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

[Presentation] Good morning. Welcome to Revvity's 2024 Investor Day. I'm Steve Willoughby, our Head of Investor Relations. It's so good to see so many of you here in person in San Diego today as well as everybody who's joining us online. First, I wanted to mention a few disclosures as we are going to be making some forward-looking statements today, which are based on our current estimates and projections, which you should only rely upon as of today as our estimates may change. I'd also point you to our investor website, our recent SEC filings, our recent earnings press release for additional disclosures to be aware of. So a couple of ground rules for today's presentations. First, all of the financial figures and metrics you see in today's presentation are based on our current 2024 guidance, which we provided back on November 4. As you may have seen in a press release earlier this week, we announced that starting next year, the majority of our Applied Genomics business is going to be moving into our Life Sciences segment. So the presentations today are being shown under this new operating and reporting structure. And so in short, it's our 2024 estimates and assumptions but under the new operating structure that we'll begin working under next year. So I think we've got a great day for you today, one that I hope you come away with a much better understanding of who Revvity is, what makes us unique and why we are so confident about our future. In a moment, Prahlad will be up to give an overview of the business, highlight some of the operating metrics we've been working on and give you a few key things to focus on in the future. Next, Gene and Craig will introduce our Life Science segment as well as our new Life Science Solutions business. From there, Kevin, who runs our Signals Software business, will share some of the innovations that he and his team are working on right now that we expect to bring to the market over the next few years. After Kevin, we'll reconvene. We'll do a session of Q&A, and then we're going to take a 15-minute break. Coming back from the break, Yves will introduce everyone to our Diagnostics business. He's going to explain to you why our Diagnostics business is different than other diagnostic businesses you might be familiar with and why we think that's a good thing. Next, Madhuri, our Chief Scientific Officer, is going to talk to us about how medicine and science are rapidly evolving and how Revvity is uniquely positioned to capitalize on these trends. And last but not least, Max will bring it home. Max will give an update on the progress we've been making on our operational initiatives and what that means for our financial future. So overall, I hope you come away from today's presentations with a better understanding of Revvity and why we are so confident in our future. I also hope you come away with a greater appreciation for the significant impact Revvity is having on the advancement of science, medicine and diagnostics and how those advancements are directly impacting families and individuals. Before I turn it over to Prahlad, I want to introduce you to the Wallace family, so you can hear how our scientific advancements are directly impacting their family today and in the future. [Presentation]

It's stories of kids like Nala and Teddi that motivates us to do what we do on a daily basis. However, for us, the inspiration comes from the fact that we know that there are 100 million new newborns every year that are not screened at birth. If you do the math, that means we could save 100 newborns every day if you were just to screen every newborn. That is what inspires us. Good morning. My name is Prahlad Singh, and I welcome you to sunny San Diego. For those of you who are here in person, hopefully, your trip was uneventful and smooth. We are really excited to share with you today our story of how we are revolutionizing science and transforming human lives with groundbreaking innovation. The birth of Revvity was based on the foundational purpose of expanding the boundaries of human potential through science. Whether that means working side-by-side with scientific researchers in developing groundbreaking therapeutics for complex diseases, or working with lab personnel in screening nearly 40 million babies worldwide annually for life-threatening diseases. Today, we hope to show you how Revvity has evolved as an innovative life sciences and diagnostics company with unique portfolio positions in leading high-growth end markets, how our recurring revenue mix is now 80% coming on a recurring basis with compelling growth opportunities. You will hear from Madhuri today that how we are becoming more of a strategic partner to researchers as we continue to close the gap between preclinical and clinical. And Max will tell you how we've transformed our portfolio and the impact that it has had on us being able to provide a differentiated financial profile. And our focus on execution will continue to result in meaningful capital deployment opportunities as we look into the future. To give you a sense of who we are as a company, we are an innovative life sciences and diagnostics company with roughly $2.8 billion in revenue. A majority of our revenue still comes from the Americas, and as I mentioned, 80% of it is now on a recurring basis from consumables, software and services. This portfolio now uniquely -- is uniquely positioned in high-growth end markets of Life Sciences and Diagnostics. In Life Sciences, we provide know-how, reagents, instruments, software and services today, primarily enabling preclinical R&D discovery and development. On the Diagnostics side, we are evolving from providing kits and assays and instruments to contiguous workflows, whether it's for newborn screening or in immunodiagnostics and looking into the future of how we partner in developing companion diagnostics with researchers. As Steve pointed out and as we reported in our press release earlier this week, we are bringing our Life Sciences Solutions together as a business unit to be more in sync with our operating model and strategic alignment. Our end customers continue to be pharma, biotech, and academia and government on the Life Sciences side. And on the Diagnostics side with immunodiagnostics and reproductive health, we serve public health labs, reference labs, hospitals and clinics. The portfolio that we have now is ready to support the global megatrends that we've all been experiencing, whether it's around advancements in cell and gene therapy, precision medicine, the development of companion diagnostics, especially for rare and complex diseases, or more so as we look into the future, the utilization of AI-enabled solutions. For those of you who have been observing our journey over the past 7 years or so, we'll recall where we started when 1/3 of our business was Analytical, Food, and Enterprise Solutions, 1/3 in Life Sciences and about 1/3 in Diagnostics primarily focused on reproductive health. Over the years, as you know, we've transformed our portfolio by acquiring leading capabilities and scientific expertise, both on the Life Sciences side, primarily for large molecules and on the Diagnostics side with autoimmune allergy, we've continued to expand our TAM, with the 2 premier acquisitions being BioLegend and EUROIMMUN. We also then reached a point in our portfolio where we divested the Analytical business and Food and Applied market along with it and the PerkinElmer brand, which gave us an opportunity to give birth to Revvity, which today, we strongly believe stands in a category of one with enhanced scientific expertise, a very high recurring revenue mix and leading market positions in the categories that we play in. This has also transformed our revenue mix and financial profile. And one of the main reasons is the markets we play in, when the legacy business, the markets that we play in typically grew in the low to mid-single digits. And the markets that we now play in, in a normal market environment, should be growing mid-single digits. Our operating margin has grown from 20% to close to 30%, and our adjusted free cash flow has gone from 70% to more than 85%. So we do have high quality of earnings and a very differentiated financial profile. However, our transformation doesn't stop at that, and it will continue as we streamline our segments and enhance our operating alignment. As you heard earlier, we are shifting the Applied Genomics business more into the Life Sciences Solutions and the creation -- with the creation of the Life Sciences Solutions business unit. That will now include instrumentation, reagents and services. This aligns more with our new operating model and allows us to execute on what our long-term strategy is. It also gives us an opportunity to enhance the commercial and operational synergies that we see now by bringing all of this under one umbrella. But more importantly, this does not in any way change our LRP assumptions. As Steve pointed out, this operating and reporting structure will be effective in 2025. The other thing that it also does for us is it better enables us to continue to bridge the gap between discovery and cure. As most of you know, primarily, our focus has been more so on the discovery in the preclinical side of the business. We continue to want to be part of the journey of the researcher as they take the drug towards clinical and commercialization. And this is where we are continuing to focus on specialized areas that require innovation. On the Diagnostics side, our focus is from moving on by continuing to provide the reagents, assays, and instruments that we do on immunodiagnostics and reproductive health, but more so how do we partner in developing companion diagnostics for precision medicine for our lab customers. So how do we do it? Our focus is unique and differentiated in 3 specific ways, which I'll walk you through. One is our approach with our customers in the market. Two is the product portfolio that we bring to bear. And three, the result of it, the market and financial position that it brings to fore. And as I've shared with this with you earlier, while our focus has primarily been to date on drug discovery, preclinical research and development, we want to be a part of the journey with our researcher as the candidate moves from early discovery towards commercialization. And towards that effort, our partnership is based on what we provide to them, whether it's technical know-how, IP, reagents, consumables and then as it moves into the clinical side, if there is a need to develop companion diagnostics. All of this is with the intent that it will drive additional upside for us versus underlying market. Let me give you a few examples of what that means and what we mean by noncommoditized offerings. Today, you will see here on the BioLegend campus of how we are providing novel antibody and specialty reagents to our customers. You'll hear from Kevin when he comes up and talks about the Signals business, of the comprehensive and scalable suite of data management solutions and workflow that we are providing to most of the pharma/biotech customers. And on the Diagnostics side, if you look at the newborn screening portfolio, from sample collection to providing the data back to the institution or to the pediatrician, we have a full contiguous workflow under a regulatory environment that is unmatched in its breadth and depth. And on the autoimmune side or more generally on immunodiagnostics, the broad menu of autoimmune and allergy tests that we are bringing to fore. And all of this are supported by a differentiated automated solution, whether it's with western blot, ELISA, chemiluminescence, or any modality as such. So what is the result of all of this and what do we foresee from a financial profile perspective? We strongly believe that this will continue to drive faster growth and profitability. On the immunodiagnostics and software side, we expect these product portfolios to continue to grow in the 9% to 11% range. This is where a majority of our scientific innovation is coming out of, and most of this revenue profile is on a recurring basis. The newly created Life Sciences Solutions business, we see growing in the 6% to 8%. Again, this is where the reagents business continues to provide innovation and drive. But the one aspect that also plays to [indiscernible] is our instrumentation business, the use -- as we continue to incorporate AI and other automation and machine learning in it, whether it's around in vivo imaging, single cell analysis, and you will see this when Kevin Quick when you go on the tour here today as to the impact that it's having on our customers. And our reproductive health business. Despite the pressure that we've seen on birth rates, that market is going to continue to outperform. And we will continue to invest in that business because that is really -- comes back to the vision of what we are trying to do and why we are doing it. So in summary, we reaffirm our long-range financial targets of 6% to 8% organic growth in a normal market environment, and none of the underlying assumptions have changed here. But nobody can do this alone. We are supported by a proven leadership team, most of whom you will hear from today on various business segments. But there are many others who are in the audience, and hopefully, you will get a chance to intermingle with them as we go through the day's agenda. So in summary, our focus, as I said when I began today, is on expanding the human potential through science. And our focus is that how do we continue to increase and strengthen our presence in the key high-growth end markets of Life Sciences and Diagnostics? How do we focus on accelerating innovation? How do we become a partner rather than a provider to our customer? And all of this while we stay focused on implementing our operating model because there is still a lot of opportunities for us to drive operational efficiency if we continue to execute strongly as we have. But at the end of the day, our real focus is that we want to drive meaningful innovation. We have seen the impact that it has on human lives. And hopefully, you'll continue to see and experience that today through these several examples that you will hear. Thank you for your time, and with that, I'll invite Gene Lay to come up on stage. Gene?

Thank you, Prahlad. Good morning, everyone. Welcome to beautiful and sunny San Diego BioLegend campus. My name is Gene Lay, Senior VP of Life Science, joined Revvity through Revvity's acquisition of BioLegend in 2021. I founded BioLegend in June 2002 and served as the President and CEO and the Chair of the Board. Prior to founding BioLegend, I co-founded PharMingen, a leading life science research reagents company in 1987. The company was acquired by Becton, Dickinson and Company, BD Biosciences in 1997. And I continued to serve as the VP of Operations 'til 2002 when I decided to go out on my own and shift my focus to starting BioLegend. I have created 2 very reputable and successful companies, PharMingen and BioLegend. In 2016, I received the EY Entrepreneur of the Year Award in San Diego in Life Science and was a final -- National Finalist in the same category. I have received 2 honorary doctorate degrees and a masteral degree in microbiology and immunology and a Doctor of Veterinary Medicine degree. In 2023, I founded the Gene Lay Institute of Immunology and Inflammation of Brigham Women's Hospital, Massachusetts General Hospital and Harvard Medical School with a mission to translate the scientific discovery to therapy. I'm very excited about the transformation of Revvity. Why am I excited about the transformation of our Life Science business? Because we are uniquely positioned to help accelerate the future of health care. I would now like to introduce you to our Life Sciences segment. It is a $1.4 billion business principally focused in offering specialized preclinical offering to help customers advance their work and to drive new innovations. Approximately 85% of its revenue come from our newly formed Life Science Solutions business, which consists of all our reagents, consumables, instruments, service, technology and technology and licensing, which Craig will give a lot more in a moment. This is a business that has a considerable market opportunity with an estimated $30 billion TAM that we expect to grow in the mid-single digits over the long term. As you can see, this is a business which has a strong profitability profile with overall operating margins in the low to mid-30s with good potential to further improve this going forward. This is a business which strives of partnering with our customers to drive innovation. We continue to expand into adjacent and downstream markets for additional growth. Before handing it over to Craig and Kevin, who will tell you a lot more about our Life Sciences business, I want to show you how our solutions are having a direct and personal impact on the advancement of science and the treatment of disease with our work with the Michael J. Fox Foundation and their efforts to find a cure for Parkinson's. [Presentation]

