Vijay Kumar

Vijay Kumar inquired about the reasons for the projected step-down in organic growth from 4% in Q4 to an implied 2% in Q1, and asked for specific end-market assumptions for industrial, labs, and pharma. He also sought clarification on the composition of the full-year 2026 EPS guidance, particularly the contribution from below-the-line items like interest expense and pension income.

Answer

CFO Shawn Vadala attributed the step-down to a more cautious approach for Q1, particularly in industrial and retail, and in the Americas and Europe, following strong Q4 performance driven by product inspection and better-than-expected results in Europe and the Americas. He provided detailed Q4 growth rates and Q1/full-year 2026 guidance for Lab, Core Industrial, Product Inspection, Retail, and regional segments (Americas, Europe, China). Regarding EPS, Shawn Vadala clarified that the 2026 guidance carried forward the 2025 beat, included a benefit from decreased Swiss tariff rates (under 1% of EPS), and noted some noise from foreign currency and better pension income below operating profit, partially offset by higher pension costs above operating profit.

Vijay Kumar asked about the sequential step-down in organic growth from Q4 2025 to Q1 2026 and the underlying end-market assumptions, as well as the composition of the 2026 EPS raise, specifically the non-below-the-line contributions.

Answer

CFO Shawn Vadala explained the Q4 beat was driven by industrial, product inspection, Europe, and Americas, while the Q1 step-down reflects cautiousness in industrial, retail, Americas, and Europe. He provided detailed Q4 results and Q1/full-year guidance by product area and region. Regarding EPS, Shawn Vadala clarified that the 2026 raise includes carrying forward the 2025 beat and benefits from decreased Swiss tariff rates (under 1% EPS), with some pension income noise below operating profit.

Vijay Kumar questioned the 2026 guidance of 4% growth, noting it's a step down from the back half of 2025's average of 4.5%, and asked for clarification on the price versus volume components. He also inquired about the modest operating margin expansion for 2026, suggesting it should be more robust given abating tariff headlines.

Answer

Patrick Kaltenbach, Chief Executive Officer, explained the prudent 4% guidance for 2026 reflects continued market uncertainty, global trade politics, and tariffs, which impact customer confidence. He noted potential upside from easing uncertainties and a recovery in replacement business. Shawn Vadala, Chief Financial Officer, added that pricing benefits are higher in H2 2025 (3.5%) compared to 2026 (2.5%), leading to modest organic volume growth assumptions. For margins, Mr. Vadala clarified that while reported operating margin expansion might seem modest, it's about +60 basis points on a currency-neutral basis, due to the Swiss franc strengthening against the euro impacting reported numbers.

Vijay Kumar inquired about the fiscal 2026 guidance, specifically Patrick Kaltenbach's comment about not assuming significant changes from the current environment, and how the 4% growth for 2026 compares to the 4.5% average in the back half of 2025. He also asked for clarification on the price versus volume components. Additionally, Mr. Kumar questioned whether the modest operating margin expansion for 2026 was appropriate, given the expected abatement of tariff headwinds.

Answer

Patrick Kaltenbach, CEO, explained the prudent 4% guidance for 2026 due to ongoing market uncertainties, suggesting potential upside if customer confidence and replacement business improve. Shawn Vadala, CFO, clarified that pricing contributed about 3.5% in Q3/Q4 2025, but is expected to be around 2.5% for full-year 2026, implying modest organic volume growth. For margins, Mr. Vadala noted that currency dynamics (Swiss franc strengthening) offset some expansion, resulting in a +60 basis points operating margin expansion on a currency-neutral basis, which he considers a strong execution despite the lower reported number.

Vijay Kumar of Evercore ISI sought clarity on EPS assumptions for the second half of 2025 and into 2026, particularly regarding the ability to offset new Swiss tariffs. He also asked about the 2026 tax rate outlook and the timing issues mentioned in the Service business.

Answer

CFO Shawn Vadala confirmed the $0.40 tariff impact is for 2025 and expressed confidence in fully mitigating the incremental costs for 2026. He expects the tax rate to remain around 19% in 2026 but noted a potential cash tax benefit. CEO Patrick Kaltenbach explained that the Q2 Service business softness was due to the timing of large projects and that he is confident it will return to strong growth in the second half, highlighting the solid 5% year-to-date growth.

Vijay Kumar from Evercore ISI questioned the revenue guidance cadence, specifically the step-down in Q2 growth and the implied back-half dynamic. He also asked for the specific fiscal 2025 tariff impact versus the annualized figure and the underlying tariff rate assumptions in the forecast.

Answer

CFO Shawn Vadala explained that Q2 represents a low point due to short-term uncertainty, particularly in China, and that the second half does not assume a volume acceleration over the first. He clarified the fiscal 2025 net tariff headwind is approximately 2% to EPS growth and confirmed the guidance assumes tariff rates remain at their current levels.

Vijay Kumar of Evercore ISI questioned the sustainability of the strong Q4 underlying growth into Q1 2025, asking about potential one-offs like customer pre-buys ahead of tariff risks, and inquired about the competitive landscape and geopolitical risks in China.

Answer

CEO Patrick Kaltenbach attributed the strong Q4 performance to product innovation and a likely budget flush in Europe, stating there were no clear indications of tariff-related pull-ins. He and CFO Shawn Vadala reiterated expectations for a more moderate start to 2025. Regarding China, Mr. Kaltenbach highlighted the company's 30-year local presence, broad portfolio, and in-country manufacturing as key mitigants against competitive and geopolitical pressures.

Vijay Kumar inquired about the fiscal 2025 growth assumptions for the Laboratory versus Industrial segments, the outlook for the Service business, and expectations for operating margin expansion.

Answer

CEO Patrick Kaltenbach confirmed that the Service business is expected to maintain mid-to-high single-digit growth. CFO Shawn Vadala provided a detailed breakdown of 2025 growth expectations by segment, noting that reported figures are impacted by a 1.5% headwind from prior-year shipping delays. Vadala explained that 2025 operating margins are projected to be flattish due to this timing effect, but underlying EPS growth would be approximately 4% higher without it.

Vijay Kumar asked for clarification on the 2026 organic revenue guidance, specifically why the ex-China growth rate of 3% represents a step down from the Q4 2025 exit rate of 6.5%, and if any one-off factors or revenue pull-forwards influenced the Q4 performance.

Answer

CEO Jacob Thaysen stated that the momentum from the second half of 2025 is expected to continue into 2026, with mid-teens clinical growth. He noted ongoing challenges in the research academic environment despite NIH budget clarity. CFO Ankur Dhingra explained that the 2%-4% ex-China guidance averages the Q3 2025 (2%) and Q4 2025 (7%) performance, using Q3 as the low-end framework, rather than basing the full-year guide solely on the strong Q4.

Vijay Kumar from Evercore ISI asked for clarification on why Illumina's 2026 organic growth guidance of 2%-4% ex-China represents a step down from the Q4 2025 exit rate of 6.5% ex-China, inquiring if any one-off factors or revenue pull-forwards influenced the Q4 performance.

Answer

CEO Jacob Thaysen stated that the strong momentum from Q4 2025, particularly the 20% clinical consumables growth, is expected to continue into 2026, with mid-teens clinical growth. He acknowledged continued challenges in the research academic environment despite NIH budget clarity. CFO Ankur Dhingra explained that the 2%-4% ex-China guidance brackets the average of H2 2025 performance (Q3 at 2% and Q4 at 7%), using Q3 as the low-end framework rather than Q4 as a base for the full year.

