or 5 years. And that was true again in the first quarter. We expect that trend to continue in 2023. And so I think we're really excited about that aspect in China, and that continues to perform well. I think if you look on the Diagnostics side, of that 60%, Immunodiagnostics is the biggest piece. And I think everyone's heard us at the commentary around some of the challenges that businesses has faced in terms of the lockdowns and the hospitals in terms of their volume ramps, et cetera. And I think some of the recent noise that's come out around the different COVID outbreaks, et cetera, it really only impacts us when there's a lockdown and the hospitals are no longer doing what we would consider sort of routine testing. And so we haven't seen that be the case. We'll continue to monitor it, but that isn't something that has, I would say, changed our thinking or thought process of what we expect from that business. And overall, for 2023, to your point, yes, Q1 was a little bit lighter. But essentially, what just happened is the volume ramp that we were expecting to happen in March pushed out to April. We said on the Q1 call that April was really the first month where we really started to see the volume pick back up in the hospitals. And so our expectation of a full second half recovery was what it was at the beginning of the year, and it's still what it is today.

Got it. You also had the expectation of a cautionary spending levels throughout pharma and biotech, which is not unique in the sector. How has your expectation for this end market progressed? And you're in a different position today than you were years ago in terms capital equipment exposure. So you're kind of dealing with a slightly different type of purchase, not different customers, but a different kind of purchase than what they're looking at. In terms of exposure to revenue specifically for pharma and biotech, how are you seeing those demand -- those end market demand trends happen over the course of, obviously, Q1, but then kind of into the rest of the year?

Yes. I think I mentioned in the first commentary, too. I mean, this was, I would say, the biggest driver of us opening up the guidance for our full year outlook. And I think as we look at the trends of it, there's really 2 components of it. One is there's the, I would say, a little bit more cautionary spend from the large pharma customers as they are working out sort of their budgets for the rest of the year and we are seeing a little bit of a longer sales cycle. I would say the second piece is on the pre-revenue biotech. Now this is a much smaller exposure for us. It's only 5% of our overall total company revenue. but it was down mid-teens in the first quarter. We do expect both the trend on more cautionary spend on the large pharma side as well as the pre-revenue too sort of continue throughout the rest of the year, which is again why we had opened up the guidance range. But to your point, I think the difference with us is that if you look at our instrument composition, yes, it's still CapEx purchases for the customers. But we do not have any sort of what I would call routine equipment that we are selling to the pharma customers. We divested everything we have in LC, mass spec, et cetera. And so what they are buying from us is heavily customized, specific instrumentation that they are looking for very specific workflows in their preclinical research areas. And so they might only have 1 or 2 instruments of ours in their lab. But they are designed for a very specific purchase, right, as opposed to them staring at 100 LCs saying, maybe I won't update them for this year. I'll just keep running the instrument. For us, they need our instrumentation for very specific research areas.

Got it. Got it. And maybe talk a little bit about because a question that I continue to feel and I'm sure you do too, is that just given your exposure to discovery and preclinical, there's this assumption that that's an emerging biotech type exposure. I think people forget that large pharma also does discovery in preclinical work. Maybe talk about how you want to kind of maintain that exposure in terms of the large pharma, maybe it solves itself just given the issues in emerging biotech? But just kind of over time like do you want to have that sort of 5% of overall company exposure to emerging biotech? Or do you want to make some strategic bets assuming that innovation does come back and spend does come back and capital markets reopen? How are you thinking about that large pharma versus emerging biotech kind of customer mix moving forward?

That's a good question. It's not like we're selling different products to the pre-revenue versus what we are to the large pharma. So in terms of like our innovation pipeline, it's agnostic to what the customer mix is. And so for us, if someone wants to buy it. We're obviously going to sell it to them. We're not going to say, no, we don't have a certain limit of exposure on the pre-revenue side. And so we'll continue to track it and monitor it, but I don't think it's going to change anything from us from like a strategic standpoint.

Got it. Just from an instrumentation standpoint, that growth in Q1 kind of exceeded our expectations of low double digits. What are you hearing and seeing from a placement perspective as you move to kind of throughout the year?

Yes. So I'd say Q1 was definitely elevated. It wasn't our expectation, I think, to be low-double digits either. But if you actually look at the composition of what drove that, it was actually mostly outside the U.S. and it was heavily, I would say, in the academic and government end market. And so that might continue to do a little bit better or to maintain that level over the course of the year. But our overall instrumentation outlook on the Life Sciences side is probably more of a mid-single digits for the rest of the year as opposed to the low-double digits you saw in Q1.

Okay. Just staying on the academic I think there's also -- I wouldn't say misunderstanding, but in terms of how the budgets work, and if we talk about use NIH as a proxy, there tends to be a lag period in terms of when the budget gets set, when they get the grants, when they spend the money. And there's been a lot of questions regarding the debt ceiling in terms of academic funding. How are you seeing sort of the academic customer spend patterns kind of lay out over the course of next year as it relates to sort of the budgets in the spend? Is this fairly defensive in your mind in terms of that end market and what you're expecting?