So for that scientist in that video and thousands of others like her around the world, that's why we come to work here each day. I'm Craig Monell. I'm the Senior Vice President of Reagents for Revvity. About 30 years' experience in the life science tool space, and I joined Revvity through the acquisition of BioLegend in 2021. I wanted to talk to you today about -- a little bit about how we serve the biomedical research community, and we do that in a number of ways. First off, we have a leading portfolio of reagents and instruments. The reagents are serving the whole research pipeline, from basic research through translational trials or translational studies through clinical trials. Next, we continually develop new products at a very rapid pace and then introduce them into the market. And the reason we do that is to meet customer requests for new markers and new assays. We also see a chance for additional growth within our space by looking at new areas of science. Our internal capabilities allow us to address those very easily. We have a lot of technology internally. And then we also look at additional adjacent markets that can make use of materials that we have, just with a slight twist. Finally, because we produce our instruments, reagents, software and other technologies internally, we have the ability to bundle these all together for complete solutions. And this may be sold to customers off-the-shelf or if they need something different, we can customize it for them. So I want to look at that business. You've already heard from Prahlad and Gene about the $1.4 billion in the Life Sciences segment. 15% of that comes from software, and Kevin Willoe is going to talk to you about that in just a little bit. So I'm going to focus on the other $1.2 billion. The growth in this is coming primarily from the reagents and consumables, and those historically have grown in the high single-digit range. The market we're looking at has a $25 billion TAM and typically grows in the mid-single digits. So breaking that down further into reagents and instruments, this year, we're looking for about $700 million from the reagents. Of those, 55% come from antibodies, antibody conjugates and other antibody-related derivatives, another 40% from other research reagents and 10% from our technology and licensing efforts. Looking at the instruments, we're expecting about $0.5 billion this year. And that's contributed from our main focus areas of sample prep and automation, cellular analysis, in vivo imaging and detection platforms. So I wanted to turn to kind of what this looks like from a product perspective. So reagents first. So most of our reagents are designed to interrogate genes, proteins or cells. And since there's a lot of genes and there's a lot of proteins, we have to have a lot of reagents. Our current portfolio is over 75,000 reagents in that area. For instruments, we have instruments placed all across academia and biopharma laboratories. Those leading platforms have now reached an installed base of over 35,000 instruments. Our technology and licensing efforts, this is largely leveraging technology developed within Revvity, and then sort of elements of that are very useful for some of the therapeutic pipelines. And so we license it out primarily to biopharma companies. The reason to do that is to make ourselves better partners with them and also to kind of really entrench ourselves as teammates in their success. So wanted to show -- we talked about reagents and instruments but they work together. First of all, when we develop new reagents, we have a really talented team of chemists, and they try to push the edge with what we can do in terms of putting new features into those. When they come up with something new, that helps to inform new types of assays we can develop, which also then informs the type of instruments we should build in the next generation. Likewise, on the instrument side, if we develop new capabilities, because we have the ability to generate the reagents in-house and adapt them to any instrument platform, we're able to rapidly put those together and take advantage of any of the new opportunities in the -- within the instrument platforms. So the other way, not just on the product development side but also on the commercial side, people who buy our reagents, they're fans of that, they can go ahead and they'll be much more interested in buying the -- or looking at the instruments that we have. People who buy our instruments are very likely to use our reagents and there's also bundling opportunities there. So when we start off, though, typically, the reagents are developed for any platform, not just the Revvity ones, because we want them to be useful to as many customers as possible. And the instruments as well are designed with an open platform with regard to -- open source platform with regard to reagents. So where does this sit kind of for our customers? Where do our customers sit in the research pipeline? Well, we've got a lot of folks at the early stages, basic research, discovery, preclinical development. And in those on the discovery side, a lot of folks are, again, looking at genes, proteins and cells or combinations of all of those in multiomic assays. So we look to make solutions for all of those. In the preclinical development side, we have good franchises in immune cell monitoring, cell line engineering and gene editing. Now if you look a little bit downstream, more in the clinical phase, that's where you find folks who are going to be using our GMP reagents. They typically are going to buy these for the bioprocessing -- cell line bioprocessing, and then QC and analytical QC of biologics in pharma. All those folks are looking to produce products that are going to help human health through improved diagnostics and therapeutics. So when we look at our customers, we think about how do we interact with them? We want to be very customer focused. So we really view this as a partnership with customers. We try to catalyze a 2-way conversation with them. So we'll educate them about what we have. If they want what we have, we'll sell it to them. And if they want something different, then we'll build it for them. So right now, within the Life Science Solutions business, we've got about 30% of the revenue coming into -- or coming in from the academic and government side and 70% from the pharma/biotech side. On the academic side, these are usually folks looking at basic discovery, how does biology work, what's coming next. So we talk with a lot of KOLs. We learn from them, we listen to them, and that helps inform what we should do next, both on the instrument and on the reagent side. On the pharma side, we also talk to a lot of KOLs as well as lab -- heads of screening labs and things like this. They also give us input. Oftentimes, the advice we get from them is more around product configuration and formulation. By listening to them and following their suggestions, we keep our product portfolio fresh and focused on the customer. So I often think about it when people say, "Well, you've got all these thousands and thousands of customers and lots of different products. So what pulls that together?" So most of our products are bought by scientists. So the scientists are our customers. Think about like our most simple product. It might be a little plastic tube with a drop of fluid in the bottom as a reagent file. And we put it out there and someone will pay maybe $200, $300 for that. A layman on the street is going to say, "Why in the world would anybody pay $200 or $300 for what looks like a drop of water in the bottom of a plastic tube? Makes no sense." But if you're a scientist, you've maybe spent weeks, months or even years, putting together all the elements for an experiment. You might have patient samples that are irreplaceable. And if you use our reagent in an assay and it doesn't work, you've just been set back a lot more than a couple of hundred dollars. You've lost potentially a year worth of work. So we can't fail them. We can't let that happen. We have to come through for them. When we think about what that means, they're looking for answers. Now when they're doing an experiment, they may get the answer they want. They may not get. It may be the wrong answer. They might get the right answer. It might be the one they hope for. It might be something else. We just have to make sure that when they use our materials, they're getting the right answers. We can't fail them on that. So I always say we're selling answers to scientists. And for that, it makes a lot of sense for us to do a lot of QC, presale consultation, validation of what we're selling as well as post sale, just handholding them through their data analysis to make sure they get the right answer. So looking at growth drivers, where do we take this? Why do we think we continue to grow above market? Well, we have our existing portfolio, and we're going to continue to strongly innovate on that, deploy products quickly. And as long as we can do that fast, we can grow faster than that market. Emerging science, because of our capabilities internally, we can deploy new technologies in those areas. We're very confident in that. And then we look at adjacent markets that we don't currently serve in any big way but we're well suited to do so. By putting those all together, we should grow well above-market growth rates. So I wanted to give an example of the first one, first sort of those 3 pillars I mentioned. And this is what's shown is the revenue contribution from life science reagents introduced over the last 10-or-so years. Each year is shown in a different color. And what you can see is that the efforts of our R&D to put out new products contributes additively for many years to the revenue ramp. And every year, we do about 1,500 -- well, over 1,500 new products. A lot of those are antibodies, recombinant proteins, assays, kits and other such products. If you look at it and you think, well, it's not a typical product life cycle for most industries. Why is it that they're still growing after 10 years? I can show you examples of products back 20 years that continue to grow well. The reason for that is, if you go back to the basic science and you think about it, if we release a reagent and it's useful and becomes an industry standard, that gets entrenched into the scientific literature. Well, since our customers are scientists and they're always looking for the next new thing, they look at what people have done before. They want to replicate that and build upon it. So that means they're going to go back and they're going to look and see what those people used in those studies and they're going to buy it. And so then that happens year after year after year. As long as an area of science grows, if we've established a standard in that area, it will grow along with it. And so again, we get this long revenue ramp. Now this particular chart here has significant contributions from both BioLegend and Cisbio. I want to give you a little bit of a background on those because they're also related to the company's transformation. So going into 2019, the Life Science business was about $400 million, and it was focused on small molecule analytics. However, the world was embracing larger molecules. All the biopharma were looking at antibodies and such. So in 2019, we acquired Cisbio. Cisbio had a leading no-wash immunoassay platform. And that helped to address the large molecule piece and kind of entrenched us into the biopharma, biologics manufacturing and screening areas. However, it quickly became clear that if we're going to continue to put out new products at both the speed and the breadth and at the cost that was going to be attractive to our clients, we're going to need to have our own internal content development capability. By content, I mean, the ability to make the proteins and antibodies and such that can -- that go into these assays. So in 2021, we acquired BioLegend. They had a very strong content development engine and so we now have addressed that issue. Along with that acquisition came an incredibly increased level of expertise in immunology, cellular immunology in particular, and then also a leading franchise in a key market, that being flow cytometry reagents. Turning to the second pillar here. This is areas of emerging science that we easily branched into. So there's a couple of focus areas or 3 focus areas I wanted to point to: one, cellular analysis; multiomics; and also looking at new ways of exploiting proteins as drug targets. Now when we do this, we want to contribute what we can in the best way with our knowledge. But that also means that to put an effective product out there, we oftentimes will partner with either other industry members, consortia or customers. In these particular areas, you see some of the logos down below, the target areas for some of our current partners in some of these emerging areas. Now to drive organic growth, it's not just external collaborations, but we can also collaborate internally within the Revvity businesses. There's a lot of capabilities and a lot of sites within Revvity. So I wanted to give just a couple of examples of how we've been doing that. In Colorado, we have a facility and comes out of the Dharmacon business, and Dharmacon has been famous for a long time for gene modulation and RNA synthesis. But we've been able to use their oligonucleotide synthetic capabilities to make inputs for both our IVD Diagnostics business as well as to power BioLegend's proteogenomics businesses. When we do that and then, of course, we get a great cost savings. Sure, but the actual important part there is that we can do much better product development. So when we -- it's always a little bit frustrating in the past trying to get large amounts of oligos designed to our specifications from some of the major outside sources. But by working with internal colleagues, we get what we want at the quality we want to our design, on the time frame we want, and we can use that to ensure that our product development goes smoothly. And also importantly, once we release those products, we know we can manufacture them consistently without any hiccups due to supply chain. Second example, CD34-positive stem cells. We actually gather these in our cord blood banking business, but we've recently begun to release these as RUO products. Now they're probably not going to sell a huge amount in and of themselves, but all of our workflows are targeted towards cellular immunology and other assays. So by working these in as controls and other elements for both our Diagnostics and our Life Science businesses and product lines, we're able to really bolster those applications. Now finally, I want to give you an example of the third pillar, and this is downstream capabilities and adjacent markets. And here, I just want to talk about our GMP bioprocessing expansion. So we have, for a long time, been present at the early stages in the research pipeline for cell therapy companies and pharma and the rest. They use our reagents, they do experiments, they find leads, they start to validate those and such. They like very much the performance of those reagents and what they might do to various cells. But eventually, all these guys want to scale something up and deploy a product. In order to do that, they need to go into pilot phase and the rest. When they start to do that, they need GMP designation on the reagents. So if we don't build the capabilities to allow them to take that product forward and scale-up, then, well, one, we're leaving money on the table. But more importantly, we're forcing those clients who relied on us at the research stage to go ahead and find some other partner to do the scale-up. So many years ago, really compelled by our customers, we started introducing GMP products. And these are typically ones that they've asked us to. They said, "I need to take this to the next level." So we look to put those into our GMP manufacturing facility. And as we get more requests, we expand the capabilities of that facility. Our focus areas right now are antibodies, cytokines and cell culture media, though that will increase with some other additions in the near future. The purpose for these right now, these are ones where we're able to offer kind of unique features at a very good value proposition. So to pull that all together, we're in growing markets. We will continue to play in those and look to exceed that -- those market growth rates. We have areas of emerging science that we can address easily, and we have adjacent markets that with just some tweaks to our baseline research products, we can enter easily. So together, our portfolios, our ability to innovate and our ability to provide solutions up and down the chain all the way through drug development should give us plenty of reason to grow for many years to come. Now I want to turn it over to Kevin Willoe, who's going to tell you about our Signals Software. That's another area of the business I think you're going to find very exciting. So prior to that, I think he's got us video. [Presentation]