Vijay Kumar of Evercore ISI asked for a detailed breakdown of the changes in Illumina's full-year guidance and inquired about the potential impact of the new product pipeline on growth in 2026.

Answer

CEO Jacob Thaysen highlighted very strong early feedback on new products like Constellation and spatial solutions, stating they are expected to contribute to growth starting in 2026. CFO Ankur Dhingra clarified the guidance update, noting that reduced expectations for instrument sales in the research market are being offset by stronger-than-expected consumables demand. He also pointed to favorable year-over-year comparisons for data services in the second half of the year.

Vijay Kumar from Evercore ISI sought to reconcile the updated revenue guidance. He noted that the total reduction seemed mostly explained by the new China forecast, and questioned how the stated ~15% decline in the research market was being offset to arrive at the final numbers for the rest of the world.

Answer

CEO Jacob Thaysen clarified that headwinds from China and NIH funding were already anticipated in the March forecast. CFO Ankur Dhingra provided a detailed breakdown for the rest of the world, explaining that a ~3 percentage point (~$90M) reduction from research/tariffs is being partially offset by a ~1 point lift from stronger clinical demand and another ~1 point contribution from pricing actions.

Vijay Kumar asked for an update on the recent China announcement, including Illumina's revenue mix and margin profile in the region, and inquired about the implied revenue cadence for 2025 given the Q1 guidance.

Answer

CEO Jacob Thaysen stated that the China situation is very new and that the company is in dialogue with relevant parties. He contextualized that China represents approximately 7% of total revenue but declined to provide further business details. CFO Ankur Dhingra confirmed that the full-year revenue growth is expected to be skewed towards the second half, driven by the NovaSeq X transition.

Vijay Kumar asked about the price-per-gigabase decline during the quarter and whether the company's 500 basis point margin expansion target is now based on the updated, higher fiscal 2024 operating margin guidance.

Answer

CFO Ankur Dhingra confirmed the price-per-GB impact was near -25% due to accelerated NovaSeq X adoption. He affirmed that the 500 basis point margin expansion goal should be viewed from the new, higher 2024 base of ~21%, expressing confidence in achieving it. CEO Jacob Thaysen added this performance is a strong proof point of their commitment.

Vijay Kumar asked about GE HealthCare's fiscal 2026 guidance assumptions for Flyrcado and sought clarification on China's Q4 decline and its 2026 outlook. He also requested clarification on backlog growth (10% in FY26) and the capital book-to-bill in Q4 (north of 1.1).

Answer

Jay Saccaro (VP and CFO) stated that Q4 China was in line with expectations, and for 2026, China is budgeted down within the 3-4% guidance, reflecting a cautious approach. For Flyrcado, he noted the weekly dose number shared for January and confidence in increasing new customer onboarding, but did not provide specific product guidance. He confirmed substantial backlog growth in Q4, setting up well for the multiyear view, and acknowledged the analyst's 'good math' on capital book-to-bill without providing a specific number.

Vijay Kumar asked about the fiscal 2026 assumptions for Flyrcado and sought clarification on the anticipated decline in China, especially given that China's Q4 performance was down in the teens. He also requested confirmation on his math regarding backlog growth of 10% in fiscal 2026 and a capital book-to-bill ratio north of 1.1 in Q4.

Answer

Jay Saccaro (VP and CFO) stated that Q4 China was in line with expectations, being the most difficult comparison, and for 2026, China is budgeted down within the 3-4% guidance, reflecting a cautious approach. For Flyrcado, he mentioned the weekly dose rate of 220 in January and confidence in increasing doses, but did not provide specific product guidance. He confirmed that backlog was up 'very substantially' in Q4, setting up well for the multi-year view, but did not provide a specific capital book-to-bill number.

Vijay Kumar inquired about GE HealthCare's Fercato distribution agreement with CDL, including CDL's market reach, shipping capabilities, and the partnership's evolution. He also asked about equipment book-to-bill trends, revenue recognition timing for 2026, and cancellation rates.

Answer

President and CEO Peter Arduini confirmed CDL/CardioNavx as a large part of the U.S. PET market, with a strategy to convert customers to Fercato, noting the partnership is just starting with a 60-90 day cycle for customer transitions. VP and CFO Jay Saccaro expressed satisfaction with equipment book-to-bill, record backlog, and trailing four-quarter orders growth, indicating a good setup for 2026 with expectations to grow faster than 3% and stable cancellation rates.

Vijay Kumar asked about the CDL distribution agreement for Flyrcado, its market reach, shipping capabilities, and partnership evolution. He also inquired about GE HealthCare's equipment book-to-bill ratio, revenue recognition timing, 2026 outlook, and cancellation trends.

Answer

President and CEO Peter Arduini confirmed CDL's significant role in the U.S. PET market and the strategy to convert customers to Flyrcado, noting strong customer excitement and the potential for rapid conversion. VP and CFO Jay Saccaro expressed satisfaction with equipment book-to-bill and backlog, anticipating faster growth in 2026, and confirmed cancellation rates remain at normal levels.

Vijay Kumar of Evercore ISI asked about the strength of the capital equipment environment across key regions and the company's strategy for mitigating tariff impacts, including visibility into fiscal 2026.

Answer

President & CEO Peter Arduini highlighted a robust replacement cycle in the U.S. and recovery in Europe, while noting China's recovery is slower. VP & CFO James Saccaro confirmed a strong equipment book-to-bill above 1.1x and detailed a two-pronged tariff mitigation strategy: immediate 'no-regrets' moves and longer-term supply chain restructuring to reduce the impact in 2026 and beyond.

Vijay Kumar asked for a breakdown of the U.S.-China tariff impact, the potential for exemptions, and the upside to guidance if tariffs were rolled back. He also questioned the reasons behind the $550 million reduction in the free cash flow forecast.

Answer

CFO James Saccaro explained that bilateral China tariffs account for about $375 million of the impact and that a hypothetical rollback could benefit EPS by approximately $0.40. CEO Peter Arduini noted GEHC is a significant exporter to China. Saccaro confirmed the free cash flow reduction was exclusively due to tariff payments and the timing of inventory liquidation.

Vijay Kumar questioned the 2-3% organic growth guidance for 2025, asking why it wasn't higher given the strong book-to-bill ratio near 1.1x. He also asked for the drivers behind the flat year-over-year margin guidance for Q1 2025.

Answer

CFO Jay Saccaro explained that while Q4 orders were very encouraging, many of the deliveries are scheduled for the second half of 2025 or later, thus not impacting near-term revenue. For Q1 margins, he cited increased OpEx investments in R&D for crucial programs and in SG&A to support new product launches like Flyrcado, which will offset gross margin gains in the quarter. CEO Peter Arduini added that the 2025 plan assumes about $30 million in revenue from Flyrcado.

Vijay Kumar of Evercore ISI questioned what hurdles might prevent a rapid and significant conversion of myocardial perfusion imaging procedures to Flyrcado, given its clear benefits. He also asked if Flyrcado could be a driver for PET system sales and if the company is seeing broader share gains on the systems side, suggesting a stronger overall market position.

Answer

CEO Peter Arduini identified the primary hurdle for Flyrcado adoption as the availability of PET systems in the right clinical locations, noting that installing new systems takes 6-12 months. He affirmed that Flyrcado and other new agents will be a growth driver for the entire PET category and that GE HealthCare is well-positioned with a scalable, integrated platform of agents, equipment, and digital tools to capture this opportunity and strengthen its systems position.

Vijay Kumar asked for a breakdown of Revvity's 2%-3% organic growth guidance for 2026 between life sciences and diagnostics, and also questioned Prahlad Singh about the M&A environment, deal size considerations, and the potential for a merger of equals.