Yes. I mean, again, I think if you look at what we're seeing from the academic and government perspective, the strong growth we're really seeing is outside the U.S. And I think we do expect that to continue. I think similar to what we saw with the large pharma in the U.S. and the academic government, it was a little bit more tepid in the first quarter. And I think we baked that into our guidance for the rest of the year, it will maintain more of a cautionary spending level. And if we see any updated trends coming out of Q2, we'll update it at our Q2 guidance call.

Got it. And then just with the divestment that you did, you're moving from a customer sort of spend from sort of a CapEx decision to an OpEx decision, which maybe results in sort of an easier environment for you to operate in. How are you thinking about that sort of OpEx versus CapEx as a mix of your overall business? And how do you think that positions you from -- I wouldn't call it defensive, but just sort of like more insulated from some of the end market demand trends that we might be seeing? If we are in this environment where heavy CapEx purchases will be depressed for a while, how do you think Revvity is positioned today versus what people know PerkinElmer from before? Because I think there has to be this perception shift from the investor base as well as to like, let's see what they can do. And now that this business has completely changed. How do you think that OpEx versus CapEx then patterns resonates with the new Revvity going forward?

Yes. I mean -- so I think if you look at it from a CapEx versus OpEx perspective within our portfolio, I would say, first, instrumentation, again, it's about 20% of our portfolio. But then when you break that down, only maybe 2/3 of that is on the Life Sciences side, 1/3 is on the Diagnostics side. On the Diagnostics side, it's really a reagent rental commercial model, which is actually an OpEx decision for the customer much more than a CapEx one. And so yes, on the Life Sciences side, if there's significant delays from a CapEx standpoint, we'll feel it. But again, it's not like we're selling routine instrumentation, and we even think within that, we should still be relatively insulated. If you look at the rest of the portfolio, the only other area where it's truly a "CapEx" decision for the customer is when they have an on-prem solution with their software. So if they haven't moved over to SaaS yet, it is still a CapEx type decision that they are making on the software side. So that's one other area where we'll feel the pressure from a CapEx perspective. But if you take a step back and look, 75% of what we sell is an OpEx decision for the customers.

Got it. Maybe shifting to diagnostics. You touched on a little bit, but just reproductive health specifically, there's obviously been pressure on birth rates that have impacted this market. While it's difficult to kind of see this trend changing in the near or medium term, how do you position this business within that environment with those -- with the birth rate pressures that you're seeing?

Yes, it's a great question. I think reproductive health is one area that I think we are truly actually excited about as a company despite what you've got out in terms of declining birth rates. If you look back over the past 4 or 5 years, I think every mature market has had a declining birth rate on average. And despite that, our business has still continued to grow positively in the mid-single digits. And there's really 2 levers that we have that's allowing us to sort of outpace what you're seeing from a macro perspective. One is on geographic expansion, and the second is on menu expansion. And so if you start first from a geographic expansion standpoint, I think the most relevant data point is there's 140 million babies born every year. Only 40 million are tested. And so there's a lot of countries that just don't do any sort of level of testing amongst their population. And so that is an area of growth opportunity for us. The second is when you look at the menu expansion, this is really a combination of, one, the launch of our most recent MPIs and us continuing to find new disease areas to test for. And the second is the adoption from both states or countries in terms of what they are willing to go and test for. And so to give you a couple of examples of that. In the U.S., you can have states that test for as low as like 20 different disease areas with newborns. And then you've got the far end of the spectrum like California that test for more than 50. And so as states take on more tests, that allows us to drive that menu expansion. Same thing from a country perspective. There are some countries like the U.K., they may be test for like, I don't know, 10, 12 this year. Egypt is like 2. And so as states and countries continue to build out what they're willing to reimburse from a testing perspective, it allows us to drive additional menu expansion.

Got it. So despite the decline in birth rates, there's a penetration opportunity basically, for sure. Okay. And then in terms of the reproductive health business, does that give you any insight or advantage into the rare disease market? And what type of differentiation could that give you over time just because there's been more and more discussion about rare disease? And I think having that reproductive health business actually gives you a good entree into rare disease. Maybe talk about how those 2 work together.

