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

Good afternoon, everyone. I'm Derik De Bruin, the Senior Life Sciences and Diagnostic Tools Analyst from Bank of America, and welcome to our 2023 Global Healthcare Conference. Our next company up today live from London is Revvity. And with us is Max Krakowiak, CFO. Thanks, Max, for being here.

Yes. Thanks for having us.

We'll have a shaft for a bit, and then we'll open the Q&A up to the audience. But I guess to kick off, it's been a year since you announced plans to transform PKI into Revvity and 1 quarter since the formal split. Certainly, given some of the slowdown we've seen in some of the traditional tools markets that the business you spread out the same. That seems like a really good idea. I guess that said, I still have a lot of clients asking who is Revvity. And can you just give us a quick overview on how Revvity compares to legacy PKI with the portfolio conversation, you grab exposure organic growth. Basically, it's like what is the company today since we're still getting a lot of questions. I was marketing earlier this week and it came up multiple times.

Yes, sure, absolutely. So yes, a lot has gone on over the past couple of years as we have really transformed the company and become Revvity. I think if you take a step back and look, this journey probably started back in 2017 at that time, which we were known as PerkinElmer. We were predominantly AES business, which is the one we just divested, maybe 45-ish percent of the portfolio, and the remaining parts of the portfolio was split between Life Sciences and Diagnostics. And so at that point in time, we knew we wanted to get into more of high-growth end markets with more reoccurring revenue. So at that point in time, we knew we had to bulk up our Diagnostics and Life Sciences businesses. It really started with the acquisition of EUROIMMUN at the end of 2017. And then over the course of the past couple of years, we have bulked up our Life Sciences division, really focused on getting more into the large molecule preclinical research areas, and that was the acquisitions of Horizon, Nexcelom, SIRION and then ultimately with BioLegend. And then once we had the acquisition of BioLegend, we knew we had enough scale in both our Life Sciences and Diagnostics business to sell out our AES business. And so that's really been the story of the transformation over the past 5, 6 years. in terms of how does the company differ now as Revvity versus the old PerkinElmer. I would say, one, there's the financial component, which I can talk a little bit more about. But the second is then also just culturally. I think our company now is made up mostly of our recent acquisitions over that 5- to 6-year period. And those companies are, I would say, differentiated in their innovation capabilities as well as their customer service. And those two are really the north star of where we are going as Revvity, which were definitely not the strengths of the old PerkinElmer. So that's kind of the cultural change that we are now embarking on as Revvity. And in terms of the financial profile, back in 2017 when that was the composition of our business, our markets were growing low single digits and we had reoccurring revenue that was 55% to 60% of the portfolio. Now you look at our portfolio, we believe we're playing in end markets that are growing in the high single-digit range and our recurring revenue is about 80% of our business. So a lot of change crammed into 5 or 6 years, but we are incredibly excited about our new company.

Great introduction. We'll follow up on the financial metrics in a bit. So any opening comments like want to recap how Q2 unfolded across your Canada markets and what you've seen so far in Q3? Any signs of improvement or softening since we basically reported?

Yes. So we typically do not give inter-quarter guidance. I'm not going to break that trend today. So I can't comment on what we mentioned as a result of our second quarter earnings result. At that point in time, we did update the full year guidance to 4% to 6%. I think if you look at that full year guidance in comparison to the rest of the peer group, it is differentiated. And I think when we look back at this as we execute through the second half, I think that will continue to be the trend for Revvity is that we are differentiated from the rest of the peer group.

And so that 4% to 6% growth rate, what's your underlying market growth assumption I assume you're growing faster, that 4% to 6% is above the market.

That's right. Yes. I mean I would think if you say we're 4% to 6%, I think we're probably growing a couple of hundred basis points above market, so that would imply something around a low single-digit market growth rate.

So that gives the point of when do you sort of like have expectations of when things will pick up?