Answer

Max Grykowiak, SVP and CFO, detailed the 2026 organic growth framework: low single-digit for both life sciences (solutions at low single-digits, software at mid-single-digits, reagents at low single-digits, instruments flattish) and diagnostics (reproductive health at mid-single-digits, immunodiagnostics at low single-digits due to China headwinds, but high single-digits outside China). Prahlad Singh, President and CEO, reiterated that M&A targets must be strong strategic additions, primarily in software and life sciences reagents, and no compelling targets have met their financial or return criteria.

Vijay Kumar asked for a breakdown of the 2%-3% organic growth guidance for 2026, specifically how life sciences and diagnostics are expected to contribute. He also inquired if there were any one-off factors contributing to the 7% diagnostics growth in Q4, and about Revvity's M&A strategy, including deal size considerations and the potential for a merger of equals.

Answer

Max Krakowiak, SVP and CFO, detailed the 2026 organic growth framework: life sciences at low single-digits (solutions low single, software mid single) and diagnostics also at low single-digits (Reproductive Health mid single, Immunodiagnostics low single due to China headwinds, but high single outside China). He noted Q4 diagnostics strength came from global Newborn Screening and Immunodiagnostics, with some instrument-related timing. Prahlad Singh, President and CEO, stated that M&A targets must be strong strategic additions, primarily in software and life sciences reagents, and meet financial profile and return criteria. He indicated that no compelling targets have been identified yet.

Vijay Kumar asked for more details on the observed pickup in October customer activity, inquiring if it was concentrated in pharma, academic, or government sectors, and whether it impacted reagents or instruments, also questioning any link to the Pfizer announcement.

Answer

President and CEO Prahlad Singh clarified that the increased activity was primarily on the pharma biotech side, specifically in instrument pockets, indicating increasing discussions rather than broad demand. Kumar also asked if the 2026 outlook of 2%-3% organic growth and 28% operating margins would translate to high single-digit EPS growth, considering FX and below-the-line items. Senior Vice President and CFO Max Krakowiak confirmed that these assumptions would imply high single-digit EPS growth, citing relatively flat interest expenses, an 18% tax rate baseline, and a lower share count from buybacks. Prahlad Singh added this was before any additional capital deployment.

Vijay Kumar asked for clarification on the organic growth guidance change, questioning if it was solely due to China's DRG policy, and inquired about the 2026 margin outlook and the assumptions behind it.

Answer

CEO Prahlad Singh confirmed the guidance change was predominantly driven by the DRG policy in China impacting multiplex tests. CFO Max Krakowiak established a baseline 28% operating margin for 2026, with further expansion of 50-75 basis points contingent on achieving mid-to-high single-digit organic growth.

Vijay Kumar of Evercore ISI noted the $135 million gross tariff impact seemed high and asked for the updated gross margin assumption and details on how the headwind is being offset. He also inquired about the company's total pharma exposure, its split between R&D and clinical, and current customer trends.

Answer

CEO Prahlad Singh clarified the $135 million figure was a hypothetical 'do nothing' scenario and that proactive measures have mitigated most of it. CFO Maxwell Krakowiak projected a Q2 gross margin near 60% due to the headwind but noted mitigation comes from supply chain changes and temporary cost actions. Krakowiak stated that pharma/biotech is roughly 35% of total revenue, and Singh added that activity in preclinical reagents has stabilized.

Vijay Kumar asked for a breakdown of the 3-5% organic growth guidance by business segment and what factors would drive performance to the low versus high end of that range. He also questioned the strength in the reagents business, asking about potential market share gains and the growth outlook for fiscal 2025.

Answer

CFO Max Krakowiak explained that for 2025, Diagnostics growth is expected to be above the company average (upper end of mid-single digits) while Life Sciences will be in the low single-digit range. He characterized the guidance as balanced and prudent, not assuming any significant market improvement. CEO Prahlad Singh attributed the strong reagents performance to innovation and portfolio strength, suggesting share gains over time. He confirmed the 2025 outlook for reagents is for growth faster than the overall Life Sciences Solutions unit.

Vijay Kumar asked about the market dynamics during the quarter, questioning if conditions worsened or simply failed to recover as expected. He also inquired about the new share repurchase authorization and the Q4 outlook for Instrumentation and Applied Genomics.

Answer

CEO Prahlad Singh clarified that market conditions are sequentially improving, not worsening, but the recovery is more gradual than anticipated. CFO Maxwell Krakowiak projected a mid-single-digit decline for Life Sciences instruments and roughly flat performance for Applied Genomics in Q4. Singh noted the new $1 billion buyback reflects strong confidence in the company's future.

Vijay Kumar asked Kevin Lobo about the specific innovation supercycles he is most excited about for 2026, beyond existing multi-year product cycles. He also sought clarity on Inari's performance, specifically regarding destocking and any sales force disruptions that might have impacted Q4 numbers.

Answer

Kevin Lobo, Chair and CEO, Stryker, highlighted several exciting launches including the Mako RPS handheld robot, Vocera Sync Badge, OptaBlate BVN and IVS, Incompass Total Ankle, and Artix, expressing strong confidence in the R&D pipelines. Jason Beach, VP of Finance and Head of Investor Relations, Stryker, confirmed that sales force disruption for Inari is 'beyond that' and destocking would be minimal in Q1 2026, with good visibility moving forward.

Vijay Kumar asked about Stryker's innovation pipeline for 2026, specifically what new products or 'supercycles' Kevin Lobo is excited about, given that some current supercycles are in their second or third year. He also followed up on Inari, asking for more visibility on the destocking mentioned and any sales force disruption that might have impacted Q4 numbers, and expectations for Q1.

Answer

Chair and CEO Kevin Lobo highlighted ongoing innovation, including the Mako RPS handheld robot, Vocera Sync badge, OptaBlate BVNA, Incompass Total Ankle, and Artix. He noted that diversification makes individual launches less critical, and R&D pipelines are healthy. VP of Finance and Head of Investor Relations Jason Beach confirmed that sales force disruption for Inari is largely resolved, and minimal destocking is expected in Q1, with good visibility for organic growth rates in late Q1 and Q2.

Vijay Kumar asked for a breakdown of the drivers contributing to the 10% sales growth target for the Medical business for the year.

Answer

Jason Beach, Vice President of Finance and Investor Relations, highlighted products like Lifepak 35 (launching in Europe) and Vocera (accelerating performance) as key contributors across the diverse Medical business. Kevin Lobo, Chair and Chief Executive Officer, added that Medical consistently delivers double-digit growth year after year, supported by a strong order book, even amidst supply chain challenges.

Vijay Kumar asked for a breakdown of the drivers behind the 10% sales growth target for the medical business for the year.

Answer

Jason Beach (VP of Finance and Investor Relations, Stryker) mentioned products like LP 35 launching in Europe and the acceleration of Vocera in Q3 and Q4 as key drivers. Kevin Lobo (Chair and CEO, Stryker) added that the medical business consistently delivers double-digit growth year after year, has a strong order book, and is on track despite supply chain challenges.

Vijay Kumar of Evercore ISI asked about the performance of the Medical segment, the broader hospital CapEx environment, and the progress of the LifePak 35 launch. He also questioned if the sequential deceleration in the Knees business was solely due to tougher comps.

Answer

VP of Finance & IR Jason Beach affirmed the capital environment remains strong with an elevated backlog. Chair & CEO Kevin Lobo added that the LifePak 35 launch is doing very well with a strong order book and will have a long tailwind. Regarding Knees, Beach stated there were no material concerns, noting July started strong and that quarterly fluctuations are normal.