For sure. That's a great question. I'm glad you asked this. This is probably one of my favorite topics to talk about. And particularly as it relates actually to our Revvity OmiX business. And this is, again, in a business that we have not had a chance to talk a lot about externally because it was just such a smaller piece of the overall portfolio. But essentially, this business actually started up -- started out as backup testing services for states and countries on the reproductive health side. And so we have a global lab footprint that again, was initially designed for backup reproductive health testing. But we also have a deep domain expertise in these labs on rare disease testing. And so this business, I think, over the next couple of years is going to become the real link between our Life Sciences business and our Diagnostics business. And so we think this business is actually going to give us a true differentiated offering to our customers -- to our pharma customers, where we can go in and work with them and have a comprehensive portfolio on their upstream preclinical research needs. And then partnering that with our ability in this global lab footprint to develop assays, procedures, backup testing services for both the screening and monitoring diagnostics associated with the therapeutics that we help them develop upstream in the preclinical research. And so that it allows us to offer, and I would say, partner with our pharma customers on a much longer perspective of their therapeutic development.

Got it. Maybe switching to e-commerce. You talked about that being a big driver for you, especially on the reagents. How has this transition progressed? And what are you hearing from customers who are utilizing your e-commerce platform?

Yes. So maybe just to clarify, too. So yes, it is, I would say, a very large strategic initiative for us. But we probably actually won't launch the new U.S. platform probably until early '24 and then sort of Europe and some of the more mostly just Europe will be sort of late 2024. So we still have a couple of quarters, I would think until we can actually really get a grasp of the impact from the new e-commerce platform. Today, for instance, we have less than 10% of our overall company revenue on e-commerce. So we are very much in the early, early innings of this. The majority of that revenue was from BioLegend on their legacy platform and they've been a huge driver of helping us design our new e-commerce system. But essentially, that is -- it's not going to be something we feel this year. It will be I would say really probably until 2025, where you're starting to see material impacts to the financials. So we've got our work cut out for us, but we are excited about where we're heading.

And then just following up on that from a margin versus sort of volume standpoint, do you think the initial impact will probably see is on margins going forward? Do you think this can actually drive additional volume as well or higher velocity?

Yes. I mean I think it's a great debate to have. I think you're going to have -- probably the first uptick, I would say, it's probably a little bit more share of wallet growth from your customers, and it will take time for us to work through the margin piece of it. But I think over time, you will see both dynamics play out.

Okay. And then just you mentioned BioLegend. Just kind of give us an update on how that's progressing. Just given the size of that acquisition, can you maybe talk about some of how that's progressing? What your expectations are for the BioLegend business going forward?

Yes. I think we are very pleased with the performance of BioLegend and excited about where it's going over the next couple of years. BioLegend is the majority of our $700 million, $800 million reagents business, which continues to grow in the low-double digits to the low-teens. BioLegend, obviously being a very large proponent of that but it is something that we think has done -- has been a great addition to our overall portfolio.

Got it. Maybe shifting to the financials a little bit more. Maybe talk about sort of free cash flow expectations for this year. You talked about the free cash flow conversion rate, which has come up. But what are your expectations for free cash flow? Where do you expect leverage to land at the end of this year?

Yes. I think from a free cash flow perspective for this year, it's obviously a little bit noisy with the divestiture. And as we did in our Q1 call, we'll keep calling out the impact related to it. But on a normalized basis, I would say our free cash flow conversion for this year should be north of 85%. And then again, the sort of our midterm outlook is to be in the upper 80s from a conversion perspective. And so I think we feel confident in our ability to deliver against that. If we look at it from a leverage perspective, assuming we do no additional M&A or share repurchases, we should end the year at less than 2x net leverage.

Got it. Got it. And I'm going to ask the obligatory AI question, which -- but I think there seems to be like an evolving understanding of how AI is being leveraged both in the tools and diagnostics area. And I think about one of the necessary recipes for AI is large, complex data sets and life sciences and diagnostics certainly has that. But maybe talk a little bit about and if it relates to the sort of the Signals platform, but kind of how you're leveraging AI and where do you see that playing our business moving forward?

I would say we are continuously monitoring it. I think I'd be lying if I said up here that we have a crystal ball and we know exactly where AI is heading in this industry. I would say that our Signals team spends a good amount of time debating it and figuring out how they position themselves to take advantage of that over the next coming years. But I don't -- I can't sit here and say we have a perfect crystal ball on it.

Got it. Maybe talk a little bit about capital deployment, buybacks versus debt pay down. Maybe help us understand a little bit more about how that cash is coming in over the course of this year? And what is sort of your thought process in sort of deciding the prioritization in terms of capital deployment for Revvity over '23 and maybe in the future?