I hope that video shows how excited we are about the market opportunities ahead. I'm Kevin Willoe, Senior Vice President of Signals Software. I've been in the industry for over 30 years working for a number of enterprise software companies. And I've seen a number of trends and technology emergence: the move to client server computing, the resolution of the year 2000 issue, and the move to mobile computing. But I feel today the opportunities ahead of us are greater than those behind us, with the emergence of SaaS, the continued proliferation of AI and ML, and just the overall sense of innovation customers seem to have. At Revvity Signals, we provide software that allows scientists to create new drugs, find better materials and run safer clinical trials. So why am I so excited about the opportunity ahead? Because innovation is truly leading the way, and we are focused and leading with innovation. Customers are truly excited about what we're doing. I visit dozens of customers a year, and I'm constantly getting feedback on how great the products are, how easy they are to use and how intuitive they are. We have a SaaS-based platform developed by scientists for scientists. Our scientists have lived in our customers' shoes. Therefore, they understand the challenges and opportunities they faced, and they focus on developing a product to meet those needs. We see multiple paths to growth, which I'll cover in a minute. So let me introduce you to the Signals business. We have decades of scientific and technical expertise. In 2012, we acquired CambridgeSoft. CambridgeSoft was a pioneer in the cheminformatics space from back in the 1990s. CambridgeSoft became the foundation for what the Signals business is today. In 2017, as the market moved to SaaS, we introduced the first SaaS electronic lab notebook product, Signals Notebook. SaaS has truly changed the way that vendors build software and customers use software. In the on-premise days, typically, you'd put 1 or 2 minor releases and 1 major release out a year. But there was typically a backlog for IT systems. It would take a while to upgrade these systems. Customers would typically be a version or 2 behind. With SaaS, we're putting out iterative changes regularly with 10 to 12 changes a year and major releases that are just proliferated out to our customers with no effort on their end. This has made customers be able to innovate more and allowed us to provide more value and incentivize customers to expand usage. We serve multiple markets, which I'll talk about in a minute. So a couple of key stats. We're roughly about $200 million in revenue. We have about 4,000 customers, over about 1 million users, and we serve the largest pharma, biotech, material science and even academic markets. We're growing at low double-digit growth, and 10 out of the top 10 and 46 out of the top 50 pharma and biotechs all use our products. So when I say use, I mean at scale, with hundreds or even thousands of users. So looking at some key business metrics. Metrics like organic growth and op profit are always important metrics to gauge the health of the business. But in software, particularly software companies with SaaS assets, there are other unique metrics that need to be considered. Some of those are ARR or annual recurring revenue. This is the amount of revenue we'll take over a 12-month period from our SaaS products. This is growing at about 30% a year. Next, APV, annual portfolio value. This takes all of our portfolio of products, on-prem and SaaS, and normalizes the revenue. SaaS products, revenue is taken ratably, meaning monthly. On-premise is a bigger chunk taken upfront and the rest is ratably. So APV kind of smooths out those peaks and valleys to give a good perspective on how the business is going. That's growing about 12% a year. And last, net retention rate. It looks at the number of customers who are upselling or expanding minus those that are leaving the platform. Our net retention rate is 106%, so we have a lot of customers continuing to expand and use. These metrics in the software world put us in best-of-class. Also provides the perfect mix of revenue predictability from the SaaS side, which is highly predictable and growth. So diving deeper into the portfolio. On the left side, you'll notice our SaaS products. On the right side are our hybrid or on-prem products. The first SaaS product is Signals Notebook. It's a product that allows scientists to gather, capture and collaborate around information. On top of that is Signals Research Suite. It expands the capabilities of the notebook to provide additional workflows, analytics and data integration. So combined, scientists can gather, collaborate and share information but also have analytic insights to make decisions where they should focus or where they shouldn't focus. So it's a great combined solution. Next is Signals Clinical. We've had a clinical business for over a decade, and we were using an analytic tool with professional services and some prebuilt IP and workflows. We've basically taken that capability and productized it. We've used the power of our SaaS platform and taken this analytics and these workflows and built the platform. So it's now more scalable, it's easier to proliferate users, and it's a better profit margin because it's more product and less services. On the hybrid side, ChemDraw, it's a standard tool for drawing and collaborating. It is the de facto standard in the industry. Everybody from the largest pharmas to students in academia are using it on a regular basis. And then Spotfire. So we've taken Spotfire, and we've built in additional capabilities and workflow and some IP. Spotfire is the leader in the research market. But it's not only the product, it's the IP and capabilities and workflows that we've built on top that really make it so powerful in the markets it serves. Now I'm going to map our products on to our customers' workflow. First thing you'll notice is that we go wide and deep. Most of our competitors focus in one particular area. We go further downstream as well as deeper, so it gives us multiple growth opportunities, to grow further into commercial, which for us is primarily manufacturing and quality and to go deeper in each particular area. As you'll see, we're strongest in discovery, but we're doing a lot more work in the other areas as well. At the end of the day, customers are looking for a single platform that bridges this discovery, scale-up and manufacturing. They don't want to jump in and out of technologies. They don't want to have technology overlaps or integration burdens. So we provide a single platform across the life cycle. So looking at the markets we serve. We're focusing on research informatics and clinical analytics. Our strongest presence is in pharma, really the top 20 pharma. It's where we started. We started there because they had the most dire needs. Frankly, they're the most demanding, have the most data needs. And our thought was if we can satisfy them, we can bring that product downstream to smaller companies who maybe don't have as demanding needs. So a very strong presence in pharma research. We also have a very targeted offer in clinical. As I said, we have clinical analytics primarily focused around safety and efficacy. So we have the opportunity in the clinical analytics space to continue to grow deeper but also with all the white space to grow broader, areas like real-world evidence or in-stream trial monitoring. And lastly, material sciences. Material science is a great growing space for us. They have many of the same needs as our pharma customers. The market we serve is about $4 billion, growing at high single digits. We have a lot of room to grow within that market. But as we go further downstream, a lot more room to actually grow the size of the TAM. So looking where our growth is going to come from: 3 major areas. The first is expansion with existing customers. As Craig mentioned before, biologics and large molecule continue to be a heavy focus. We're continuing to put more capabilities in the products to address those customer needs. Our customers are saying we want a single platform to allow us to focus on small molecule and large molecule, which is exactly the strategy that we've embarked upon. Next, SaaS has truly changed the way we can upsell accounts and bring more value. We're adding consistent capabilities. They're getting more value. Therefore, they're able to proliferate out to more users and more user groups. Next, new offerings. Signals Synergy is a component for our Signals Notebook product that allows us to expand collaboration to CRO partners. So a pharma may have outsourced trials or research, they'll use Signals Synergy to collaborate those efforts with their pharma partners and their CROs. And next, a product called LabGistics, which I'll talk about in a slide or 2. The last area, new customer wins. As I said, as we met the demands of the Tier 1 accounts, it's easily opened the door to the Tier 2 and Tier 3. And with SaaS, these customers no longer have the burdens of needing really large IT organizations or tens of millions of dollars for on-premise systems and challenges upgrading. SaaS allows us to service those customers easy in a very cost-effective manner. And I talked about material science. So material science is a great market for us. It's specialty chemical, materials and food. We've typically serviced it primarily with the product capabilities we've had. But after bringing on a number of customers, we've decided to continue to expand the platform. So we're adding additional capabilities such as formulation that those customers need, so we have the ability not only to grow with the product we've had 2 years ago, but to grow even further with things like formulation. Some of our growth enablers, AI and ML. Frankly, we've been doing AI for 10 years. It wasn't called AI back then. We were doing predictive analysis, looking at historical information to predict what's going to happen in the future. Now they've categorized it as AI and ML, a lot of people are embracing it more, but we're also putting a number of capabilities into the product to allow us to really provide AI and ML capabilities. Our customers really want us to embed it in the workflows. So we've done things like added semantic search, tech summarization and antibody predictions. And we have a lot of other things we're integrating. Our strategy is to look at the customer's use case and workflow and integrate AI and ML as it makes sense, not just at a generic sense. Low-touch, no-touch or digital. The world has really moved to looking at software in a digital sense. So we have to make sure we have our search engine optimization so they find us. We have to make sure we have a very intuitive and easy-to-use website so they get the information. We have to make sure we're putting content that is high value, so when they get to the information, it's resonant and it's relevant to them. We've also moved further downstream with e-commerce. So there's a number of products that customers will be able to take that entire journey on their own. There's others where they'll take parts of the journey and they get us involved to take them the rest of the way. All of this resulting in we expect to be a 9% to 11% growth. So diving deeper on 2 initiatives: the first is in the design area and the second is on logistics. So biodesign is a design tool for large molecules. As Craig and I both said, it's a market that's growing rapidly. Biologics like antibodies or new modalities like CAR-T are more complex than small molecules. They need different workflows, they need different tool sets. Biodesign provides cloning and molecular design capabilities. It allows us to expand the footprint within the clients, again, moving towards that single platform but also allows us to address net new users. Next is LabGistics, tools for complex logistics execution. This assists with the complex laboratory logistics and scale-up and manufacturing. This process -- these tools focus on bioprocessing groups, again, allowing us to expand our footprint, moving more towards that single platform and again, focuses on new users. So we're bringing more value to the customer. We're also able to sell more seats. We have a tremendous amount of internal users using our products, groups like the Genomics Insights' Center of Excellence, cell line engineering services and gene editing teams. So they're not only using our products to help run their business better, but they're giving us invaluable feedback that allows us to incorporate that feedback into our products to ensure we're staying ahead of marketing -- of market needs. This is all resulting in a lot more satisfied customers and is reflected in the 106% retention rate. The transition to SaaS for a number of customers has been very compelling. Here's an example of a customer who had 8 different scientific disciplines with hundreds of users on 4 different on-premise notebooks. The notebooks couldn't communicate, couldn't collaborate, were difficult to maintain and upgrade and very, very expensive. We were able to take all of these hundreds of users, transition them over to Signals Notebook. They're now sharing, collaborating data and information. They've been able to reduce the license costs. They've been able to reduce staff costs. They don't have to worry about some of the challenges in security because we're now managing that all for them. And they've seen a drastic improvement in user satisfaction. And in turn, we've seen more users. All of this has resulted in them being able to reduce the number of trouble tickets for these systems by over 1,000%. There's a value to us, too. We believe that the lifetime value to us of a SaaS customer is 50% greater than that of an on-premise customer. Why? Because it's viral in nature. It's very sticky. We're continuing to add more capabilities, which adds more value and allows them to add more users. So how are we going to grow? A couple of areas: expansion within existing customers. As I mentioned, our customers are great. They give us a lot of feedback. They're constantly asking for directions they want us to take it to put in the product. And given the viral nature, we're just continuing to expand quarter after quarter with the users. Next is new offerings. I talked about Signals Clinical, Signals Synergy, LabGistics and others. And last, new customer wins. Again, as we go downstream to Tier 2 pharmas or as we move more and more to material science, the core products we have are addressing their needs. And that will just have a ripple effect. The more new customers, the more they'll grow virtually and it will continue to grow. At the end of the day, we're leading through innovation. Many of our customers are embracing SaaS and they're looking for help moving down the SaaS journey. We have happy customers. We see opportunities both within our existing accounts and markets as well as new accounts and markets, and our business is growing profitably through innovation, all resulting in helping our customers unleash that big beautiful science. Our success is a key component of the robust outlook we have for the overall Life Science business. Craig highlighted the exciting and differentiated offerings within the Life Science business. We expect to have a $1.4 billion business growing at above-market rates with margins greater than 30%. We're going to do this through a differentiated portfolio with growth opportunities both in the markets we play and adjacent markets. We stand out in terms of scale, future growth potential and profitability. With that, I'll turn it back to Steve for the first of 2 Q&A sessions.

Thank you. So for the Q&A, as mentioned, we have 2 Q&A sessions. Following this first session, we're going to take about a 15-minute break and start back up. I highly encourage all of my sell-side and buy-side friends to ask questions today. All of the questions will be happening here live in the room as we're not doing anything via the webcast today. So I've got 2 mic runners right around. Anthony, please go ahead. Please state your name and your firm as well. Thank you.

All right. This is Doug Schenkel from Wolfe Research. Thank you for the fantastic event and hosting all of us and for taking our questions. So this was a really helpful overview of the Life Science portfolio. It's clear that you have a great complementary portfolio of reagent products anchored by BioLegend but clearly complemented by a series of products added organically and inorganically over the last several years. It's also clear how your instruments really complement the reagents. What was maybe a little less clear for me was whether or not the instrument portfolio is where you want it to be today. And are there opportunities to maybe broaden that portfolio to target some of the growth areas that you focused on? And then kind of similar to that, on the Signals side, which is clearly a great high-margin, high-growth business, are there opportunities to use Signals to drive growth in other areas of the business? So it's clear how you can grow Signals in itself, but can that be kind of a leader to basically drive growth in other areas of the business?

Thank you for the question, Doug. Let me start with the instrument side of the question first. And I think you will see today during one of the breakout session when Kevin, Craig, and the team sort of go through the portfolio that we have and how it links. I think the aspect for growth when you think on the instrument side comes down to not the box that you're going to build, right? I think that day has gone. It's more about the information that you provide and how do you provide that information. So the amount of machine learning that you are able to put on it, and you will see some examples of that today, where on the in vivo imaging side, we've already started to sort of implant that. And that's sort of going to be the driver on the instrument side of the business. So I don't want to steal the thunder of the team and hopefully, you'll get a chance to see that later in the afternoon. To the second side -- to the second question that you had, I think one of the examples that sort of amplifies as to what we are able to do and connect the dots between Signals and the Life Sciences side of the portfolio is Image Artist. Image Artist was designed specifically to be able to be operated on our instrument portfolio. And I'll, again, want Kevin to probably elaborate a bit more on that.

Yes. So I think Image Artist is a product that both sales teams work and collaborate on, right? So they're bringing their expertise of the instrument and the scientific workflow, and we bring our expertise on building software. So it's the perfect connectivity between the software world and the instrument world, and it's definitely a differentiator.

And you'll see more examples of that, Doug, when we go also on the Diagnostics side of the business as of how the teams are working together and the benefit that we get.

All right. Is it possible if I could ask one more?

Go ahead.

And I hate to kind of go off script given the focus of today. That being said, we hosted an investor event earlier this week. There is, probably no surprise to any of you, a tremendous amount of focus on the current environment and the uncertainty related to some of the end markets that you address coming off of the election last week. It's a little bit of an unfair question given it's only been a few days, and I don't think any of us have any answers. But when you think about areas of heightened uncertainty, the outlook for NIH funding, the impact of tariffs, potential changes in how pharmaceuticals and biologics are regulated, do you have any thoughts on how you can uniquely serve customers in these periods of -- this period of uncertainty? And in some ways, I don't want to lead the witness but I think a lot of your offerings can be part of the solution versus part of the problem in a time of change, but obviously, I want to get your thoughts.