Yes, it's a tough question. I don't think anyone has a crystal ball in terms of when things will return until we really find out the root cause of why pharma biotech spending has slowed down across the large pharma customers, then we can really maybe start to talk about a recovery. But for right now, we're not hearing a smoking gun or finding a smoking gun or hearing a specific answer from our customers as to the exact reasons.

I mean the other big driver is obviously China being a big point of this. And China's been a huge tailwind for the life sciences sector over the last few years. I think historically, PKI was 18% of sales from China or faster. I guess what's your exposure to China in total and then in Diagnostics and Life Sciences? And I think is there something that you think we're just seeing a cyclical downturn in China? Is there something more structural at work?

Yes. I would say, even for China, it's different for us versus the rest of the peer group. And I think you'll hear that theme throughout today is trying to clearly generate that we are different. So if you look at China, right, I think there's been some sell-side research reports, that say Revvity has 17% of exposure and on that bar chart, we appear to have the upper exposure amongst the group. However, our composition of what we do in China is very different. So of that 17% of total company revenues in China, 10% is Diagnostics and 7% is Life Sciences. In the Diagnostics space, that is a little bit more insulated from what is going on from a macro perspective. That is required healthcare for the general population of China, whether it be in reproductive health or immunodiagnostics, that business is going to grow in the low double digits plus this year. We expect that business to continue to perform well over the mid- to long-term outlook, again, because it's much more insulated from the broader macro concerns that are driving China discussions right now.

So a lot of those lines, you -- some of the immunodiagnostic like EUROIMMUN is elective. Are any implications for the ongoing anti-corruption issues? I mean, you mean from our channel checks, it feels like that the social elective diagnostics may be a little bit more hesitant right now? Are you seeing anything like that?

Yes, maybe just clarify one thing. I wouldn't say that our testing is elective. It's not acute, meaning it's life threatening, but it is still testing that needs to get done. And so from that standpoint, as we look, particularly, again, around the anticorruption. What we're hearing from the commercial teams is that is focused on the tendering process with hospitals around high-ticket CapEx-type tenders. If you look at our Diagnostics business in China, more than 90% of it is reagents and assays, that is not in the scope of these large tendering process that are getting the big scrutiny from the government officials, et cetera. So it's a fluid situation. And although I'm not saying we're completely immune, but it is a fraction of a fraction of what we're talking about for our China diagnostics business.

Got it. And I mean, some companies have also flagged local competition. Is there any -- like that? I mean, your PerkinElmer acquired a number of local Chinese businesses during that time period prior to the spin. What is your sort of like China manufacturing footprint? What is the competitive landscape of domestic companies?

Yes. So I would say from a local competition standpoint, we're not really seeing a fringe upon where we have really differentiated technology. So I think on the life sciences standpoint, we have differentiated technology with our high-tech reagents, our high-tech instrumentation. And even on the Diagnostics side, if you look at what we do around autoimmune, which is in our immunodiagnostics business, those are not simple assays. So those require a high degree of science and technical specificity that really -- there is a massive gap between us and any of the local competitors. So much so that we actually have some of our customers asking us not to manufacture the product in China and to keep it offshore because it changes their purchasing behavior if it is not a locally manufactured product, which is wildly different than what our assumption would have been 3 or 4 years ago. So when you look at what we actually manufacture in China today for China because we don't export anything out of China, it is predominantly in the reproductive health area, where it is a benefit for us to have the local manufacturing.

Got it. So assuming that we're -- the markets will rebound at some point, when you did -- when you announced the separation, the initial guide was for 10% plus organic sales growth. I mean, given all the market changes, given everything is going right now, are you still comfortable with sort of that from a long-term perspective?

I think when you put that in context of what we believe the underlying market growth rates of where we play and what they should be that is still our mid- to long-term assumption. Now obviously, a lot is going on right now from an end market perspective, and there's definitely some volatility and different dynamics going out. But again, we were very conscious in the end markets that we chose and wanted to be in as a result of our new portfolio. And those were naturally more faster-growing end markets. And so we'll continue to see how the market evolves here, but I think we continue to be encouraged by the specific end markets that we chose to play in.