Vijay Kumar asked about the cadence of margins throughout the year given the tariff impact and inquired about the performance of the LIFEPAK 35 defibrillator launch.

Answer

CFO Preston Wells expects a relatively even flow of margin improvement to reach the full-year target of 100 bps, with mitigation efforts offsetting the back-half-loaded tariff impact. CEO Kevin Lobo reported that the LIFEPAK 35 launch is going very well with a strong order book, and it was a significant growth contributor in Q1 despite some supply challenges in the Medical division.

Vijay Kumar sought clarification on the 2025 guidance, confirming the maximum operating margin dilution from Inari and that the spine divestiture impact is fully absorbed. He also asked about potential sales disruption and due diligence regarding Inari's DOJ investigation.

Answer

CFO Glenn Boehnlein confirmed the Inari op margin dilution would be a maximum of 20 basis points and the spine impact was absorbed in the EPS guidance. Group President Andy Pierce added that Stryker conducted deep due diligence on the investigation and felt comfortable proceeding with the transaction.

Vijay Kumar requested an update on Mako utilization rates, specifically the percentage of procedures performed robotically, and asked about the macro environment, including procedure wait times and the capital backlog.

Answer

VP of Finance and IR Jason Beach stated that specific Mako utilization statistics would be provided in the annual update in January but confirmed the rates continue to progress positively. CEO Kevin Lobo commented on the macro environment, noting that procedure wait times remain healthy at roughly double pre-pandemic levels (around 4 months), which provides visibility for continued market strength.

Vijay Kumar questioned the penetration and durability of Abbott's double-digit growth in rhythm management, particularly for Aveir, given the typically slower-growing pacemaker category. He also sought updated thoughts on capital allocation, Exact Sciences deal timing, dilution, and the balance between M&A, divestitures, or spin-offs.

Answer

Chairman and CEO Robert Ford stated that Aveir represents about 10% penetration in the global low voltage/pacing market, indicating early innings for growth. He highlighted strong growth in trained regions and 50% penetration in U.S. single-chamber pacing, emphasizing Aveir's role in establishing a new standard of care. Regarding capital allocation, Mr. Ford reiterated a focus on a growing dividend and M&A in MedTech and Diagnostics, with the primary near-term focus on integrating Exact Sciences. He confirmed no change in Exact Sciences deal timing or EPS impact, with a shareholder vote on February 20th, and noted ample capacity for tuck-in deals post-close.

Vijay Kumar asked about the penetration of Aveir in rhythm management and the durability of its double-digit growth in a typically low-growth category. He also sought updated thoughts on capital allocation, including the Exact Sciences deal timing, dilution, leverage levels, and the balance between M&A, divestitures, or spin-offs.

Answer

CEO Robert Ford stated that Aveir represents about 10% of the $5 billion global pacing segment, indicating early innings for penetration. He highlighted strong growth in areas where training began 1-1.5 years ago and noted that U.S. single-chamber pacing is about 50% penetrated. He expressed confidence in sustained differentiated growth through new product launches and clinical evidence. Regarding capital allocation, Mr. Ford reiterated commitment to a growing dividend and a balanced approach. He confirmed that post-Exact Sciences close, the gross debt-to-EBITDA ratio would be around 2.7x, leaving ample capacity. His near-term focus is on Exact Sciences integration, with future M&A likely to be tuck-in deals. He confirmed no change in Exact Sciences deal timing or dilution assumptions, with a shareholder vote scheduled for February 20.

Vijay Kumar asked for an overview of Abbott's China business, including year-to-date and prior-year performance, and the normalized growth outlook, considering macro issues beyond VBP. He also inquired about the size and penetration of the cardiac rhythm management (CRM) dual chamber leadless pacemaker market.

Answer

Chairman and CEO Robert Ford noted that China's contribution to total revenue has decreased to less than 6%. EPD and nutrition businesses in China were up double digits year-to-date, and cardio-neuro saw sequential growth. Excluding diagnostics, China's growth rate was 5-7%. He projects mid-single-digit growth for China in 2026. For CRM, he highlighted AVAIR's success, driving the business from flat to double-digit growth. He estimated single-chamber penetration at 50% and dual-chamber at sub-10% in the U.S., with significant international opportunity in the $4 billion low-voltage pacing market.

Vijay Kumar inquired about Abbott's overall China business, including macro issues, year-to-date performance across segments, and the normalized growth outlook compared to peer expectations. He also asked about the Cardiac Rhythm Management (CRM) business, specifically the market size and penetration of the dual chamber leadless pacemaker (Aveir).

Answer

Robert Ford, Chairman and CEO, stated China now represents less than 6% of total revenue. He noted double-digit year-to-date growth in EPD and Nutrition in China, and sequential growth in cardio/neuro, with diagnostics being the primary challenge. Excluding diagnostics, China's growth is 5-7%, which is the target for 2026. For CRM, Ford highlighted Aveir's role in transforming the business from flat to double-digit growth, driving market share gains. He estimated single-chamber Aveir penetration at 50% and dual-chamber at sub-10% (mostly U.S.), within a $4 billion low-voltage pacing market, with aspirations to become the market leader.

Vijay Kumar of Evercore ISI questioned the sustainability of strong growth in Cardiac Rhythm Management (CRM) driven by the Avera pacemaker and asked for a breakdown of the factors behind the updated EPS guidance.

Answer

Chairman and CEO Robert Ford asserted that Avera has fundamentally changed the CRM business's growth trajectory, citing a 50% increase in trained physicians and a doubling of daily implants. He expects outperformance to continue for several years. EVP and CFO Phil Boudreau explained the EPS guidance update reflects derisked sales, a tariff impact of just under $200 million, and a continued but lessened headwind from foreign exchange.

Vijay Kumar asked about the drivers for the expected back-half revenue acceleration and how the new tariffs would impact gross margins.

Answer

Chairman and CEO Robert Ford attributed the expected back-half acceleration to two factors: the ramp-up of new product launches like Volt and easier year-over-year comps, particularly in Diagnostics (VBP impact) and International Nutrition. EVP and CFO Philip Boudreau confirmed that the tariff impact would be felt largely in the gross margin, but the strong Q1 margin performance provides a partial offset.

Vijay Kumar posed a two-part question on the sustainability of margin expansion trends and the company's balance sheet strategy regarding M&A in medtech versus diagnostics.

Answer

CFO Philip Boudreau addressed margins, stating that with commodity inflation normalizing, the company is back to its standard focus on gross margin expansion and expects to eventually return to historical levels. CEO Robert Ford discussed the balance sheet, emphasizing a disciplined and selective M&A approach focused on strategic fit and return on invested capital (ROIC). He confirmed plans to pay down approximately $1.5 billion in debt in 2025 while maintaining flexibility for opportunities in both medtech and diagnostics.

Vijay Kumar asked about the impact of the recent joint FDA, CDC, and NIH statement regarding infant formula and NEC on Abbott's legal position, and what steps the company might take to ring-fence potential liabilities.

Answer

Robert Ford, Chairman and CEO, said the strong government statement supports Abbott's position that its products are the standard of care and not causative of NEC. He expressed frustration that this evidence is not currently admissible in court. He warned that if the regulatory process and science are disregarded by the tort system, it would be difficult to keep these products on the U.S. market, and he intends to resolve the litigation faster than the typical multi-year playbook.

Vijay Kumar asked about order and backlog growth in the quarter and whether China-related stimulus or pharmacopeia updates were impacting orders. He also inquired about the light gross margins in Q4, assumptions for FY2026 gross margins, and the quantification of tariff versus FX dynamics.