Yes. Doug, and I'll start and Max, you can jump in. Let me start by saying I don't think it's an unfair question because it's on everybody's mind, right? So might as well get the question out and try to figure out how to -- as you would imagine, we've sort of planned these scenarios as we and all companies were there, [ wait and solve ], would have imagined and planned scenarios around these. Let's take the 2 examples that really are top of mind, right? One is the change in the administration and the second is China. For China, as you know, as for the last decade or so, we've been working diligently to a day where we would have to be in China for China. I think on the reproductive health side, on the autoimmune side, we've primarily accomplished that goal, right? All the supply source, vending, R&D, development, manufacturing, distributing in China for China happens in China. So we don't sort of import anything in there. Same thing on the autoimmune side. We continue to build that portfolio. On the Life Sciences side, we don't have a whole lot of competition there. So we've not taken that step. And I think we'll see and assess how that goes. Concurrently, on the other side, less than 1% of direct material sourcing that we use in our company comes from China. So with COVID , if there is one thing that came out of COVID is we built supply chain redundancies across the globe to be ready for a day, whatever that day might be that might result in something that we don't have control over. So what we have focused is controlling what we can control and plan for that. On the administration side of the question, look, I think it's an unknown. We don't -- I mean, we don't know what we don't know. But what we do know is we control and focus on executing a portfolio and a pipeline that gets the best reagents out into the marketplace, have the best instrumentation, ensure that every newborn is screened to the best of our ability, and focus on what we can control.

I think you answered it beautifully.

Mike Signore, T. Rowe Price. Just I had a question on the reagents kind of build there, the downstream capabilities. I think you -- or capabilities, I think you quantified it as 100 basis points. Is that all the GMP expansion there? And then if you could just kind of touch on that, is this the first foray into that? And how big could that sort of be if we looked out 3 to 5 years, the GMP commercial-grade opportunity specifically?

Max, do you want to start?

Yes. So I think as you look at the reagents growth drivers, right, the one you're referring to is the expanding into the market adjacencies, which we said was roughly 100 basis point contribution. I would say the majority of that is related to the GMP work that we are expanding upon. I think in terms of sizing the exact dollar amount, I think you can get there roughly by the 100 basis points in the size of our reagents business. I think it's an area we remain incredibly excited about. And it's an area that we've talked about didn't require a ton of capital investments in order to build out. A lot of it was just refining the work that we already do today. And I think it's an area that we're going to continue to be excited about. Just one that might take a little bit of time. It's something that you work with your customers over a multiyear period. It's not something that happens overnight, but we do think it will be a meaningful contributor to our growth algorithm over the long term.

Anthony? Yes, Dan.

Great. Dan Leonard from UBS. Two unrelated questions. First one for Gene and Craig. Can you talk a bit about the pricing opportunity in the reagent business? I think it was a point of pride for you that over a long period of time, BioLegend had never implemented a price increase. I'm curious if that's changed and how you're viewing that opportunity going forward. And then a question for Kevin. Just hoping you could clarify what proportion of the Signals portfolio would you attribute to small molecule versus large molecule today?

Maybe start with Craig. Pricing?

Okay. Well, on pricing, yes, as I think you mentioned, we hadn't raised prices on our U.S. list from inception of the company through 2022. We had huge inflation that kicked in. There've been inflation all those years, but we always kept reinvesting to kind of be more and more efficient, right? The cost of our inputs kept going up, but we were able to keep our margins and even expand them simply by looking at innovation. Now in 2022, very large increases on some of those input pieces. So we did do a price increase at that point, and then we did a small one at the beginning of '23. We did not increase prices for '24, and we have no plans to increase prices on the BioLegend side because you're referring specifically to the BioLegend case for 2025. And the reason for that is we can continue to look at economies of scale, refining our processes and maintaining our margins or even increasing them simply by innovation. The nice thing about reagent manufacturing in many cases is, it's batch, which means your costs are on the setup, on the QC, on the data interpretation, the materials that actually make, whether it's 1 gram or 50 grams, they don't really scale -- those scale linearly but all the rest of the cost doesn't. So we believe we're able, at our scale, to have the best sort of cost profile going forward. And we'd much prefer to pass that on to our customers rather than ratchet up and take every dollar out of their pocket. We'd rather give them more answers if we can.

And to continue to outgrow the market.

Absolutely. We'd rather outgrow by becoming more relevant than simply trying to drive our price.

Yes, small molecule versus large. It's a tough question to answer at the moment for 2 reasons. One is, it depends on which product, right? So Spotfire is molecule-agnostic so it doesn't matter. But we see the biggest growth opportunity for the Signals Notebook and the SaaS suite, the growth of large molecule. We've just started that journey. We've had a number of customers who chose us for small, and we're going to make a large molecule decision on a separate platform. And they like the platform. They said, "We're going to wait." And we've been building in capabilities to allow them to start using it with large molecule and buying more licenses. So I can't tell the exact number at the moment. We will track it once our biologic products are out and we actually have a way to track specifically. But it's definitely -- we're at the beginning of the growth trajectory for that large molecule.

Over here. Eve?

Eve Burstein from Bernstein Research. I wanted to dig in a little bit more on software and drill down into 2 of the key growth drivers that you guys highlighted. So maybe first question on expansion with existing customers into biologics and large molecule, which you just talked about. Just to clarify, are the new products that you're talking about, biodesign and the biologics molecule for Signals Research, am I right, I think I saw on the slide that they're expected in '25? And if so, can you give us a little bit more there?

Yes. So with biologics and large molecule, there's ways to address it, right? We're adding capabilities to the product outside of those 2 products where people can start using the core platform on biologics and large molecule. Biodesign is going to be out in 2025 and LabGistics to follow afterwards. So our strategy right now is to put incremental capabilities into the product so people can start using it for large molecule and biologics to the point where it's enough to be a stand-alone module, and then we'll introduce the modules. So we're not going to just wait. So the answer is people are going to start using it now and ramp it up as those products come to market even more.

And if I can just add to what Kevin said, Eve. If you recall during one of the calls, we've said, Kevin's team's focus is on the user groups. They have user groups 2, 3 times a year. And then basically, the customers sort of give very good insight into what their demand is or what their need is. And that's where the modular approach works very well, that they are able to introduce the -- on the platform on a much more modular basis.

Okay. And then on new customer wins or expansion to smaller customers, it makes a lot of sense that as you move more to SaaS-based products, your portfolio has been more accessible to smaller customers. But sales to smaller customers also requires a really different commercial setup and a higher level of commercial intensity than you've had previously. And it requires a real financial commitment, which we understand you may have been a little bit hesitant to make in the past. And you highlighted that there's a low-touch or no-touch sales approach, but I don't know that, that's really enough for those smaller customers. So why is now the right time to pursue this opportunity? And what kind of capital or manpower are you actually committing to go after it?

Yes. So maybe I can start. I think as you look at the new customer wins, I would actually say there's 2 buckets of the new customers. One is expanding into some of the smaller pharma/biotech customers. And second is acquiring customers in the material science landscape. So I think as you look at the commercial execution across those 2 areas, first, on the smaller pharma customer side, it is really leveraging the e-commerce platform. You can go on the website, see the demo of the tool and go and sign up right there on the website. It's an easy use, where you can click to chat. It is a low-touch solution for us to be able to penetrate that market. We will not be investing significant commercial head count nor do we think we need to, to execute on that opportunity. I think where you might see some additional head count is in the newer areas of material science, but it's not an immense amount of new head count. I think there, you also have some very material large customer accounts where you can get at with more of a strategic account management style. And we've already seen some early wins this year on some meaningful contracts.

Kevin, maybe you could add, too, on how we're leveraging existing capabilities in material science.

Yes. Well, so a couple of things. Again, most of our material science companies these days are just buying the core platform. But now as we're adding more capabilities like formulation, we've already had it but we're beefing it up a little bit more for them or design of experiment. It's going to allow them to use it on a broader basis. The one thing that I would say is that it is easier to sell customers the SaaS product than the on-premise product because we have multi-tenant environments we just turn on and they evaluate as opposed to going on-site in their data center, installing the software. So it's actually less of a lift for us and them for Tier 2 or accounts looking at SaaS than it was for on-premise. Frankly, our success in Tier 2 is going to be ramped up mainly because we're focusing on it more. We were just so focused on those Tier 1s. Now we have the bandwidth to focus on Tier 2s with no additional investments from a sales perspective unless we decide to expand material science a bit.

Puneet?

Puneet Souda, Leerink Partners. So Prahlad, a high-level question for you first, and then maybe a more deeper one for Gene and the BioLegend team. Prahlad, different companies in life science tools space take a different approach to working together across divisions and segments. Some are siloed, some are working closer. That drives more innovation, that drives more products into the market, and it creates better working synergies. So just wondering where you are -- where do you see Revvity positioned? And how close of a collaboration that you see across different divisions, where it is and where would you like it to be? I'll just stop there.

Maybe we could hold that question for the second Q&A session after we've gone through the Diagnostics. I think you will learn a lot in the next 1.5 hours. So we'll come back to you on that one, if you want to ask a follow-up.

I will respond to it after you've seen the second session because that sort of gives you a few nuggets into how the 2 businesses are working together.

Okay. Then if I could get one more.

Go ahead. Yes.

Just asking in terms of where do you think the -- just looking at the Life Science portfolio, where it is today, do you have all the right pieces? And if there is disruption coming, again, let's see, hope not, and given all the uncertainties in the marketplace, but if it was to, where are some of the areas where you think there's more opportunity?

Yes. It's a good question, Puneet. And look, it's not that we've sort of shut our eye off and not looking at opportunities. There are 2 pieces to the puzzle, right, that you might have some needs, but you also have to have targets available that sort of fit and sync in with your strategy, both culturally and from a portfolio perspective. That match hasn't happened yet. So if there are areas of growth, we continue to look for it and there are opportunities over the next several quarters or as they come to fore, we will definitely keep our eye on it. I think the bigger thing is that we've acquired 12 companies. We've tried to meet the needs that we had. There were -- if you were asking me this question in 2020, 2021, there were significant gaps in our portfolio. We were a small molecule company and the market was moving towards large molecule. We didn't have anything literally. And that's where the acquisitions -- we've put largely the pieces together, but we'll continue to be on the lookout is probably the best way to answer the question.

Maybe down in front here, Rob.

Rob Moses, RGM Capital. I just had a question on the Signals business. What percentage is SaaS cloud versus perpetual today? And as you're going through that transition, you talked about the value. Could you just give a sense of like where we're at in that journey in terms of that conversion? And are you converting your installed base? Or is it more so new SaaS for new logos?

So it's both. So we -- with the acquisition of CambridgeSoft, they had an electronic lab notebook on-premise. So most of those customers, CIOs and CFOs have a cloud-first strategy. And if it's not a cloud product, you have to justify why. So it's transitioning those customers who had perpetual licenses and we're just paying maintenance over to SaaS. So they're having a better, less manageable system that we're now managing and we're also having a new revenue stream. And it's new customers, right? We rarely ever see a new customer in the notebook side looking to buy an on-premise notebook, right? And if they do, we really try to convince them otherwise because that's not the direction of the market overall. So it's a combination of existing customers transitioning over and net new customers. But as I said before, the beauty of SaaS, we're going to have access to markets we would never have access to with an on-premise system. They just didn't have the resources and the technology expertise to put these big on-premise systems.

I think maybe just one other piece to add on that as well. I think as you look at our SaaS as a percentage of the overall portfolio, it's roughly 1/3 of our software revenue today is SaaS related. I think we're probably in the middle innings of that journey. But the other point I'll mention is that we are ahead of our 2 main competitors. And I think we've mentioned that we think that is a true differentiator for us and why we win in the marketplace. And we look to continue to execute and be ahead of the game in the coming years.

Andrew?

Andrew Cooper, Raymond James. Maybe just a quick one for me on GMP as you talked about it in sort of some of the customer pull and the natural move downstream. Can you give us a sense what are the win rates when you come and say, "Hey, we have this capability to bring to bear?" And in the scenario where a customer still goes elsewhere as they move into that next phase, what's the reason why?

Craig, you want to start?

Yes. So most of these historically have sort of evolved out of the early-stage seed planting with customers who have come to us for some solution. Maybe it's a particular media that they wanted to use because it happens to help their cells grow and differentiate in the way that they want, or maybe it's a particular functional antibody or particular cytokines. So there's a lot of, say, smaller companies that will work with us. And then to the extent that they're seeing what they want, that naturally goes to a larger scale subsequent proposal and then a larger proposal. As they march down their development pathway, they're kind of locked in to the materials that they started with as long as we can deliver and as long as they function well. So that's where a few years ago, we were starting to need to hand people over to others. We don't want to do that anymore because it's disrupting to them. And frankly, we can serve that market. So when we look at the little guys, we're continuing to march through that development pipeline with them. That's why we say it takes a few years to play out because they don't get to a really large scale until they get some success in the clinic. Pilot scales at least.