Yes. So maybe starting first from just an overall, I would say, capital allocation perspective. So if you look at what we got from the divestiture, we got roughly $2 billion, call it, an after-tax proceeds. We have about $1.3 billion of debt that's due over the next 15 months, some of which we've already started to chip away. But if you sort of net those 2 together, you're left with roughly $700 million of cash coming out of the divestiture in the short-term debt pay down. And then if you look at our free cash flow conversion over the next 3 years, call it, $500 million a pop per year, that's $1.5 billion, add that to the $700 million. You've got a $2.2 billion, I would say, of free cash that we have available to deploy over the next 3 years. Obviously, then there'll be a little bit more additional capacity we have, too. So maybe you get to like roughly $3 billion of capacity while remaining investment grade. Now in terms of the prioritization, M&A will remain our prioritization. And it's what we've done historically. It's what we're going to continue to be focused on going forward. I would say there might be a little bit more of an organic investment step up for us. We've talked about e-commerce today. We've also publicly discussed our intentions around G&P investments on the -- specifically related to BioLegend. And then -- so those are 2 areas we'll invest in. And then I'd say in terms of the other areas, in terms of debt repayment, other than the short-term debt, our long-term debt is very favorable. It's average duration out to 2031 at like 2.5% of fixed cost. We have no floating rate debt. And so there's not much I don't think we would do from a debt perspective. In terms of share buyback, we have come out and announced that we got additional authorization from the Board to do $600 million of share repurchases. We wanted to have that flexibility. We'll continue to monitor what happens from a market perspective, but our priority is going to be M&A.

Got it. And you took the CFO role during an interesting time in terms of managing all the integration of the various acquisitions and divestitures. Maybe talk a little bit about how you're managing the current integration versus your ability to do additional M&A and sort of the balance of time that you spend and how you're allocating your resources internally in terms of integration versus new acquisition opportunities?

Yes. It's a great question. I mean I think our integration strategy is also why we win a lot of deals truthfully. And if you go back and look at our track record of what we've acquired, most of it has been private companies that were founder-led, and our pitch to them is we're not going to do the Danaher or the Thermo model. Thermo being come out and rip out the management team and replace it or Danaher, here's your DBS playbook, now go and run. And so for us, we do a much more, I would say, customized integration approach and one that is like take BioLegend, for instance, rather than forcing BioLegend to integrate into our legacy processes from a reagent standpoint, we're taking our reagents business and actually reverse integrating it into BioLegend and giving them more scope and control over our entire reagents portfolio. So we don't have a set rule book on here's the integration playbook now go and run, we see what's the best way for us to create value for our shareholders. And so each one has a little bit of a different fit to it. Each one moves at different speeds. As I mentioned on some of the gross margin initiatives, those are longer-term plays that we're excited and working on now, but they're going to take a little bit longer to play out. And so I don't think our integration strategy prevents us from doing other acquisitions. We're going to be able to figure out what's the best fit for the company and make a call.

And then what is your view in terms of the opportunity set as it relates to valuation attractive areas for you in terms of public versus private? As you mentioned before, you've done a lot of private company acquisitions. I think the bid-ask spread in the private market has probably narrowed a little bit in terms of expectations versus what people are willing to pay. But maybe talk a little bit about public versus private and how you think about that from an M&A standpoint and where valuations are today versus what we were seeing a few years ago?

Yes. Yes, I do think our preference probably still is more on the private side. It doesn't mean we wouldn't do something on the public side. If the right asset came available, and it was a strategic fit and the price made sense, I think that we would absolutely put our name in the hat. But I think for us, really, the -- on the private side, what we're seeing is we're actually not seeing really the compression on the bid-ask spread. And I think we're kind of a little bit to see what happens here over the next coming months. At some point, we think that's going to have to change. But I think you're going to see a tale of 2 cities. You're going to see the private companies that are, I would say, well capitalized. They're profitable. They're growing well. And for them, it doesn't make sense to sell at something that they don't think they think is short of what they're worth. And so they'll wait and they'll just hold. And they'll wait until the public markets come back up and they'll sell again when the valuation sort of recover. I think what you will see though is for some of the companies that aren't as well funded and might be burning some cash. And for them rather than going into another round of funding, I think they're going to be more open to an acquisition.

I want to go back to something you said earlier about the difference and what makes you an attractive partner or acquirer. And you brought it up with BioLegend was a really interesting example where you have this reagents business already existing within Revvity. But then you acquire experts in reagents essentially and allow them to say, "Hey, we've got this great business, what can you guys do with it?" How does that resonate with potential acquisition targets in terms of what it allows them to do to expand their footprint and basically leverage their expertise? Does that sort of resonate really well when you're coming into making your pitch in terms of how Revvity could be an attractive place for them to be?

It does for sure. And I would say the -- actually, the other piece to that is, I think, a differentiator for us is we keep a lot of the founders of the companies that we acquire. I think if you go back and look, I think of the 10 acquisitions we've done over the past 3 or 4 years, 8 of the founders are still there. And so what they really care about when they're selling their business is that someone is going to come in and sort of rip it apart, right, and ruin what they were trying to accomplish from a business perspective. And so the fact that they can stay on as part of that journey and be a part of a larger company, and get the chance to actually take on more responsibilities like we've done with BioLegend is definitely a selling point for them.

Great. With that, we're out of time, Max. Thank you very much for joining us, appreciate it.