Answer

President and CEO Padraig McDonnell reported a book-to-bill greater than one and stable order rates. He noted that the SAMR tender shifted and GACC orders were smaller than expected, thus excluded from the 2026 guide, but highlighted Agilent's strong track record with China stimulus. Interim CFO Rodney Gonsalves stated that while gross margins are not guided, expansion is expected in FY2026, with full tariff mitigation anticipated in the second half through pricing and cost reductions, and BioVectra's annualized impact no longer being a drag.

Vijay Kumar asked for commentary on order and backlog growth in the quarter, specifically if China-related stimulus or pharmacopoeia updates were impacting orders. He also inquired about Q4 gross margins, which were noted as light, and sought assumptions for FY2026 gross margins, including quantification of tariff versus FX dynamics.

Answer

President and CEO Padraig McDonnell confirmed a book-to-bill greater than one and stable order rates. He mentioned that the SAMR tender shifted to later in 2026, and GACC orders were excluded from the 2026 guide, representing potential upside. He highlighted Agilent's strong track record with China stimulus. Interim CFO Rodney Gonsalves stated that while gross margins are not guided, expansion is expected in FY2026, driven by full tariff mitigation in the second half (through pricing and cost reduction) and the annualization of BIOVECTRA's impact.

Vijay Kumar from Evercore ISI questioned if Q3 results benefited from instrument timing shifts and whether tariff surcharges were already part of the pricing benefit. He also asked what differentiates Agilent's 2026 outlook from peers.

Answer

CEO Padraig McDonnell clarified that instrument growth was from a steady improvement in replacements, not a one-time shift, and that pricing benefits from tariff surcharges have not yet been realized. He differentiated Agilent's 2026 outlook by highlighting an expected China stimulus, a strong and unique CDMO mix with NASD and BioVectra, and secular growth drivers in the CAM market where Agilent has high share.

Vijay Kumar from Evercore ISI questioned if Q3's strong top line was aided by instrument shipment timing from Q2 and asked if tariff-related surcharges were part of the reported pricing benefit. He also sought commentary on the fiscal 2026 market growth outlook compared to peers.

Answer

President and CEO Padraig McDonnell clarified that Q3 performance was driven by a steady improvement in the instrument replacement cycle, not a timing shift, with total instruments growing high-single digits. He stated that pricing surcharges have not yet been realized and will phase in during Q4 and 2026. Regarding the 2026 outlook, McDonnell expressed positivity, highlighting differentiators like the expected China stimulus, a strong CDMO mix with high-growth NASD and BioVectra, and secular drivers in the CAM market.

Vijay Kumar of Evercore ISI questioned the guided slowdown for the Agilent CrossLab Group (ACG) in Q3 after a strong Q2. He also asked about the drivers for a sequential decline in overall company growth guidance, Q2 gross margin performance, and a restructuring charge.

Answer

Angelica Riemann, President of the CrossLab Group, attributed the Q3 ACG guidance to normalizing for the Q2 consumables pull-forward, while affirming strong fundamentals for the full year. CFO Bob McMahon explained the overall Q3 guidance reflects a tougher year-over-year comparison and a prudent stance amid macro uncertainty. He noted Q2 gross margin was impacted by tariffs and mix, and clarified the restructuring charge was a GAAP-only item related to the 'Ignite' program.

Vijay Kumar asked about the driver for the instrument book-to-bill ratio being above 1 in a seasonally weak quarter. He also sought clarification on the 'few hundred million dollars' replacement opportunity and its service attach rates.

Answer

CFO Bob McMahon clarified the strong book-to-bill was a sign of continued recovery in instrumentation, led by LC and LC/MS. CEO Padraig McDonnell noted the installed base is older than the median. President of the Agilent CrossLab Group Angelica Riemann added that the replacement cycle provides an opportunity to increase the attach rate of services and consumables.

Vijay Kumar asked about the drivers for the expected second-half growth acceleration in fiscal 2025 and sought clarification on the outlook for free cash flow and the cadence of margin expansion during the year.

Answer

CFO Robert McMahon explained that the second-half growth step-up is predicated on continued market recovery, particularly in China (aided by stimulus), pharma (driven by the Infinity III launch), and the small biotech sector. He noted the guided step-down in free cash flow is due to a peak in CapEx for the NASD expansion in FY25. For margins, Q1 will be seasonally lower, with benefits from the Ignite transformation program expected to materialize more significantly in the second half of the year.

Vijay Kumar of Evercore ISI asked which of the company's challenged areas—NASD, China, and biopharma—are expected to improve in the next fiscal year and whether there are any first-half versus second-half dynamics to consider. He also questioned if the Q4 sequential guidance is supported by current booking trends and if it includes any year-end budget flush.

Answer

CEO Padraig McDonnell stated that Agilent anticipates improvement across all challenged markets (NASD, China, biopharma) next year, reflecting a slow but steady recovery. He confirmed the Q4 guidance does not assume a year-end budget flush, which would represent potential upside. CFO Bob McMahon added that the Q4 sequential step-up is consistent with historical seasonality and is supported by the current order book.

Vijay Kumar asked which of the challenged business areas—NASD, China, and biopharma—are expected to improve in the next fiscal year. He also questioned if the Q4 sequential revenue guidance is supported by current booking trends and whether it assumes a year-end budget flush.

Answer

CEO Padraig McDonnell and CFO Bob McMahon responded. Mr. McDonnell stated an expectation for all challenged markets to improve next year, with the Q4 guidance reflecting the start of that trend. Both executives confirmed the Q4 sequential step-up is in line with historical seasonality and is supported by the current order book. Mr. McDonnell explicitly stated that the guidance does not include any potential year-end budget flush.

Vijay Kumar of Evercore ISI asked about the drivers behind the increased pharma cautiousness that accounted for a significant portion of the guidance cut. He also questioned if the weakness was broad-based or from specific customers, whether it was a market share issue, and for details on the timing of the new cost savings.

Answer

CEO Padraig McDonnell attributed the $175 million guidance impact to pharma's challenged willingness to spend on capital equipment, a trend expected to persist in H2. He asserted the weakness is broad-based and a macro story, not a market share issue, citing data showing stable or gaining share. CFO Bob McMahon clarified the $35 million in cost savings is for the second half, with the company reaching a $100 million annualized run rate in Q4.

Representing Vijay Kumar, an analyst asked if Agilent had seen any signs of government stimulus in China and what its impact might be. A second question concerned pricing trends during the quarter and expectations for the remainder of the year.

Answer

CEO Michael McMullen and COO Padraig McDonnell stated they have not heard anything about a potential stimulus in China and that if one were to occur, it would represent upside to their forecast. CFO Robert McMahon added that pricing was between 1% and 2% in the quarter, in line with expectations, and the company remains on track for its full-year pricing goals.

Vijay Kumar of Evercore ISI inquired about Agilent's book-to-bill ratio, particularly for LSAG instruments excluding China, and questioned why the positive order trend wasn't reflected in the Q1 guidance. He also asked for the fiscal 2024 assumptions for the NASD business and the China market.

Answer

CFO Robert McMahon explained that the LSAG instrument book-to-bill ratio was positive both with and without China, but the Q1 guidance remains prudent and does not assume a year-end budget flush. CEO Michael McMullen added that a tough 10% prior-year comparison also impacts the Q1 outlook. For the full fiscal year 2024, McMahon stated the company assumes a mid-single-digit decline for China and mid-single-digit growth for the NASD business.