I think we'll wrap up the first Q&A session now and enter into a 15-minute break. We'll have a longer Q&A session at the end of the presentation. So we'll come back in 15 minutes. Thanks. [Break] [Presentation]

So very powerful to hear directly from Sumaira Ahmad, which is a patient and a key collaborator how the work that we're doing in immunodiagnostics is advancing science and also impacting patient outcomes. It's really personal stories like these that illustrate our purpose at Revvity. Good morning. I'm Yves Dubaquie, Senior Vice President of Diagnostics. I have over 25 years' experience in the health care industry. And as a trained biochemist, I know how important it is to lead with science in this industry. So expanding the boundaries of human potential with science was one of the reasons for me to join the company 2.5 years ago, and it continues to be so. So I'm excited to share with you an overview of our unique and high-growth Diagnostics business that is having positive impacts on patients' lives today and how we expect this to continue. So there are a number of things that I want to show you today regarding how we uniquely play within specialized diagnostics. So first, I will introduce you to our portfolio, which may look slightly different than what you are likely used to from other diagnostics companies and also show you how this difference is what makes us unique. Next, I'll touch on how we're focused intensely on driving innovation, both in existing and new markets. Then I'll highlight how we're concentrating to penetrate key markets globally, especially the U.S. And finally, I'll show how we're leveraging some of our key capabilities and strengths across the business. So let me give you an overview of Revvity Diagnostics. About 60% of the $1.4 billion revenue comes from our high-growth immunodiagnostics business, with the remainder from our market-leading reproductive health business. We have been growing revenue in the mid-single digits over the past 5 years on average and delivering strong operating margins of 27%. We operate in markets of meaningful size and underlying growth. Our estimated TAM exceeds $30 billion, growing at a mid-single-digit 5-year CAGR, and I will explain to you why we expect this business to continue to grow above this rate going forward. Our leadership position in these specialized markets is really based on us providing complete end-to-end testing solutions. This includes sample preparation, analytical platform, software and service. So I think it's actually underappreciated for a specialty diagnostics company like ours that we have a broad variety of platforms ranging from mass spectrometry to immunochemistry to molecular techniques as well as cellular assays. So I think it shows that we're taking a very tailored approach to answering a diagnostic question. So a key area of focus is autoimmunity, where we have a market-leading position in area that is undertested globally. The key differentiators here are really the broad assay menu, quality and performance across our tests. Another specialization area is infectious diseases. Here, we have an extensive suite of assays for various conditions such as latent tuberculosis, tropical infectious diseases as well as blood bank testing. Our newborn screening franchise provides complete sample-to-result solutions, ensuring that screened babies get a healthy start to life. And finally, we operate a global network of clinical laboratories that offers diverse -- access to diverse patient populations and through which we can effectively partner with pharma and biotech companies in helping them in their development programs. So as my colleagues have been highlighting earlier today, our Diagnostics franchises play a key role in this continuum of research to cure. We are screening patients both at birth and later in life through advances in genomics. We then help diagnose highly complex diseases to finally, monitoring drug therapy, therapeutic dose and efficacy. But what I really want you to take from this slide is that this is not a linear process, but it's actually circular and provides important feedback loop to diagnostics. Every touch point that we have with a pharma/biotech customer critically informs us about the diagnostic needs of the future for these therapeutics. So for example, over 40 active clinical trials today are using Revvity cell and gene therapy technologies. And our licensing team obviously continues to drive or grow the number of these programs and customers. So every one of these touch points provides an important feedback loop, and I view this as a key differentiator for our business. Now let's pivot to who are our customers. One of our key customer segments is obviously the private diagnostic labs, including major lab networks. They value our specialized diagnostics tools but also our scalable automation to reduce hands-on time and cost. We continue to support their growth as we see rapid consolidation globally in this particular market sector. At university hospitals and research labs, we often engage with key opinion leaders and lab directors. They value really our innovative, comprehensive testing solutions as well as our deep therapeutic area expertise. There, we partner to help them develop assays for novel biomarkers and are able to expand our diagnostics menu that way. Another important customer segment that we have a very entrenched relationship with is our public health screening and testing labs. These customers really count on our end-to-end screening solutions and value our unwavering commitment to 24/7 service, quality, and continuous menu expansion. For example, we partner with every state-run newborn screening lab in the U.S. Now let me turn to our market-leading immunodiagnostics franchise, which makes up about 60% of the overall Diagnostics revenue. Now this is a truly unique and special business which has a profound impact on the diagnostics journey of patients. Our $800 million business has been growing high single digits on average in the past 5 years. So half of the revenue is 50 -- half of the revenue is from autoimmune testing, followed by infectious disease and allergy. Now this durable growth profile has been achieved by participating in selective specialty markets where we hold podium positions, such as autoimmunity as well as latent tuberculosis. And we intend to leverage these underlying high-growth conditions by menu expansion, new automation solutions and share gain. In particular, EUROIMMUN and T-SPOT.TB have strong brand recognition and a positive reputation for performance, quality and clinical differentiation. Now there are several key factors which will allow this business to continue to be successful: first, elevated underlying market growth; second, innovation in existing and adjacent sectors; and third, geographic expansion and penetration opportunities. Based on these key growth drivers, which I will lead you through, we expect our immunodiagnostics business to grow high single to low double digit on average going forward. Let's talk about market growth first. Autoimmune disease testing is a very attractive market with strong growth fundamentals. As you see here, plotted for the U.S. data for one of the most common autoimmunity biomarkers, ANA or anti-nuclear antibody, the prevalence is steadily increasing. Now this is fueled by demographic trends, increased exposure to environmental factors, infection as well as increased awareness about these type of diseases. This is a high complexity diagnostic area with over 80 distinct diseases described affecting 1 in 10 people globally. Nonspecific symptoms really require highly specific and sensitive assay panels, which then -- which often reflects to secondary and tertiary tests. Frequently, autoimmune assays become chronic, requiring patients to be tested repeatedly. And finally, clinical adoption is still underpenetrated even in developed markets. So we are well positioned to capitalize on this attractive and sustainable growth opportunity because of our strong therapeutic area background, which started over 35 years ago at EUROIMMUN as well as our continued innovation. So we brought many innovations to markets, and here, I want to highlight 2 recent ones specifically for you. Both innovations really result in reduced operator hands-on time and increased testing flexibility, which ultimately improves lab productivity and this is what our customers count on. So the AP 2400 is a latent TB testing platform that we've launched a couple of months ago. The automated workflow is particularly attractive for high-volume testing labs that do not want to compromise clinical performance. So we expect this platform to drive improved market positioning and share gain for our TB franchise, and we expect FDA approval in the first half of 2025. Another area that we are focusing on is the expansion of multiplexing solutions for autoimmune testing. The [EUROMicroblot] provides miniaturized immunoblots in a format that allows both single and multiplex testing in the same ELISA analyzer, again improving lab productivity and also saving very valuable sample volume. We've launched this solution for infectious disease and will follow with autoimmune menus in the second half of 2025. So we also have a strong pipeline of innovations that we're working on in new and adjacent areas such as neurodegenerative diseases as well as active tuberculosis. As you know, neurodegenerative diseases affect millions of patients worldwide, with Alzheimer's disease being the most common illness. Now with the availability of disease-modifying drugs, the detection of early onset Alzheimer's finally has become therapeutically actionable. So here, our focus is on moving from cerebrospinal fluid samples to serum or whole blood in order to detect low abundance biomarkers for Alzheimer's disease as well as other neurodegenerative diseases. This will require high sensitivity detection platforms as well as novel sample preparation methods. We're also concentrating on assays for active tuberculosis, which continues to be the #1 infectious disease killer now that COVID has subsided, claiming the lives of over 1.25 million people per year. Effective tests for active tuberculosis already exists, but all of them are based on sputum. So here, we're really focusing on something that does not exist today which is a blood-based rapid diagnostic to detect the most challenging cases of tuberculosis, such as extra pulmonary tuberculosis as well as in pediatric patients. So we have over 20 years' history in tuberculosis research and diagnostics. So we know the disease, we know the market conditions, and we have a good understanding of the test requirements. Now let me turn to our third immunodiagnostics growth driver. Geographic expansion represents another significant growth opportunity. What you see here is the relative share of our U.S. versus rest of world revenue. And as you can see, we experienced tremendous growth over the past 7 years, growing from 5% to 15%. And the U.S. is the largest autoimmune testing market in the world. So we believe that it continues to be underpenetrated, and we're making meaningful investments to tailor our FDA programs, so to tail our R&D programs rather to FDA requirements. So good progress there has been made, but a significant opportunity still remains in front of us. So hopefully, you now have a better understanding of what our immunodiagnostics business is and why it is so special. Driven by the factors that I described, I -- we expect this business to grow between 9% to 11% on average going forward. And as you've seen, we do have very strong capabilities to help diagnose autoimmune and other complex diseases. But importantly, we shorten the time of each patient's diagnostics journey, which is so critical to drive clinical decisions and ultimately improve patient outcomes. So this is really an outstanding diagnostics business, unlike others, which has significant opportunity still in front of it. So while our immunodiagnostics franchise is helping deciphering some of the most complex diseases, let me now turn to our reproductive health franchise. And here, I want you to hear directly from one of the impacted families, how we help patients at their earliest stages in life. [Presentation]

What a moving testimony from the Aaron's family courageously battling Duchenne muscular dystrophy, which is such a devastating disease. It's really making a difference for children Eli by diagnosing these rare diseases early in life which is the focus of our newborn screening solutions. Let me give you now an overview of our Reproductive Health franchise. This $500 million business has been growing low single digits on average in the past 5 years. Now bear in mind that this is significantly outperforming global birth rate trends, which I will discuss later. Now the majority of the revenue, about 70% is from newborn screening followed by prenatal and maternal health as well as cord blood banking and rare disease services. So we are the industry leader in newborn screening with over 40 years of history. And we have built strong relationships with public health institutions, key opinion leaders, patient advocacy groups and, of course, also our customers, the newborn screening labs worldwide. But most importantly, our screening solutions save the lives of over 85 babies every day. And you've seen firsthand the deeply personal impact that this can have on the quality of life of a child and their family. So this further underscores the purpose we have at Revvity and shows by what we're motivated every day. So the foundation of our leadership position are our comprehensive and scalable screening solutions, which focus really on the unique needs of our customers. We not only have FDA-approved solutions or tests for over 70 conditions, which include metabolic, endocrine or genetic disorders, but we also have high-touch instrument and clinical services. Now the workflow always starts with the same sample, a dry blood spot or DBS obtained from the heel prick of a newborn in the hospital. This sample card then gets sent to the clinical laboratory where the blood analytes are extracted and subjected to the analytical modality. I've already touched upon the fact that we have a wide variety of diagnostic platforms that we're using to answer the diagnostic question. But most importantly, in this workflow, the entire workflow is wrapped in comprehensive software solutions that track samples, report out results in a highly efficient and compliant manner. So now let me tell you how our newborn screening business is able to significantly and consistently outperform the global birthrate trends in developed countries by over 600 basis points each year. There are several key growth drivers that enabled our business to grow 2% to 4% in the low to mid-single digits over the past years, and we see this growth rate continue going forward. First, geographic expansion with new customers; second, menu expansion with existing customers; and third, menu expansion by introducing new and innovative products. Let's talk about geographic expansion. And you've heard some of these numbers earlier today from Prahlad but let's go through it one more time. if you consider that of the 140 million babies born, only about 40 million or 30% are being tested for at least 1 disorder, it becomes very clear that this is a massive growth opportunity. 100 million babies remain untested. So the number of countries that have implemented national programs for screening has been steadily rising to over 100. And we continue to engage with the health authorities of countries that do not yet have such programs. In addition, the recent WHO proclamation, which emphasizes the importance of newborn screening will drive further awareness in those countries and may be unlocking funding opportunities. So all of these factors not only point to a massive growth opportunity but they also represent a responsibility for us to bring newborn testing to more babies across the world. Another growth driver is to increase the menu adoption with existing customers. So there is meaningful dispersion in the number of tests per baby conducted both at the U.S. state level as well as across the globe. So for example, while California will test for 59 disorders, Montana might test for 33, Germany for 19 and China for 9. So as clinical evidence continues to accumulate, we see great potential in existing customers adopting more of our available menu over time. We talked about innovation being another key growth driver. And in the U.S., the adoption of new tests or new test for newborn screening is really guided by a federal advisory committee, the Recommended Uniform Screening Panel or RUSP. This panel is recommending a standardized list of disorders from which the states then will select their specific programs. Now the number of RUSP approved conditions has steadily increased to over 64 in the past 20 years. And one of the key factors here is really the availability of treatments for new rare diseases also fueled by cell and gene therapy. So we offer testing solutions for all of these RUSP disorders today because we're engaging early on with the newborn community and anticipate which disorders will be nominated next. So this defines then an organic R&D pipeline for us. So let me highlight two of these innovations from this pipeline for you, one metachromatic leukodystrophy and the other one, next-generation sequencing for newborn screening. So you have heard from the Wallace family earlier today that MLD, what a rare -- I mean what a devastating disease MLD is and which affects the nervous system, and really is just a death sentence if left undiagnosed and untreated. So we've been partnering early on with pharma companies operating in this space -- and in March 2024, Orchard Therapeutics received FDA approval for their gene therapy. Now often, these types of therapies show better efficacy the earlier during the disease process they are administered. And this is why it's so important to identify these patients as early as possible. So we've launched an MLD research assay today and we're planning a path to FDA approval in combination with other anticipated disorders. With that strategy, we can then stay ahead of future RUSP nominations and turn on these diseases when they become nominated. Another innovation that we launched this year is our next-generation sequencing panel for newborn screening. As we see rapid acceleration of genetic research, it makes sense to interrogate a specific set of genes that are associated with these inherited diseases. So I want to emphasize that this is really a rapidly evolving field with the goal to complement and augment our existing newborn screening, and much more work is needed, but it holds a tremendous potential to improve neonatal care. So I'll share with you our newborn screening growth drivers in detail. If we're combining these with a stable outlook for our cord blood banking and prenatal and maternal health segments, we expect the total reproductive health business to grow 2% to 4% going forward. So hopefully, I was able to show you how passionate we are about reproductive health and why it is fueling our purpose on a daily basis. There is so much opportunity to improve neonatal and prenatal care and we believe that our testing solutions will continue to drive solid growth for the years to come. So finally, let me show you how we leverage many of our unique and internal capabilities in intercompany collaborations. You've heard some examples earlier today from Craig about in-sourcing. And so through in-sourcing of critical in vitro diagnostics raw materials from our Life Science business, we're able to strengthen the security of supply and become less dependent on the external suppliers. One such opportunity comes from this very site here, BioLegend, which is a rich source of high-quality antibodies for both our immunodiagnostics and reproductive health businesses. So as we shop the Revvity store first, we're creating meaningful synergies for margin expansion in addition to stabilizing our supply chain. We're also leveraging expertise in our core Reproductive Health markets into meaningful opportunities for cell and gene therapy manufacturing. As we have built unique capabilities and infrastructure to cryopreserve cord blood stem cells, we're able to partner with pharma to support critical steps in their cell therapy manufacturing processes and logistics. These turnkey solutions is really avoiding significant infrastructure investment that these manufacturers would need to make otherwise. So let's bring these different parts together for the outlook of the overall Diagnostics business. Combining the high single-digit immunodiagnostics and low single-digit Reproductive Health growth rates, we're assuming the overall diagnostics business to grow between 6% to 8% going forward. In addition, we see significant opportunities for strategic collaborations with customers on top of that. And you will hear more about this upside from our Chief Scientific Officer, Madhuri, in a minute. So in summary, we feel very confident in our strong potential across specialized markets and in our ability to deliver above-market growth. This is a truly unique business. Now before turning it over to Madhuri, let's have another look at how we're partnering with rare disease organizations to make a difference in patients' lives. [Presentation]