Got it. So let's go more here. I got a bunch of follow-ups, but let's got over near-term [indiscernible] I'll go out from there. So you took down by 300 basis points, the core growth guide for this year. That's -- but you said that there was 100 basis points of stronger immunodiagnostics, but there was a 400 basis points hit from biopharma, of which 100 that came from China. Can you sort of unpack that remaining 300 basis points of where the headwinds were.

Yes. And so the way I would probably think about the 400 basis points of pressure, China was more just a geographical subset of that. But the way I would actually talk about the 400 basis points is you make geographically agnostic, and I'll talk more a little bit about the different businesses. So what's really driving that 400 basis point drop is split between our life sciences, the instrumentation we sell into life sciences customers. It is the software business that we sell into life sciences customers. And then it is also related to the technology/licenses agreements that we have had in the pipeline for a while with our Life Sciences customers. Now those three dynamics are all based on CapEx-type purchases from the large pharma customers, which is really where we are seeing the most cautionary spending levels. And so when we looked at it in the guidance for the second half, we really wanted to take off anything that was dependent upon those big-ticket items from our pharma customers. So in our software business, for instance. We didn't want to have in there any go get on any new commercial deals that we have in the pipeline. Same thing with our licensing, our partnership agreements we have. We wanted to take those out of the assumption for the second half. And then yes, between the first quarter and the second quarter, we did start to see a decline in the instrumentation and looking at our July order book, we thought it was more appropriate to bake that in and assume that continued for the second half.

Got it. Speaking of the software business, I mean, frankly, I haven't thought much about it since you did the [indiscernible] Spotfire deals way back then. Can you go a little bit deeper into what your software offerings are [indiscernible]? Because as I said, I don't think it's something that a lot of investors have paid attention to.

Yes. And I mean partially, that's been our own fault, too. I was not having it as well known out there because when we were the combined company with AES, it was such a smaller piece of the portfolio, it never really got the airtime that it deserved. But I would say we are incredibly enthusiastic about the future of our software business. And so it's roughly a $200 million revenue business for us. It has operating margins that are very similar to our overall life sciences business, which is in the upper 30%. And I think most of its competition is actually privately owned companies. And so there's not as much comparisons out there, but we think we are the predominant player in the space. And so what we offer is we are focused on free clinical research areas with the large pharma and biotech customers. But predominantly, our offerings are based on small molecule. So when we look out to the future, we have a couple of different areas for the future of this business. One, our customers are begging us to do the same thing on the large molecule side in terms of the software offering, which we have products in the pipeline for. The second piece is expanding our customer reach, not only down further in the pharma food chain in terms of moving from large down to the mid- and small-sized companies, but we also have the opportunity to play a little bit more downstream as the preclinical research starts to work yourself into the clinical trials with the CROs, et cetera. So that business has a ton of runway in front of it. And what we really offer the customers today is 3 different products. One is we have something called ChemDraw, which is basically the drawing of the compound that the scientists are working on. We have our lab notebook, which is basically like the ERP for scientists. Think about it as basically documenting the 20 steps of your experiment and documenting basically the results of each step. And then we have, as you mentioned, Spotfire, which is really our analytics platform, which sits on top of it, allowing the customer to analyze the data from their experiment. So that's kind of our product portfolio. But again, I think we are hopefully going to be continuing to talk more about this business as we are very excited about its long-term potential.

And does -- I guess there are a lot of -- to your point, I mean, there are a lot of competitive offerings there and a lot of companies are doing. I guess how does sort of like pharma make a decision on purchasing for that? Because I'm just not -- I say it's never been clear for me how they go in and choose like which electronic notebook or which one they're going to do because there's just a lot of different offerings on this.