Vijay Kumar asked for further elaboration on Azenta's macro comments regarding CapEx and government shutdown impacts, noting that other life science tools peers had not reported similar trends. He also inquired about the segment assumptions for Q1's projected decline and the confidence in the second-half acceleration, as well as the expected EPS for the year given the margin expansion.

Answer

CEO John Marotta reiterated strength in outsourcing but a pause in NIH/government projects due to the shutdown, primarily impacting multi-omics. EVP and CFO Lawrence Lin confirmed CapEx weakness in SMS and government shutdown impact leaning towards multi-omics. Lawrence expressed confidence in H2 acceleration due to commercial investments and price optimization, stating EPS would be 'greater than $0.50' with similar other income to 2025. John Marotta emphasized the company's focus on EBITDA margin expansion and economic value.

Vijay Kumar from Evercore Inc. asked for further elaboration on Azenta's macro comments regarding CapEx and government shutdown impacts, noting that other life science tools peers had not reported similar trends. He also questioned the confidence in second-half acceleration for fiscal 2026 and sought clarity on the expected EPS for the year, given the projected 300 basis points of margin expansion.

Answer

CEO John Marotta and CFO Lawrence Lin explained that the government shutdown primarily impacted multi-omics, while CapEx slowdown affected SMS, emphasizing their confidence in full-year guidance based on direct customer data. Lawrence Lin expressed strong confidence in H2 acceleration due to commercial investments and price optimization, stating that EPS would be 'greater than $0.50' and that the company focuses on EBITDA margin expansion as a key value driver.

Vijay Kumar of Evercore ISI requested quantification of the Q3 order push-out supporting the Q4 forecast, asked about the impact of recent leadership changes, and inquired about the strategic focus of the M&A funnel.

Answer

CFO Lawrence Lin cited seasonal trends, NGS momentum, and a large C&I order as drivers for Q4 confidence, also noting a C&I funnel at 2.5x revenue. CEO John Marotta highlighted positive impacts from new commercial leadership in North America and SRS. Regarding M&A, Marotta stated the focus is on disciplined, accretive tuck-ins within core areas like biorepositories and automation.

Vijay Kumar asked for the assumptions behind the 1% NIH funding headwind, its timing, and the source of the offsets. He also questioned the sustainability of the strong first-half free cash flow and the reason for the implied step-down in margin expansion in the second half, including any potential tariff impacts.

Answer

CEO John P. Marotta explained that the 1% NIH risk has been fully countermeasured by pivoting to Pharma and Biotech, supported by a dedicated "geopolitical war room." CFO Lawrence Lin added that NIH funding pressure creates an outsourcing opportunity for Azenta. Regarding cash flow, Lin noted it was driven by strong working capital execution but also a one-time tax refund. He confirmed the guidance contemplates tariff impacts and the second-half EBITDA comparison is tougher due to prior-year items like stock comp releases.

Vijay Kumar of Evercore ISI questioned the company's exposure to potential tariffs in China, the reasons for the slow start in the Sample Management Solutions (SMS) segment, and the sustainability of Q1's strong gross margins.

Answer

CFO Lawrence Lin stated that the potential impact from increased China tariffs is immaterial and factored into guidance. CEO John P. Marotta explained the SMS result was due to the timing of large store projects, noting the backlog is robust with 75% of 2025 revenue secured. On margins, Marotta expressed confidence in the trajectory, citing operational efficiencies and favorable mix.

Vijay Kumar asked for details on the Multiomics segment's strong performance, including the drivers of the 25% NGS growth, the status of the NovaSeq X Plus transition, and Gene Synthesis results. He also inquired about China's performance, potential tariff impacts, and CEO John Marotta's strategic vision for Azenta.

Answer

CFO Herman Cueto confirmed the 25% NGS growth was driven by increased volume and price stabilization, with the NovaSeq X Plus transition nearly complete. He noted Gene Synthesis grew in the low single digits for the quarter. CEO John P. Marotta stated that due to their regional manufacturing strategy, they do not anticipate an impact from China tariffs. Marotta then outlined his strategic vision, which centers on portfolio optimization, operational excellence through simplification and KPIs, and a rigorous, returns-based approach to capital allocation.

Vijay Kumar asked a two-part question regarding Medtronic's new products. First, he inquired about the sufficiency of MAPRS (mapping and ablation procedure specialists) and supply for the Affera PFA franchise to achieve the $2 billion revenue target. Second, he asked about the potential for AltaViva (Tibial) to cannibalize Botox procedures and become a billion-dollar product, given its market opportunity.

Answer

Chairman and CEO Jeff Martha confirmed that supply for Affera is strong and MAPRS hiring is keeping pace with tremendous growth, expressing confidence in the PFA business. Regarding AltaViva, Martha highlighted its significant market opportunity (16 million US patients with urinary urge incontinence), its ease of use compared to sacral nerve stimulation and Botox, and its potential to be an incremental growth driver for the pelvic health business.

Vijay Kumar inquired about the supply chain and MAPRS (Medtronic Ablation Procedure Representatives) readiness for Affera to achieve the $2 billion target. He also asked about the potential for AltaViva (Tibial) to cannibalize Botox procedures and become a billion-dollar product.

Answer

Chairman and CEO Jeff Martha confirmed that supply for PFA is strong and MAPR hiring is keeping pace with tremendous growth, ensuring no constraints on the $2 billion target. Regarding AltaViva, Martha highlighted its potential in the large overactive bladder market, noting that patients often choose Tibial over sacral nerve stimulation or Botox due to its simpler, faster activation. He believes AltaViva will be incremental to the sacral nerve business and significantly boost pelvic health growth.

Vijay Kumar inquired about why FY26 earnings growth is back-end loaded, whether product mix negatively impacted Q4 gross margins, and if the CEO would commit to EPS growing faster than revenue regardless of FX.

Answer

CFO Thierry Pieton attributed the back-loaded earnings to lower Q1 factory absorption, front-loaded R&D and S&M investments in growth areas, and an FX headwind in Q1. CEO Geoffrey Martha committed to delivering leveraged EPS growth independent of currency fluctuations, citing structural changes like dynamic pricing to create natural hedges.

Vijay Kumar inquired about the dynamics of the FY26 guidance, asking why earnings growth is back-end loaded and whether the company can commit to EPS growing faster than revenue regardless of the foreign exchange environment.

Answer

CFO Thierry Pieton attributed the back-loaded earnings to front-loaded investments in R&D and sales for new launches, typical Q1 factory absorption, and an FX headwind that eases through the year. CEO Geoff Martha affirmed a commitment to leveraged EPS growth independent of FX, highlighting structural changes like dynamic pricing and natural hedges to reduce currency exposure.

Vijay Kumar from Evercore ISI asked for confidence that the U.S. Surgical slowdown was due to distributor timing and not share loss, and also questioned if there were any one-timers in the strong gross margin performance.

Answer

CEO Geoff Martha attributed the Surgical softness to two large distributors reducing inventory, a dynamic expected to resolve by Q1 '26, and confirmed that end-customer purchase data shows stable demand. Interim CFO Gary Corona stated the gross margin strength was driven by COGS efficiency, pricing, and some FX favorability, not one-timers. Mike Marinaro, EVP & President of the Medical Surgical Portfolio, then detailed progress on the Hugo robot, a key future growth driver for the segment.

Vijay Kumar asked for details on the Cardiac Ablation Solutions business, questioning the cause of the flattish growth, the resolution of the supplier issue, the confidence in a Q3 rebound, and the revenue uplift per case for the new Affera system.