What an amazing representation of precision medicine in action. We have been on this journey with Jain Foundation for over a decade. And we'll continue to collaborate with them in their quest to find a precision medicine for patients with dysferlinopathy. My name is Madhuri Hegde, and I'm the Chief Scientific Officer of Revvity. I'm a fellow of the American College of Medical Genetics and Genomics and a diplomat of the American Board of Medical Genetics and Genomics. My career is spanned from doing basic research, discovery, and running high complexity clinical laboratories. I have almost 200 peer-reviewed publications and have been a recipient of several research grants. I came to Revvity about 8 years ago, and have really enjoyed doing basic research, contributing to the molecular understanding of disease and advancing genomic medicine when I was in academics. But Revvity has really offered me the chance to see the immediate and tangible impact of these rapid advances. You have heard today about our foundational capabilities, which truly spans the entire spectrum of human health. But as Prahlad mentioned right at the start, these foundational capabilities are based on cutting-edge technologies, keeping a constant focus on the scientific advances. What I'm going to talk to you today is about the changing face of medicine. Where we are today, what the future looks like and what we are doing at Revvity to stay ahead of it? Medicine is changing rapidly. We live in a very dynamic environment where the expectation is to remain spry, adapt and deliver. The current state with the way we look at it today is we live in this world of symptomatic medicine. But what is changing is we are moving into this new modalities of screening for neonatal, prenatal, pediatric and other phases. At Revvity, we have really positioned ourselves to contribute to transforming of these basic fundamentals going from predictive, preventive, personalized and participatory medicine, which is called as a 4Ps. This is really reflected in the market today, and you can see this on the slide of how the market is expected to grow. But the customers are really seeking partners who can accelerate their journey from concept to clinical impact. What we saw about these capabilities from my colleagues today, Think of them as beads on the string, which live in a very tightly connected ecosystem to support these modalities going from new drug or compound development, develop high complexity assays, partner with pharma to develop companion diagnostics, early screening, diagnosis and monitoring patients. This really spans entire disease course. And at Revvity, we are very well positioned to enable the 4 Ps, as I mentioned in my previous slide. So if you think of this beads on a string, none of these are linear. We all know that the customer entry point could be in any of these areas. The added complexity to these entry points is that the customer needs could depend on their product or their project itself, which could mean that the customer needs are in diagonally opposite areas. This is really an outstanding feature of what we do at Revvity is to remain nimble and deliver cross-functionally. I'm going to show you a couple of examples of how we have been able to achieve this. Our acquisitions are part of as distinct assets, but they are really business units with clear focus lanes. These acquisitions, which you have heard of today, really added immediate scale, expertise in highly specialized areas and expanded new -- Revvity into new and attractive markets. I'm going to talk about 2 examples of the acquisitions we have done recently. One being Horizon in the Life Sciences, adding to the Life Sciences portfolio and expanding the Life Sciences portfolio into cell engineering. That comprises of CRISPR and RNAi, reagents, cell models, cell engineering and base editing technologies. These additions really enable our customer and on their quest to understand gene function, genetic disease, drivers and therapeutic delivery. You just heard from Yves about the specialty diagnostics portfolio, which was enabled by addition of Oxford Immunotec. Addition of Oxford Immunotec brought the T cell immunology technology to our company with their latent TB product and which now we are also focused on the active TB product. But this really also uses the Revvity's channel expertise and the workflow solutions we have across Revvity. So what you are seeing today is how we are bridging the gap from research to reality and enabling precision medicine. The idea really is how do we close this gap between life sciences and diagnostics. Again, going from discovery, preclinical development, clinical, commercial, screening, diagnostics and monitoring. But before I show you the examples, I want to talk about 4 unique differentiators, which are truly unique to Revvity and bridges this gap between life sciences and diagnostics. These unique capabilities are really positioned to drive precision medicine. The first one, you have heard a lot about it today, is our ability to develop cutting-edge content development. be it in antibodies or in diagnostics. From Yves, you heard about our leadership position in newborn screening. Today, Revvity's assays and tools are used in more than 100 countries from established markets to new and emerging markets. These tools are really important for early screening and early identification of babies because we have seen today that precision medicine is only way for early intervention, which is enabled by early screening. Bringing these 2 together and going on to the third one, which is truly unique to Revvity only is our global laboratory footprint. The global labs are -- have a broad accreditation profile and support our Life Sciences and Diagnostics portfolio by giving them a unique window into needs and regions -- needs and drivers of the different regions. Added to that is our broad genomic database, which enables our pharma partners to understand the efficacy of their drugs and the impact of these new drugs in diverse genetic populations. These 3 matchless capabilities really sort of bring into these -- unmatched capabilities really bring us into the specializing omics expertise we have been able to develop. And I'm going to show you three examples now of how these unique differentiators support our foundational capabilities. The first one is of Duchenne muscular dystrophy. You saw from Eli's example how devastating this disorder is. The incidence of Duchenne is about 1 in 5,000. And though it is categorized as a rare disorder, it's truly not a rare condition. It is a devastating disorder with no cure today. The Duchenne gene is the largest gene in the human genome by size. So it's really not easy to screen for mutations in this gene. In our global clinical labs, we offer one single comprehensive assay, which enables the detection of all mutations in one single format. Previously, this used to be done in multiple steps using a variety of different methods. But most important is early diagnosis. Revvity is the only company which has a Ck-MM assay which is FDA approved, which can be used for newborn screening. Yves talked about the RUSP panel. And today, DMD is being considered to be added to the RUSP panel. The advantage here is that there is already an FDA-approved product, which can be picked up by the states and implemented, and Ohio is already starting to look into that. The sequencing-based assay enables the new cell and gene therapy approaches that are being developed. This is really important for the pharma companies to understand what is the mutation so that they can target the mutation, understand the efficacy of the drug or the approach they are using, understand what the disease modifiers are and enable genome-wide identification of any off-target hits. But last but not the least is that Ck-MM assay is going to have a huge impact on early diagnosis of these boys so that the pharma companies who are developing these assays can intervene at the right time. The second example I'm going to give you is about the prevalent diseases. And this is really a great example to show how our life sciences and diagnostics portfolio has come together to address some of the toughest challenges our customers have. We all know that diabetes is a global pandemic. But what is more alarming is the growth of type 1 diabetes, the increase in type 1 diabetes. About 20 years ago, 9 children out of 100,000 were affected by type 1 diabetes. Today, it has gone to 15 per 100,000 and it is expected to grow to several million by 2040. There is 1 single FDA-approved drug on the market today, which can delay the progression of type 1 diabetes, which makes it very important that early diagnosis has to happen so that these kids can go on this particular drug. With collaboration across the company with Life Sciences and Diagnostics, we were able to develop an auto antibody assay for neonatal detection. Governments like the Italian government have already mandated starting 2025, that kids under the age of 1 will be screened for type 1 diabetes. This product did not exist a year ago. Bringing together our progress in omics, immunology, antibodies, we were able to fast track this product development and bring it to the market. So thinking of therapies and the 2 examples I gave you of Duchenne muscular dystrophy and type 1 diabetes, it's really important to select the right type of approach when treating these conditions. Coupled with our gene delivery portfolio, we have now added the Pin-Point base editing technology. Of all the genes we know today with disease-causing mutations, about 50% of those mutations are single nucleotide changes. So this one single technology, which is a Pin-Point technology has a broad application across a large number of diseases. You heard from Yves about the newborn screening sequencing product, which we brought to the market this year. This will go beyond screening Duchenne muscular dystrophy into looking at thousands of conditions for early detection and Pin-Point technology is perfectly suited to address many of these conditions. The Pin-Point technology has a reduced cytotoxicity, lower rate of genomic aberrations, less off-target hits, which really differentiates itself from the CRISPR-Cas9 approaches. So what I've shown you today is how we are bridging this gap from discovery to cure. With our global commercial footprint, our global laboratory footprint, we are uniquely positioned to capitalize on opportunities for growth as science and medicine rapidly advances. That, coupled with our internal capabilities in manufacturing, research and development and a global quality and regulatory network, we have this ability to innovate and create novel solutions for our customers. But the focus really is on how to improve patient outcomes. Now I'll hand it over to Max Krakowiak, our Chief Financial Officer.