It is. But if you think -- so we probably have 95% penetration in the large to mid pharma. And once you kind of have that scattered across the globe, to up-end the scientists, user interface on a day-to-day basis is a very significant hill to climb. So for our business, we have a 99% renewal rate. Generally, when we get a renewal, we also have 6% to 7% upsell as part of that renewal. So it is a very sticky business once you are in there. in terms of if you are a new company you're trying to evaluate what type of offering you have, one, depends on how big of a need you have, right? Are you talking thousands of labs across the globe or are we talking a couple, right? One thing that's different for us when they're evaluating that is we are furthest along in the SaaS journey of any of our competitors. We started 4 or 5 years ago. Most of our competitors are starting that journey today. So we have a better SaaS offering, which is more akin to the small and midsized pharma companies. Another thing that they will look for is what is the interfaces between your different modules. Since most of ours are homegrown applications, we have very good connectivity between our software modules versus some of our competitors who have built up through acquisitions, they do not have one suite that they can offer to a customer with that all integrated together. So that is another differentiator for us and a big key as to when a customer is evaluating the purchase decision.

Got it. The -- we briefly mentioned biopharma, but I want to go a little bit deeper into that. I mean what are your thoughts on just what is sort of like driving the conservative spending right now? And I guess, I mean you do still have liquid handling, high-content screening tools, mass specs or things like that. But I mean are those more or less -- I guess when you sort of listen to your competitors and sort of this is, I mean, is that more or less at risk from spending? I'm just not sure. I don't have a really good sense of like where pharma isn't really hiring where they were like buying those tools going into the pandemic. Do you see outsized growth in those tools and that this is maybe some hangover. Just anything you get sort of like [indiscernible].

Yes, I mean -- so maybe answering your first question in terms of like what are we hearing as the reason I mentioned a little bit earlier, we don't really have a smoking gun. The most common feedback we hear from the customers is the CFO said no, right? And so there's additional layers of approvals, et cetera. We're not seeing orders being canceled. We're not seeing a slowing of our pipeline. There are still very robust discussions with the customer. But right now, it's kind of stuck on the later stage of the commercial discussions because there's either additional approvals or not the desire to spend cash. And so from that perspective, my best hunch would be that everyone enjoys getting 5% of their money sitting in the banks, and it makes it much harder to clear returns on additional CapEx of the business cases that are being offered by the purchasing team. That would be my best guess. I don't have an exact answer for you. In terms of as we look at our overall intermediation portfolio, particularly on the Life Sciences side, I think it's important to delineate what we are selling versus the broader group, right? So you mentioned things like mass spectrometry, right? Let's talk about chromatography -- liquid and gas chromatography. We divested those product lines. And so what we are selling to our pharma customers is really around, I would say, maybe 3 product families in terms of instrumentation. You have in vivo imaging, you have high content screening and you have the cell counting, which is really on the back of the new -- the recent acquisition of Nexcelom. For those 3 product families or those end markets, we are the predominant market share leader in all 3 of those and we are selling specific high-tech innovation for very clear scientific outcomes. These are not generalists equipment. And so in that sense, I do think that we're still being impacted, but we are being impacted less than the broader peer group when they're talking about instrumentation. As you see in our full year guidance instrumentation for us this year, we expect to be flat, which I think is above the broader peer group in terms of what they're steering at from an instrumentation standpoint.

Got it. Let's talk about some of the specific business segments. How do you think about the reproductive health business? I mean birth rates in many parts of the world are declining. How should we think about that impacting the business? And I guess at one point, there was a lot of focus on sort of like the genomics based prenatal testing, not a basic prenatal testing business. I mean is Vanadis still a growth driver for the company?

Yes. I mean, so if you start more broadly, reproductive health business roughly $500-ish million in revenue. The biggest component of that is the neonatal testing business. As you mentioned, birth rates have been declining globally on average over the past 4 or 5 years. Obviously, that has an impact on our business. But the fact that our growth rate CAGR over that same time period is low to mid-single digits despite birth rates declining globally mid-single digits I think is a testament to the power of our portfolio. And really, the way we're able to drive that positive growth despite the declining birth rates is because of, one, our geographic expansion; and two, our menu expansion and our continued innovation around rare disease testing for new borns. And so are we agnostic to what's going on from birth rates? No. But we expect that business to continue to grow positively in the mid- to long term. In terms of your secondary question on sort of the Vanadis and the NIPT prenatal testing, it is a much smaller part of our overall portfolio. Vanadis has really strong growth rates, but it is on a much smaller base. I think we continue to be excited about the potential of that differentiated technology, but we're going to continue to kind of see how the next couple of years for that platform plays out.