Answer

Chairman and CEO Geoff Martha attributed the temporary slowdown to a third-party component supplier interruption that has since been resolved with expanded capacity. He expressed confidence in strong double-digit growth for Q3, driven by the ramp of PulseSelect and the new Sphere-9 launch. Sean Salmon, EVP & President of the Cardiovascular Portfolio, clarified that while Affera increases revenue per case, it is not a 3x increase over cryoablation.

Vijay Kumar followed up on the NGS Q1 question, asking if the customer headwind, which was present in Q4, was worsening in Q1, driving the NGS assumption.

Answer

Adam Laponis, CFO, confirmed that the "air pocket" from the customer headwind experienced in Q4 is continuing into Q1, but is expected to significantly reverse with a ramp beginning in Q2 2026.

Vijay Kumar posed a two-part question regarding NGS. First, he asked why the Q1 2026 NGS guidance implies a sequential decline from Q4 2025, seeking clarification on any additional timing elements. Second, he questioned whether the MRD Express solution offers tumor-naive assay sensitivity comparable to tumor-informed assays, asking for supporting data and observed customer interest.

Answer

Adam Laponis, CFO, confirmed that the customer transition impacting Q4 2025 NGS revenue would continue into Q1 2026, with sequential growth expected to resume from Q2 2026, leading to 20% year-over-year growth by Q4. Patrick Finn, President and COO, clarified that recent medical conferences suggest tumor-informed approaches lead to increased sensitivity, and Twist's speed and scale are designed to enable this segment of the market.

Vijay Kumar sought confirmation that the $5 million revenue impact from a single NGS customer transition is the primary driver for the sequential decline in Q4 NGS guidance and asked about the expected revenue cadence from Q1 to Q2 of fiscal 2026.

Answer

CFO Adam Laponis affirmed that the $5 million sequential step-down from one customer in Q4 is the key factor driving the NGS guidance for the quarter. He clarified that while some impact from this customer will persist into Q1, the company is committed to and expects overall sequential growth for the business in Q1.

Vijay Kumar sought clarification on macro assumptions, asking if the guidance accounts for tariff impacts and how the company views growth in the U.S. academic and government sector given potential NIH budget pressures.

Answer

CEO Emily Leproust stated that tariffs have had minimal impact and are viewed as a potential competitive tailwind. Regarding the academic market, she highlighted the strong 20% year-over-year growth and emphasized that Twist is significantly underpenetrated, presenting a large opportunity. She drew a parallel to Twist's past success in the budget-constrained biopharma space, where its value proposition drove growth.

Vijay Kumar of Evercore ISI questioned if one-time items drove the Q1 gross margin beat and asked for the rationale behind raising guidance for SynBio and Biopharma when the quarterly outperformance was led by NGS.

Answer

An executive, likely CFO Adam Laponis, confirmed there were no one-time items in the gross margin beat, attributing it to sustainable process improvements and revenue leverage. He explained the guidance raise reflects increased confidence and visibility in the Biopharma and SynBio segments, driven by order trends and new product traction, respectively.

Vijay Kumar asked about Twist's exposure to NIH budgets amid political uncertainty and whether the company is seeing market share gains due to its U.S.-based manufacturing. He also requested clarification on the amount of related-party revenue and the implied Q4 2025 adjusted EBITDA exit rate.

Answer

CEO Dr. Emily Leproust stated that NIH exposure is minimal at less than 1% and that budget constraints historically create opportunities to gain market share. She confirmed that 100% of Twist's DNA is made in the U.S., which is a competitive advantage. CFO Adam Laponis reported Q4 related-party revenue was approximately $12 million and confirmed that the analyst's implied Q4 2025 adjusted EBITDA loss range of $10 million to $13 million was 'not unreasonable'.

Vijay Kumar sought clarification on the implied mid-teens decline for injectables in Q4 and its drivers, as well as reasons for implied operating margin declines. He also asked Andrew Heider about the specific Novum issue, Baxter's communication with the FDA, and remediation requests.

Answer

EVP and CFO Joel Grade attributed injectables softness to U.S. market shifts, reduced premix demand due to IV infusion protocol changes, and competitive pricing, with overall operating margin decline reflecting volume softness. He addressed the Novum issue, reinforcing confidence in the platforms, noting close work with regulators and customers on field actions, and supporting users by ramping up Spectrum IQ inventory as an alternative.

Vijay Kumar from Evercore Inc. sought clarification on the implied mid-teens decline in injectables for Q4 within the Pharmaceuticals segment and the drivers behind it, as well as the implications for operating margin declines. Kumar also pressed for details on the Novum IQ pump issue, asking about the specific problem identified, recent communications with the FDA, and the FDA's remediation requests.

Answer

EVP and CFO Joel Grade attributed the Pharmaceuticals segment's challenges, particularly in injectables, to market shifts like softness in premixes, competitive pricing, and increased use of IV push protocols in the U.S. He emphasized Baxter's focus on reinforcing the clinical value of premixes and improving commercial execution. Grade stated that the overall operating income decline in Q4 guidance primarily reflects the impact of sales/volume softness on operations. Regarding Novum IQ, Grade reiterated that the field actions are publicly known and Baxter is working closely with regulators and customers to develop additional corrections, supporting current users and offering Spectrum IQ as an alternative, while remaining confident in both infusion platforms.

Vijay Kumar of Evercore ISI asked why hospitals continue to conserve IV fluids now that they are off allocation and questioned the severity of the Novum pump issue, seeking context on whether it could take years to resolve. He also requested a bridge for the updated operating margin guidance.

Answer

EVP & COO Heather Knight explained that changing hospital practices takes time but they are actively working with customers to resume normal usage, supported by new supply programs. She differentiated the current voluntary Novum pause, which addresses a small subset of workflows, from more severe historical recalls. EVP & CFO Joel Grade attributed the lower operating margin guidance primarily to the volume impact on manufacturing absorption and unfavorable product mix, partially offset by a reduced tariff impact.

Vijay Kumar from Evercore ISI questioned why hospitals continue to conserve IV fluids despite them being off allocation and asked about the severity and potential timeline for resolving the Novum pump issue.

Answer

EVP & COO Heather Knight explained that changing hospital practices takes time and that Baxter is actively working with customers, highlighting a new Visient partnership to build supply confidence. Regarding Novum, she stressed the pause was voluntary and temporary to address issues in a small subset of workflows, differentiating it from more severe historical recalls, with a goal to resume shipments before year-end.

Vijay Kumar questioned the reasons for the guided Q2 core revenue deceleration and whether the change in operating margin guidance was due to tariffs. He also asked about the extent of market share gains for the Novum IQ pump and its downstream impact on consumables.

Answer

EVP & CFO Joel Grade attributed the Q2 revenue slowdown to IV fluid conservation by hospitals and conservatism in the HST outlook. He confirmed the operating margin guidance change was due to tariffs and FX impacts. COO Heather Knight stated that Novum has already gained low single-digit market share and has a strong pipeline, which should positively impact related consumables as customer confidence and inventory levels normalize.

Vijay Kumar asked for a detailed breakdown of the 2025 operating margin guidance and requested quantification of Hurricane Helene's Q4 impact and the drivers of the earnings beat, particularly pump performance.

Answer

Executive Joel Grade provided a bridge for the adjusted operating margin, detailing a path from 13.9% in 2024 to a guided 16.5% in 2025, attributing the increase to factors like the reversal of Helene's impact, operational improvements, and stranded cost offsets, partially reduced by MSA dilution. An executive confirmed Helene's Q4 impact was approximately $110 million in sales and $0.10 in EPS. An executive identified as Heather highlighted the Nova IQ infusion pump platform as a key driver, with its business growing 50% in 2024 and gaining significant market share.