Thanks, Madhuri. As you've heard throughout today's presentation, Revvity has been built on the foundation of innovation, scientific expertise and a passion for what we do. And it's that internal fuel that focuses us on delivering our mission to improve human lives around the world and puts us in a position to continue doing so as the needs of our world continues to evolve. Hello, everyone, I'm Max Krakowiak, Chief Financial Officer of Revvity. In addition to the positive impact that we as Revvity are having on society, we also believe that we are in a category of one in regards to our financial profile and future value creation opportunities. Today, you're going to hear me discuss the how. How our new portfolio puts us in a position to deliver differentiated organic growth, how our Revvity operating model is going to help us execute operationally and deliver best-in-class margin opportunities and how we plan to drive accretive disciplined capital allocation to maximize the return to our shareholders. Now before we head into the future profile of Revvity, we thought it was important to take a look at how the transformation has changed our financial profile. Starting first from a revenue perspective. We now play in faster-growing end markets, with stronger marketing positioning and with a higher mix of reoccurring revenues. But it's not only our revenue profile that has been enhanced. It is also the quality of our earnings. Our operating margins are now in the upper 20s. And over the past 5 years, our free cash flow has grown at 11% CAGR. This is not the same company. And our financial trajectory as a result of the transformation has improved for the better. Now as a result of this transformation and all of the acquisitions and the significant divestiture, there was one glaring need that arose out of the transformation. And that was that we, as a company, needed a unified an aligned operating model that could help piece together all of the great cultures that we have acquired and all of the different business processes to allow us to be aligned to how we are going to deliver on our strategic mission as a company. Now this Revvity operating model has 4 main pillars. One is on accountability and making sure that we have the right level of visibility and ownership on all of our key KPIs. Second is agility and our ability as an organization to meet the ever-evolving needs of our customers and end markets. Third is on digitalization as we continue to focus on investing in digital capabilities that will allow us to more -- operate more efficiently and change the way we work as an organization. And lastly is on talent and how we are putting our people in the best chance to succeed. Now the Revvity operating model was launched shortly after the birth of Revvity in March of last year. It has the complete support of everyone around and throughout the organization. And I would say that our operating model is focused on: one, driving that innovation engine; two, is best-in-class customer satisfaction and three, is operational execution, all of which will lead to strong financial performance. Now in terms of where we are in the journey, given that we have just launched this a little over a year ago, we are still in the early to mid-innings. We have a ton of tremendous potential in front of us as an overall organization. Now one of the outputs of our Revvity operating model is our ability to capture operational synergies. And you've heard them consistently throughout today's presentations. We've identified 3 main focus areas here, and we want to highlight a couple of examples. First, on innovation and our focus on cross portfolio solutions. Whether it was Yves referring to it in diagnostics around the cryopreservation and what we're doing with pharma customers or whether it's around Madhuri and our ability to create the type 1 diabetes assay, those are just a few of the many, many examples of how we are leveraging our internal skill sets around all of our business units to fuel our innovation engine. Secondly, from an operations standpoint, we continue to have immense opportunity around sourcing and particularly in-sourcing. Again, you heard this many times throughout today's presentation, whether it was the oligos example, the antibody example. Those, again, are just a few of the many examples of in-sourcing opportunities we have as an organization. Also, we can look at manufacturing and logistics optimization. For those of you that are here in person today, you will get a sense of this firsthand when you go through the BioLegend facility tour. There are also other areas around footprint consolidation. On our most recent earnings call, we just mentioned 1 of the examples of our new headquarters in Waltham, Massachusetts, but that is also just one example of many rooftop consolidations we've been able to execute on and help us deliver on our synergies. Thirdly, from a commercial perspective, we spent a lot of time in the past talking about our focus on e-commerce and strategic accounts and how these initiatives will enable us to cross-sell and unlock the full value of the Revvity store through already existing commercial channels. Underpinning all of this is our focus on our digital capabilities and how we plan to drive efficiencies in the ways that we work as an organization. Another output of the Revvity operating model has been the renewed or enhanced organizational structure we now have as an organization. We mentioned in the press release earlier this week. I know Steve and both Prahlad mentioned in their prepared remarks today, but we are reallocating the majority of our Applied Genomics business into our Life Sciences segment, and we are consolidating our Life Sciences reagents and instruments business into Life Sciences solutions. Now these 2 changes are meant to drive: one, a clear focus of execution and two, helping us unlock the full potential of our commercial and operational synergies. As you look at it from a financial perspective, this move of roughly $150 million of revenue from Applied Genomics into the Life Sciences business creates essentially 2 business segments, with roughly 50-50 splits of our revenue with each representing $1.4 billion. Additionally, from an operating margin standpoint, you noticed that our segments have become closer to parity in the overall company average, but both segments still maintain an opportunity for further margin expansion. From a timeline perspective, we will continue to report under our existing structure throughout 2024 on our Q4 earnings call and the release of the 10-K. And then starting in Q1 2025, we report under our new structure. Now that we are through with some of the logistics, let's take a look at the future financial profile of Revvity, starting first with our growth algorithm. We believe that our transformation now provides us with an enhanced growth algorithm. That enhanced algorithm is on the foundation of us being in faster-growing end markets with stronger market positioning and higher recurring revenues. If you take a look at our historical performances by business units on a pro forma basis over the past 5 years, you will notice that mostly all of our businesses are within their LRP. Now if you take a step back and look at those 5 years and what has happened, there have been significant ebbs and flows. You've had the whole dynamic of COVID, and you've also seen a robust pharma biotech spending cycle, followed by the recent headwinds in the past 18 months. But I think the results of Revvity over that time period showcases; one, the resiliency of our new portfolio; and two, the differentiated performance versus our peers. And I think as you've heard throughout today's presentation, we still have immense opportunity in front of us across each of our business units that will enable us to deliver 200 basis points of growth above our average market rates. Now in addition to the above average or the above market growth rates, we also have additional upside opportunities through our tech and licensing partnerships with pharma biotech as well as the companion diagnostics opportunity in our rare disease services business. We believe that in a normalized market environment, we should grow 6% to 8% and that result will continue to be differentiated versus our peer group over the long term. In addition to the enhanced growth algorithm, we believe that our new portfolio provides us with superior margin opportunities. Starting first with gross margin. We anticipate in a normalized market environment to be able to expand our gross margin 25 basis points per year. That is on top of already gross margins that are north of 60%. And why we believe that we are able to continue to expand our gross margins is; one, the mix and volume from our faster-growing, higher-margin areas of life sciences reagents, software and immunodiagnostics; and two, the benefits of our Revvity operating model, particularly around our pricing processes as well as us being able to execute on the operational efficiency through our M&A synergies in our supply chain around areas such as sourcing, overhead and logistics. In addition to the 25 basis points of gross margin expansion, we believe that as a company, we have the opportunity to deliver 50 bps of operating expense leverage on a per year basis. This, to me, is one of the more exciting areas of our Revvity transformation, and it's one that I think is maybe missed or underappreciated by our investors. The thesis is simple. We believe that R&D should grow in line with our revenue, while SG&A should grow at half the rate of sales. Now how do we get this SG&A leverage? It's really in a combination of 2 things: one, our innovative product portfolio; and two, the Revvity operating model. And when you put the combination of those 2 things, particularly around initiatives such as e-commerce and strategic account selling, what we're able to do is unlock the full value of the Revvity store through already existing commercial channels and commercial reach. It does not require additional head count. I think when you look at it from a G&A perspective and our focus on digital investment and digital capabilities, it's going to enable us to keep our G&A relatively consistent as our business continues to grow and expand. To summarize it from a margin perspective, today, we already have operating margins in the upper 20s, but we believe that our entitlement of operating margins can go up to the mid-30s which represents the best-in-class across the industry. Now we get there by 75 basis points of margin expansion per year, which equates to incremental margins in the upper 30s to low 40s. So I've mentioned that this transformation; one, has provided an enhanced growth algorithm; two, has provided us with superior margin opportunities, but an additional benefit is also improved cash flow generation. And you've already started to see the benefit of that in 2024 as our free cash flow conversion should be north of 90% this year, which has dramatically improved from our historical performance, which hovered around 70% free cash flow conversion. And as we look towards the outer years, we believe that our free cash flow conversion should be sustained north of 85%. And that is on the foundation of 3 key drivers: one, our portfolio is just naturally less capital intensive. We have a higher mix of reoccurring businesses. Two, we continue to invest in digital capabilities around core cash processes such as AR and AP, leveraging tools like AI and automation. And third, we are able to leverage the Revvity operating model to provide clear accountability and ownership to the cash metrics across the organization. This 85% conversion also includes a self-funded portion of an increase in CapEx as we continue to reinvest back in the business to drive our operational initiatives, as well as enhance our product development roadmaps. So if you take the combination of our already strong balance sheet positioning and our improved cash flow generation, we, as Revvity, have an ample opportunity in front of us in terms of capital deployment. If you look back over the past couple of years, there's been 2 actions we've taken. One, we've been on a significant deleveraging journey. And two, we've had a much stronger balance between M&A and our share repurchases. Over the past 2 years, we have repurchased more than $500 million worth of shares and we've recently announced the additional $1 billion of share repurchase authorization from our board. I think going forward, you will continue to see a balanced but yet flexible approach to capital deployment with a focus on maximizing the value creation opportunities for our shareholders. Now underpinning our capital deployment opportunities is our approach to capital deployment. I think as you've seen over the past couple of years during our acquisition spree, we had an intentional focus on building internal capability breadth and scientific expertise. And now although our key priority areas have and will continue to evolve in the future, what's important is that we now have an internal innovation engine that we can leverage to continue to drive our faster-growing core areas of life sciences reagents, software and immunodiagnostics and leveraging our collective ability to be able to drive and expand into new markets. I think you will continue to see that theme going forward as we focus on attractive profitable growth investment areas, and we will be focused on: one, bolstering our key channels; two, providing differentiated scale; three, helping us bridge scientific gaps in the portfolio; and four, continuing to enhance our internal scientific expertise. So bringing this all together in terms of our future financial outlook. We believe that as Revvity, we should be delivering double-digit EPS growth per year in a normalized market environment. That EPS growth is comprised of 7% and from our revenue and 3% on the back of our operating margin expansion of 75 basis points per year. The upside opportunity from capital deployment that I mentioned is further upside to our EPS algorithm. Now I know many of you today were very anxious to get official 2025 guidance, and I hate to be the bearer of bad news, but you're going to have to wait until our Q4 earnings call. However, I did want to provide a little bit of color on things to consider for 2025. First, so if you look at it from a market environment standpoint, as we mentioned on our Q3 earnings call, we believe the path to normalization is going to continue into 2025. Our margin expansion will be dependent upon our ultimate organic growth for next year. However, as we've showcased in 2024 and even in a tough market environment, we are able to provide differentiation on our operating margin expansion versus the peer group. As you look at 2 below-the-line items, we believe our net interest expense should be roughly $70 million next year. That's essentially equivalent to the Q4 exit rate we have. Now that is up significantly year-over-year, but it's really in the backbone of 2 factors. One, we have a lower cash balance. Again, due to the deleveraging journey that I previously mentioned, and two, we do expect to have lower interest rates on our cash balances. From a tax rate perspective, we anticipate 20% tax rate next year that includes a pillar 2 headwind of roughly 100 to 150 basis points. However, as we've showcased throughout 2024, we've been making meaningful progress on our tax planning initiatives, and we continue to do so in the future and ultimately bringing our tax rate back down into the high teens. Now before I conclude on today's personalized journey through Revvity, I wanted to provide a personal story of my own and one that really embodies why I'm so excited to come to work every single day at Revvity. Last year, Steve and I were on a roadshow visiting various investor sites and at one of the sites in an elevator ride down, one of our shareholders had mentioned to me that their child had been diagnosed with a disease at a very young age. He had mentioned that if it was not for Revvity's newborn screening capabilities, their child would not have been able to receive the proper amount of care and been able to live a normal life. To me, as a father of 3, that's a story that hits particularly close to home. And I think if you were to interview any one of our 1,000 employees across the globe, they're going to have a similar story. So to conclude and bring this home. We believe that as Revvity, we are in a category of one. We have created an innovative life sciences and diagnostics company with an enhanced product portfolio. When you combine that with our focus on the Revvity operating model and our intense focus on innovation, customer satisfaction and operational execution, it's going to be what enables Revvity to deliver differentiated organic growth above the market, industry best margin opportunities and meaningful capital deployment for our shareholders. But again, it's not just the financial profile that we think differentiates us is Revvity. It's the impact that we have in the world around us. You've heard it consistently throughout today's presentation, whether it was from Gene, Craig and Kevin around how we, as Revvity are bettering the discovery and development of therapeutics or whether it was from Yves in regards to how our diagnostic screening and testing business is helping save patients' lives or whether it's from Madhuri in terms of how we, as Revvity are best positioned to deliver on the needs of precision medicine. I'll bring you back a little bit to how I opened this. Revvity has been built on the foundation of innovation, scientific expertise, and a passion for what we do. And it is that internal fuel that unifies, drives and differentiates us as Revvity. With that, Steve, I'll turn it back over to you for Q&A.

Okay. So let's do some more questions. We're ready to go. Let's start right behind with Anthony, right there. Mike, go ahead.

Mike Ryskin, Bank of America. Throughout the presentation, you kind of touched on us at the end, you talked about what your view of market growth is and your opportunity to grow above market. I want to dig into that a little bit, especially maybe on the life science component on the reagent side. I mean you talked about innovation, expansion to adjacencies like omics, like some of the GMP capabilities. All that makes sense. But when we talk to a lot of your peers in the reagents business, everyone is investing in innovation, everyone's focused on some of the same adjacencies. So can you just dive into that a little bit? What makes you uniquely positioned to continue to outgrow the market whether this was just a little bit of a low-hanging fruit from BioLegend over time or just sort of the sustainability of that above-market growth? .

Do you want to start?

Yes, sure. And I think when you look at our Life Sciences reagents business, I think it's important to go back to a lot of the themes that Craig had mentioned, really around how we partner with our customers. It's different than the rest of the peer group. We are focused on it from a scientific expertise lens and how we are helping them solve the most challenging problems that they face. Two, I think we pride ourselves in our customer service. It is not the same customer service between us and our peer group. I think the third one is really around the quality of what we provide and how we position it from a value proposition standpoint. He mentioned the dynamics around pricing. We are here as the best value offer for our customers with the best service and the highest quality products. I think that's to us is why we believe that we are going to continue to grow above market.

And then if I could squeeze in a quick follow-up. On the -- Max, toward the end, you're talking about capital deployment and M&A opportunities. Just doing the quick math on the pie chart kind of points to something like $2.5 billion of M&A through 2028. If you think about the scale of what you brought on with BioLegend and EUROIMMUN, just how should we think about future M&A? Is it going to be something a little bit chunkier or a bunch of smaller technology bolt-ons? Just goes to the question I think was asked earlier in terms of are there any big legs to the stool that are still missing? Or is it just more about little bolt-ons here and there?

Yes. Mike, I think the way to think of it, the response is similar to the question that was asked, right? I think the big gaps in the portfolio we have built which was around -- primarily around large molecules, biomolecules where we had. We'll continue to be acquisitive. We've been an acquisitive company. I don't think that's going to go away. But I think it's going to be a bit more focused rather than what we had been in terms of how aggressive we were, is the way to think of it.

Dan?

Dan Arias from Stifel. Max, I wanted to follow up on Mike's question just on above average growth there. If I look on the slide, you have the 200 basis points as being capable in normal market conditions. I mean one way to think about that would be to say that you have the growth drivers that you do that you can employ at market growth of 2%, 4%, 6%. So is it right in thinking that there is some end market condition mix that needs to be in place in order for those upside drivers to materialize? Or is the 200 basis points of above-market growth really set to be something that takes place sort of in any environment?

Yes. I would say it's probably more of the latter, Dan. And I think you've seen a testament to that over the past couple of years with the choppiness particularly in the pharma biotech space. I mean I think for us, and as we've shown throughout today's presentation in each of our end markets, we have opportunities to deliver above-market growth rates. And I think what we're most excited about is really the resiliency of our portfolio and being able to show -- continue to show that differentiation throughout any cycle.

And just as a follow-up, I probably will wade into 2025 waters, which I'm sure you're excited about. But -- just thinking about the 6% to 8% that you've laid out as an LRP long term and then what you said about '25, which is that it's a path to normalization, which doesn't necessarily suggest that 2025 will be a fully normalized year. But if I think about the lower end of the range, 6%, and thinking about 200 basis points of above-market growth and then some of the drivers that you have from licensing rare disease services, which it sounds like you feel good about the consensus number and the way that 2025 is rolling out from the companies that have put an outlook out says that 3% to 4% organic growth is sort of a number that might be possible. Do you feel like the low end of a 6% to 8% LRP range is doable next year?

I think you're going to have to wait for official guidance into our next call. Dan?

Is there anybody on with the market assumptions being made by the companies that have talked about 3% to 4% is a reasonable number for...

Yes, I think we're going to take the next several weeks, Dan, to assess what we think we are comfortable coming out with and then I think in our Q4 earnings call, we will do that.

Can't blame a guy for trying.

Luke?

Luke Sergott from Barclays. Just wanted to follow up on that. So there's a lot of uncertainty headed in there. And so getting to that normalized market rate, like what are you guys hearing from your customers from like the drug discovery and biopharma given all the pipeline rationalization. China right now is a complete unknown. I mean what are your customers over there saying that when they'll get back to that normal? Like what's it going to take for them to really kind of say, "All right, we're back to that reinvestment of normalized rates?"