Got it. We get an update on Oxford Immunotec. We've not really heard much about it in detail since the acquisition. How is it differentiated from QIAGEN? And how should we think about other companies there's been some noise about Roche getting to the latent TB testing market. So how should we think about that evolving?

Yes. So I'd say maybe a couple of things on the Oxford and TB market in general. So one from an end market perspective, TB continues to be the #1 killer, right? COVID overtook it for a little bit period but TB is still one of the most deadly diseases out there. And so it's an end market that's actually growing 10% on average. So we continue to be very excited about that market. When you look at our product offering versus QuantiFERON with QIAGEN being the biggest competitor, I think there's a couple of different dynamics to understand. One is actually from a differentiation standpoint, we have the most sensitive assay. Because we have the most sensitive assay, we're -- our customers are actually eligible for higher levels of reimbursement on the test, which is very different than QuantiFERON. The challenge that Oxford has always faced is that it has a lower level of automation in the QuantiFERON. And so we came out with our first wave of automation innovation, I think about a year ago. There's going to be continued ways of automation. And as we close the gap on automation, our more sensitive assay as well as our higher reimbursement is going to prove to be a much bigger differentiator for us particularly in the U.S., which is where we are the most underpenetrated. If you look outside the U.S., we're probably the #1 player and QuantiFERON is #2. The challenge is the U.S. market is 50% of the TB market, where QuantiFERON currently has a much stronger position.

Got it. And entries from Roche and these other players.

I think it's going to be hard for them to match the sensitivity of our assay.

Got it. You mentioned COVID. You had a very nice tailwind from that. It certainly gave you a lot of cash to go out and sort of help transform the business. Beyond that sort of tailwind, any lasting benefits to PerkinElmer?

Yes, I think Revvity.

Sorry.

I know, I know. I do it myself sometimes too. I think the biggest trail on effect for us is really in our sample prep and lab automation business. So if you look at what we refer to it sometimes is our applied genomics business. If you look at that business and its market position in pre-COVID, we were probably the #6 and #7 player. I think as a result of COVID, we are probably now the #3 or #4 player in the space. And what really was eye opening to our customers is because we had the most sensitive PCR tests in the market, it allowed us to pull through more of this sample prep and lab automation portfolio and what our customers realize is we have the best-performing extraction kits on the market. And so that has really opened their eyes to our portfolio. And given that, that is a much more recurring revenue type assay, and we've built up such a large installed base from COVID, that will continue to be a tailwind for us. The headwinds we talked about in that business is more the normalization on the instrumentation side, but our reagents continue to grow well into the double digits really on the backbone of really customers understanding the capabilities we have from an extraction standpoint.

Got it. Let's go on to Horizon next? We've heard some drug developers and CDMOs setting a tad more cautious on the cell and gene therapy market over the last 6 to 9 months. Can you tell us sort of how Horizon fits into the cell and gene therapy landscape? And how the business performing and sort of like the outlook for that segment?

Yes. So I don't think we give broader updates on like the cell and gene segment overall. But I would say that we are still incredibly excited about the power and differentiation from a technology standpoint of the Horizon business, and it continues to perform well against our expectations we had at the time of the deal model. And I'll give you a couple of examples of that. So one, hopefully you saw the press release related to the base editing licensing technology that is on the backbone of the Horizon technology. And it's really just starting to scratch the surface of what we believe will be a very robust pipeline for our base editing technology, which there is nobody else in the market today who has that technology and is able to license it to the pharma customer. So we continue for that to perform well. The other dynamic I'll talk about because you mentioned it a little bit in terms of the end market dynamics and what some of the customers or the pharma players are saying, I think what you'll end up seeing in the cell and gene therapy side is, remember where we play. We play in preclinical research, which is really the top part of the innovation funnel for the pharma customers. We don't see that really where the crunch is going to be. We believe they're going to continue to invest and find areas of innovation around cell and gene therapy because that is the future of where everyone is trying to go from a therapeutic standpoint. What you're probably going to see is once you get more downstream in the funnel, right, is for things that you want to enter into clinical trials, that funnel might get more narrow in terms of what they try to push through. That is also where they start to feel the biggest increase from a cost perspective in terms of moving their therapeutic through the clinical trials. So that might get tighter, but we don't play down there. We play at the beginning of the funnel really around the hub of innovation around cell and gene therapy.