I think it's a lot of wait-and-see approach still, Luke. I mean if you look on the reagent side of the business, you saw the results that we announced in Q3. The reagent side of the business continues to do well. Discovery is going on. It comes down to the CapEx spend that you would expect from pharma biotech. And that's the piece, I think there is still a wait and watch. There is a release of funding, but there was so -- for example, there was no super budget flush that folks have expected. So that hasn't happened. And that's why we see that -- we call it more what we refer to as a pass-through normalization, some are calling it gradual normalization. Whatever the term you want to use, but that's the way to reflect on it.

All right. Great. And then just here when you guys are talking about bridging the gap between the discovery to the clinic. You have all the pieces in place that seem to -- where you have diagnostics starting to talk to life science a lot more. How much of the strategy really was just more of now that you guys have those pieces in place that you're now trying to super drive that where the discoveries you're making on Life Sciences are having that much more impact on your Diagnostics portfolio versus in the past, it was like, "Oh, we have the screening test or we're doing some rare disease work like we can come up with a screening test." How much of those 2 businesses now talking to each other?

That's a good question. And I'm referring back to what Puneet asked also on this earlier, Luke. Look, when we made these acquisitions, they were made solely based on the opportunities that we would get by filling the gap in our portfolio on the large and biomolecule side of the portfolio. I think what we have seen is there is additional drivers for internal synergistic opportunities around the technology, which we didn't ascertain that they would be to that level. I mean you saw a few examples here, but there is need for an antibody or if there is a need for a raw material on either side of the portfolio, whether it's on Diagnostics or Life Sciences, it is much easier to have the scientists sit in a room, define, design and decide what do they need and build that out rather than have to wait for -- with an external vendor to get in line to what we want and customize it to what your need is. That's the added benefit that we are seeing and it is not just for the current portfolio, but also as you look at future pipeline products or NPIs that you are planning to bring to fore. That's where the -- I would say that, that wasn't as certain to be that opportunity would exist.

Over on this side. Jack, you can run the mic over, Madeleine. Go ahead, Patrick. Yes, go ahead.

We can't see you, that's why.

Patrick Donnelly from Citi. . Prahlad, maybe one for you on the Diagnostics side. The China piece is obviously a variable here. We get a lot of questions about VBP, could that be escalating? Can you just talk about your assumptions around that piece, what you're hearing, again, both near term and even long term, when you think about that ImmunoDx, I think it's 9% to 11%. What you're assuming for China and how to think about the VBP potential impact?

Yes. It's obviously a germane question. Patrick, VBP is not a new phenomenon. And we've talked about it. We've talked about local competition, and we've talked about what the government has said for the past several quarters. The way we have focused on over the past decade is on reproductive health, we have gone in country for country fully. As I said, all the way from raw material sourcing, R&D, development, manufacturing, customer service, all of it is in country for country. . On the autoimmune side, we've also moved quite a bit of our portfolio in there, where we feel there is local competition. There is local competition in the marketplace. We have assumed price declines in our portfolio. But you have to keep in mind that reproductive health and autoimmune are niche and specialized products. Will they eventually come under the purview of VBP or any other act over the next several years? Yes. Our focus is how do we continue to innovate and bring new assays into the marketplace. So we are a step ahead of the competition. That's strategically what we've said over the past several years, and that is our path.

Yes. I think just -- maybe just to add one financial. In terms of the LRP and the outlook for immunodiagnostics of 9% to 11%, we anticipate that China immunodiagnostics is growing probably mid-single digits, which as you look at this year, it is going to grow mid-single digits, and that's with a mid-single-digit headwind from our change in the go-to-market strategy.

Okay. No, that's helpful. And then, Max, maybe one, I understand you guys don't want to touch certainly the growth piece on '25. I guess when you think about the margins, it kind of says in the slide, it's contingent on what level of organic growth it is on the margin expansion opportunity. Can you just talk about, I guess, the moving pieces there, if there is a bit of a lower growth environment in this gradual build back to the 6% to 8%. Maybe it's a little bit below the 75 bps. Maybe just talk about the moving pieces. I know that SG&A, half the revenue rate. If the revenue comes down, just how to think about what that margin expansion opportunity is if growth does shake out a little bit lower than the LRP?

Yes, sure. So I think if you think about it more longer term, I think as we've mentioned, if there's a year where we're growing mid-single digits, the 75 bps of operating margin expansion will probably be closer to 50 basis points, right? Another data point would be if you look at this year, it's roughly a flat market environment or a flat organic growth rest of the company, and we're still expecting to expand margins by 30 basis points. That gives you a little bit, I think, a context in terms of some data points. But as you look at 2025, in particular, I'd say there's 2 factors at play. One, we still have immense opportunity on our operational synergies as I walked through today. And two, we're not going to completely starve the business for investments. So as a leadership team, we'll make the right level of trade-offs there. But we -- over the long term, we continue to be extremely excited about our margin potential as a company.

Jack?

Jack Meehan from Nephron Research. Wanted to continue on in immunodiagnostics. So you had a great slide that just showed the historical growth versus what's assumed in the LRP. And I think for that business, over the last 5 years, it's grown high single digits, and now you're forecasting 9% to 11%. But China is going to slow down. So can you just bridge us on what is accelerating to kind of get you up to that 10% rate?

Yes. And so actually, if you look at the historical performance of immunodiagnostics, China has been a net headwind. So if you remember during the periods of 2020 through 2023, you had essentially all the lost revenue from COVID. And so actually, if you look at immunodiagnostics outside of China, the historical growth rate is in the low teens. And so for us, as we look at the future outlook, One, I've already mentioned our assumptions around China. And two, we're actually probably putting a little bit more of a moderated growth expectation outside of China for immunodiagnostics.

Okay. And then 1 follow-up. I think you talked about 200 bps from new products in that business as well. Can you just talk about how much is coming from T-SPOT versus other things? And maybe just give us a mark-to-market on that. I think it was $75 million of sales or so in 2019. Just how is that business today?

Yves, maybe I'll touch a little bit on the financial piece, and then I'll let you talk about some of the new products. . As you look at -- let's first talk about the T-SPOT and the Oxford business. I think we've mentioned that, that was one business in particular since acquisition that has had some headwinds, particularly if you look at its market presence, mostly being in Asia and Europe, COVID was a challenging dynamic for that business. I think we remain incredibly excited about its future going forward. It's been roughly a flattish business probably since the time of acquisition, but it's one that we believe we still have a competitive right to win or excited about our recent product launches, particularly the AP 2400 that we've talked about. I think when you look at the overall growth algorithm for immunodiagnostics, we believe that our tuberculosis business is growing probably right in line with our overall company average or for the immunodiagnostics side. And Yves, maybe you want to talk about just some of the additional new products we have?

Yes. So in the other areas of autoimmune testing, we're launching some new panels for our IDS clear platform in the U.S., to got FDA approval for -- we're super excited about our connective tissue disease panel, and we will see several waves of hopefully approval there in the next year. And as Max mentioned, I think for the AP 2400, what has been holding us back with actually a clinically higher-performing test than the competition has been really the automation piece. And now this automated workflow puts us on par with the competition with a clinically differentiated test and in the U.S. with higher reimbursement. So that's why we believe there is a strong market positioning with this new platform.

Two other things, if I can just add to what Yves said, Jack. One is around the U.S. market, right? While we do focus on China, if you look at the U.S. market, we've done very well, but there is still a lot of room that we still need to get to in the U.S. It's still 15% from a CAGR. This is a number, as you saw in the slide could go to 40%. Two areas, specifically two disease areas to keep in mind where we are seeing a lot of opportunities for growth as we look forward from our pipeline. One is around neuro autoimmune and second is around nephrology. Keep in mind, and I think I've said this until the cows come home autoimmune testing is still in its nascent season. And right now, it's just the general screening of autoimmune diseases that happen. The next layer that comes in is how do you go into neuro autoimmune, how you look at specific nephro antibodies, which makes it a whole lot more of a specialized area to focus on. So look, I have said this, and I think EUROIMMUN and BioLegend are going to be the 2 best acquisitions in the history of the company. And I think EUROIMMUN has already proven that, and BioLegend is on its way to do that.

Matt?

Matt Sykes from Goldman Sachs. Appreciate you guys hosting us today. . Yves, I've got just sort of a 2-part question on newborn screening. You outlined some of the growth drivers. One is geographic expansion, another one was related to expansion of conditions that are being screened for. So as you think about geographic expansion and you think about maybe moving towards areas where there actually are an increase in birth rates, there typically is also an affordability issue. So as you think about how your infrastructure is set up and maybe the flexibility you have in COGS, can you meet that demand in those types of markets? And then secondly, on the number of conditions, is the fact that a lot of these conditions are not druggable a gatekeeping factor for those conditions actually being screened for? Meaning if there's no therapy available for conditions being screened, it's helpful to know, but it might not be as important of a condition being screened. So given that you want to increase the number of conditions being screened, is that an important driver for you to have that therapeutic development alongside of it?

Yes. Maybe I'll start with the latter part. I absolutely agree. I mean there's no point in screening if there is no treatment in most cases. So -- but that's why I think one of the key growth drivers is the advances we see in rare disease therapeutics. And I think with cell and gene therapy, we've seen several of those examples, and we mentioned several of those. So I think that will be really driving the continuation here in that field. In terms of the emerging markets and screening, cost is clearly an issue in those geographies. But again, we are also looking to see how we can adapt from a COGS perspective and going maybe manufacturing closer in some of those in those geographies? I mean that could be another area there as well.

Let me give you 2 -- I'm sorry, I can't hold my passion. Please excuse me. Let me give you 2 specific examples, Matt. If you take Indonesia, India and the African continents, that makes up 35 million, 27 million and 4 million of births. So what is the number?

I don't know what numbers you...

75 million of births, right? That's what it accounts for. TSH, 1 penny a pill is therapy for it. 1 out of 1,200 kids have TSH as a genetic birth deficiency, correct me if I'm wrong. And the therapy is a penny a pill. So the therapies, I understand for MLD and for DMD and for SMA, they are very expensive. But I think what we are talking about is basic screening. Just for PKU, for TSH, for basic newborn genetic disorders, which can be managed or treated relatively inexpensively. That's where the opportunity for us is. And that's why we've started now making foray in India and Indonesia, 2 key markets where you're getting government acceptance on moving -- India just announced in their budget last year that they're going to move forward in collaboration with the UN announcement around newborn screening. So there is a lot of opportunities there for us. Sorry, I didn't mean to stop, Madhuri.

No, I was just going to go back to the 2 examples I gave, which is type 1 diabetes and Duchenne. Though the basic tenet of newborn screening is that where there is a therapy available, what is changing with newborn sequencing is to identify those conditions early on so that you can slow down the progress of the disease itself. So you're changing fatal conditions, more chronic conditions, but that is really the fundamental here that the Ck-MM assay will allow for early detection and thereby early intervention and slow down the progress.

And just 1 quick follow-up, Max. You talked a little bit about changing sort of the pricing strategy or redeveloping some of the processes there. Could you maybe unpack that a little bit and give some color on that? And is there an effort to harmonize the pricing strategy across the portfolio, just given all the new businesses that you've acquired, does it make sense to try to harmonize that strategy? Or does it not?

Yes. So I think from a pricing perspective, part of the Revvity operating model was just putting in, I would say, a more consistent process for each of our business units. I think a lot of it tended to be manual and very bespoke and a little bit unorganized historically. And so as a result of the Revvity operating model, we really created clear guidelines and expectations around our pricing policies. But it is going to differ by business unit, right? I mean the pricing strategy you have in Life Sciences reagents is not the same you're going to have for Life Sciences instruments or the same we're going to have for software or immunodiagnostics, reproductive health, they're all different. But each business unit and all the acquired companies, they should be aligned if they're in the same business unit and what the market needs are to a single pricing strategy. And that is really what the Revvity operating model has been focused on. .

Rachel?

Perfect. Rachel Vatnsdal from JPMorgan. I want to follow up on Patrick's question earlier around China. So I know you mentioned that assumed within the LRP that you're thinking that ImmunoDx grows mid-single digits. But how should we think about the entire China exposure and what's embedded in your underlying assumptions? Also, you've talked about how stimulus could potentially be a tailwind for you guys. So would stimulus help get you back to that long-term growth rate? Or do you think that will be additive on top of it?

So a couple of questions there, Rachel. So I think first, let's talk with stimulus. I think if you go back and look through the past couple of decades in China, stimulus has always been there. I think we've talked about that this stimulus package has gotten a lot more hype around and a lot more attention to it, but it's not a new phenomenon in the China market. That has always been there to help companies in academic markets, and I think that's going to continue in the future. So although this one might be building off of a relatively lower base due to the headwinds, I don't think it's a relatively unique dynamic. I think it's one that will continue to be there over the long term. I think as you look at our China exposure overall, as a reminder, it's 17% of total company revenues, 10% on the Diagnostics side, 7% on the Life Sciences side. I've talked about the Diagnostics, biggest piece of immunodiagnostics and the assumptions there. I think as you look on the Life Sciences side, we expect China to grow in line with our overall averages across the business unit. So Life Sciences Solutions, 6% to 8%, and software, high single to low double digits. I don't think China is any different.

Perfect. And then just a quick follow-up, just on the gross margin expansion. You talked about 25 bps is embedded within the LRP on the gross margin line. Can you just walk us through how much of that is truly based on volume versus in your own control?

Yes. I would say actually, the majority of it is probably driven by a volume perspective. When you look at the actual expansion. I think the operational synergies that we are driving is essentially helping us offset the inflation that we're seeing from a material standpoint, and then you get the benefit on the volume side.

Any other questions from anyone? . I think at this point, we'll wrap it up. I appreciate everyone's time this morning. Hopefully, you have a much greater understanding about Revvity and why we are so excited about our financial future. So thanks for joining us today.