Got it. And let's round it out with BioLegend. How has that been going? I mean has it delivered sort of like the mid- to high-teens growth that you expected? And obviously, there's -- we've got a lot of questions from investors on how BioLegend compares to Abcam since that's, obviously, the news with Danaher making a bid for it. Can you just do a quick compare and contrast of what that is.

Yes. Sure. So I would say maybe stepping back firstly you asked how it's performing, right? Obviously, the life science market overall is in a very different space than when we acquired the company in the summer of '21. However, with that being said, our reagents growth overall as a company this year is going to be low double digits, that's embedded into our guidance. BioLegend is a massive component of our overall reagents business. So although the market might be a little bit softer than what it was a couple of years ago, that business continues to perform very well.

Got it.

Now to answer your question in terms of the comparison to Abcam. I'd say there's a couple of big differences. One is that everything that BioLegend does from a content development standpoint is made in-house. That is not true for the rest of the competition. The rest of the competition will distribute other vendors antibodies into the market. BioLegend does not do that. Everything is made in-house, which helps both from a margin profitability standpoint, but also the speed at which we can deliver products to our customers. Second thing I'll say is that BioLegend's value proposition is that it has the most innovative science from a reagent antibody perspective. The second is that, again, they have the fastest delivery time and best on-time delivery to the customers. And the third is the go-to-market strategy. We are not a vendor in the eyes of the customers, we are consultative sellers or partners with the pharma customers. So to give you like data points on that, the BioLegend team does not like to be called sales reps. They are field application scientists. Most of them have PhDs and masters. These are not sales reps. These are true scientists sitting in the labs with the customers, trying to help them solve cutting-edge scientific challenges.

Got it. Since you're a CFO, I have to ask some CFO questions. So sticking to capital allocation, you've got $1.3 billion in relatively low interest rate debt is coming due this year and next? I think $500 million this year, $800 million next year?

That's right. 500 [indiscernible] tomorrow.

Yes, Okay. You -- I mean you say it yourself -- companies are getting 5% of cash right? So how should we sort of think about net interest expense for the remainder of '23 and then going into '24?

Yes. I think our guidance right now for '23 implies about $60 million to $65 million of net interest expense. I think as you look on to it next year, right, we won't have the $500 million that we're currently paying tomorrow. Additionally, we are still paying some trailing taxes related to the recent divestiture. And so we will have less cash available to be reinvested next year. So I'd probably think of that $60 million to $65 million number, probably increasing maybe by 30% year-over-year as you look out to 2024.

Got it. What about additional acquisitions? I mean, [indiscernible] pay down. It's like what else is attractive that would fit with the portfolio?

Yes. I mean I think when we look at M&A, right, the first question is, is it a strategic fit? As I mentioned, the North Star for us is really around being on the cutting edge of science around being able to sell high-value products to our customers and being a true partner to them. So the first thing we look at is the strategic rationale. The second thing that we evaluate is the financial profile. Now right now, our company -- our new company Revvity and the financial profile, that's a little bit more challenging of a hurdle rate than what it would have been for the PerkinElmer goal. So that's not to say we wouldn't do a dilutive deal, but it makes it much harder to find the right strategic fit that also is comparable to our new financial profile. So that hurdle has gotten a little bit more challenging. In terms of what we go after as a company, I think our track record shows that we generally tend to like the privately owned founder-led companies. We think that, that is a sort of our sweet spot for M&A purchases. Again, not to say we wouldn't do other things. We've done some public company acquisitions in the past, but that's really always been sort of our sweet spot from M&A. And so if you compare that with it being our sweet spot of M&A, plus the fact that, as I mentioned, the financial hurdles we're looking for, if you're a privately owned founder-led company and you have great profitability, you're agnostic to what's going on in the public markets. You're agnostic to the fact of what's going on with interest rates. You were just told a year ago, your company is worth X. It's very hard to go and convince that owner that now their company should be -- is valued on why just because the public markets and interest rates have changed. If their company is profitable and it's continuing to grow, they will just wait for you to pay for what they think is the appropriate valuation for their company. So we'll continue to be active in terms of our M&A pipeline, but it is still -- I wouldn't say -- it's still a relatively challenging environment for what we are particularly looking for, for our company.

So the 13% to 15% EPS growth, you were talking about the time of separation, was that inclusive of capital deployment?

That was not inclusive of capital.

Got it. Let's talk a bit on margins. Revvity is guiding to -- guiding to roughly an operating margin or 30%. About 29% this year, but that's with market headwinds. How should we think about margin expansion exiting. Is that 75 to 100 basis points of expansion still a reasonable framework?

Yes. The 75 to 100 basis points is still what our mid to -- or midterm outlook is from a margin expansion standpoint. The other piece I'll just mention on that is, when we came into this year and said 30% operating margins, there are 2 key top line assumptions with that. One was 9% organic growth and second was $100 million of COVID revenue. That COVID revenue came at very favorable pull-through margins for us. So the fact that, that 9% went to 4% to 6% and the $100 million basically went to 0 and the fact that our operating margin only went from 30% to 29% when it really should have been down more towards 26%, 26.5%, I think it shows the underlying power of our new company and the margin profile we have. And so I think we continue to have confidence in our ability to deliver the 75 to 100 basis points.

Got it. Any questions from the audience? If not, I guess if the slower environment lasts for longer, do you have more cost efficient -- more cost levers to pull in the business?

I would even say for this year, what we've done from a cost perspective, we are not emerging by any means the future of the business. I think we've done some general belt tightening in order to ensure we protect Mars as much as we can, given the current market slowdown. But we are not foregoing critical investments for us in the future, whether it be around GMP, e-commerce, et cetera. We continue to invest in those areas. So I think it would really depend on how soft we're talking from a market perspective. I think it's similar this year, maybe you might be close to maybe to 75 basis points. On the flip side of that, if there's a huge rebound in the market next year, I also wouldn't anticipate us blowing out the 100 basis points. I think there are some discretionary spend that we do want to put back in the business. So I think kind of if we're somewhat in the similar range we had this year, I think 75 to 100 basis points is still the appropriate range.

Got it. That's what I was looking for. So we are coming to a close now. Any -- my final question is always what doesn't The Street appreciate about your company with [indiscernible] about Revvity?

Hopefully, you heard it in my commentary today, I try to use the word different as much as possible. I think that we are different in a couple of factors. One, I think we're different in the sense that we do not try and play in commoditized offerings to our customers. We are very intentional in playing in high-value, high technology, differentiated offerings to our customers, whether that's around reagents, whether it's around our life sciences instrumentation, whether it's around the disease areas we play in diagnostics, right? We don't play in general, respiratory, infectious disease. We are focused on much more specialized end markets which require a high degree of technology whether it be around TB, autoimmune, et cetera. So our whole portfolio is based on the notion of being in differentiated technology. The second is we really do have different goal. By the end of this year, we have differentiated financial performance than the peer group. We are not immune to the end market environment, but we are less impacted on the market environment than I think the rest of the peer group that I think we just need to continue helping folks understand how different we are as a company. And so that's what Stephen and my job is.

Great. And with that, thanks, everybody. Thanks for listening. Thanks, Max, for being here, and have a good conference, everyone. Thank you very much.

Thank you.