Vijay Kumar sought clarity on the fiscal '25 guidance framework, asking if the 4-5% growth is off a lower base and if lost IV revenues are considered permanent. He also asked for a bridge from Q3's 14.5% operating margin to the 16.5% target for 2025 and inquired about the dividend policy.

Answer

CEO José Almeida outlined 2025 growth drivers, including new product launches and the Novum IQ pump, expecting a restocking of IV solutions to balance any early-year hurricane impact. CFO Joel Grade explained the 2024 continuing ops margin is not a clean comparison to the 2025 target because it includes stranded costs without offsetting TSA income. He confirmed Baxter is committed to a dividend but will resize it for the new organization.

Vijay Kumar asked about the confidence in fixing current business issues, how the third quarter played out relative to prior expectations, and the outlook for business growth in 2026.

Answer

President and CEO Emmanuel Ligner expressed confidence that issues are fixable, citing the team's passion and the need for leadership. He acknowledged disappointing Q3 numbers, attributing challenges to S&OP, communication, and accountability. EVP and CFO Brent Jones stated that 2026 numbers are under fresh review for accuracy.

Vijay Kumar inquired about CEO Emmanuelle Ligner's confidence in addressing business declines, the quarter's performance relative to prior expectations, and the timing of emerging issues. He also asked CFO R. Brent Jones about the potential for business growth in 2026, considering specific contributions and bioprocessing trends.

Answer

Emmanuelle Ligner, President and CEO, expressed strong confidence in the fixability of issues, acknowledging disappointing Q3 results but emphasizing the team's passion and the need for improved leadership, communication, visibility, execution, and accountability. R. Brent Jones, EVP and CFO, stated he would take a fresh look at 2026 numbers for accuracy before providing an outlook.

Vijay Kumar inquired about the drivers behind the Q3 organic growth guidance, specifically the expected performance of the Bioprocessing and Lab segments. He also asked for a breakdown of the factors causing the EBITDA margin decline and whether the current pricing pressures are expected to persist into the next fiscal year.

Answer

EVP & CFO R. Brent Jones explained that the Q3 guidance reflects consistent performance in the Lab segment, seasonality, and ongoing recovery from manufacturing headwinds in Bioscience. Jones attributed the Q2 margin decline primarily to strategic pricing actions in the Lab business to gain market share, with mix being a secondary factor. He deferred on 2026 margin guidance but noted that new contracts are expected to become accretive over time as volumes recover.

Vijay Kumar asked for clarification on the weakness in controlled environment consumables within the Bioscience Production segment, questioning why customers were cautious if these products are tied to production volumes. He also requested more detail on the heightened competitive intensity within the Lab Solutions business.

Answer

CEO Michael Stubblefield attributed the controlled environment consumables weakness to customers optimizing usage amid macro pressures, but noted the revenue is sticky and recent commercial actions are showing positive effects. Regarding competitive intensity in the Lab segment, he linked it to the challenging macro backdrop, which has led to some volume shifts at a few accounts, but also highlighted important contract wins and extensions, such as with Regeneron. He emphasized that the company is taking decisive actions to strengthen the business regardless of the competitive environment.

Vijay Kumar inquired about the underlying order trends for the bioprocessing segment in Q4, questioning if the strong performance was influenced by any pull-forward of orders due to tariffs or macro uncertainty.

Answer

CEO Michael Stubblefield confirmed a strong finish to the year for bioprocessing with high single-digit growth, stating there was no evidence of a significant pull-forward. He highlighted that underlying market fundamentals remain strong, destocking has subsided, and a healthy order book with 2-3 month lead times supports a sustained recovery into 2025.

Vijay Kumar sought more detail on the weakness in the Bioscience Production segment beyond bioprocessing, focusing on semiconductors. He also asked if the strong Q4 bioprocessing order trends provided a reasonable growth jump-off point for 2025.

Answer

President and CEO Michael Stubblefield specified the weakness was isolated to U.S. semiconductor manufacturing, where a recovery stalled in Q3. He expressed high confidence in the Q4 bioprocessing growth forecast of mid-to-high single digits, driven by strong order momentum and share gains, but did not commit to it as a 2025 baseline.

Vijay Kumar questioned the margin performance, noting 100 basis points of margin expansion in fiscal 2025 despite TAVR recall charges and tariffs. He asked if the sequential decline in Q4 margins is due to incremental tariff headwinds and if the analyst day's 50 basis points of annual operating margin expansion is still relevant for 2026.

Answer

EVP and CFO Jon Monson reiterated satisfaction with the expected 100 basis points of operating margin expansion for the year, despite the $100 million tariff headwind and the Accurate withdrawal. He emphasized managing margins on an annual basis rather than quarter-by-quarter. For 2026, Monson stated that while the annual operating plan is being finalized, the company expects to expand operating margins, drive meaningful expansion, and deliver leveraged double-digit EPS growth, consistent with the long-range financial goals shared at the investor day.

Vijay Kumar of Evercore questioned Boston Scientific's fiscal 2025 margin performance, noting the 100 basis points of margin expansion despite TAVR recall charges and tariffs. He asked about the sequential decline in Q4 margins, whether it's due to incremental tariff headwinds, and if the 50 basis points annual operating margin expansion target from the analyst day remains relevant for 2026.

Answer

Executive Vice President and CFO Jon Monson reiterated satisfaction with the 100 basis points operating margin expansion for the year, overcoming a $100 million tariff headwind and the ACURATE withdrawal impact. He attributed this to strong top-line performance and effective offsets. Monson stated that margins are managed on an annual basis, not quarter-by-quarter. For 2026, while specific details will be provided in the Q4 call, he confirmed expectations for continued operating margin expansion and leveraged double-digit EPS growth, aligning with the long-range financial goals.

Vijay Kumar of Evercore ISI asked for an update on the CHAMPION-AF trial for WATCHMAN, including patient preference and adoption outlook, and the status of the U.S. FDA submission for the ACURATE neo2 TAVR device.

Answer

On TAVR, CEO Michael Mahoney stated there was no new update on the U.S. submission but hopes for more clarity in Q2. Regarding WATCHMAN, CMO Dr. Ken Stein reiterated a H1 2026 data readout for CHAMPION-AF, which he believes could triple the addressable market and support 20%+ growth. He stressed that the ability to get off blood thinners is highly attractive to patients, suggesting strong demand if the trial is positive.

Vijay Kumar asked about the use of mapping in PFA procedures, seeking to understand the current percentage of cases that use mapping and what portion of that Boston Scientific aims to capture with its own solution in the medium term.

Answer

CEO Mike Mahoney and CMO Dr. Ken Stein reiterated the company's commitment to an open platform strategy. They noted that mapping is heavily used in the U.S., Japan, and China, but less so in Europe. While they believe their OPAL platform offers the most efficient workflow with FARAPULSE, they will continue to support competitor systems to accommodate physician preference. They declined to speculate on future market share for their mapping system but confirmed it is a significant area of investment.

Vijay Kumar from Evercore ISI asked about the U.S. regulatory strategy for the ACURATE neo2 TAVR valve following the upcoming data presentation at TCT.

Answer

CEO Michael Mahoney confirmed the ACURATE neo2 trial data will be presented on October 30th and that the company will hold an investor meeting that day to discuss the data and the broader cardiology portfolio plan. He highlighted the valve's continued above-market growth in Europe and the recent launch of the next-generation ACURATE Prime. He did not commit to a specific filing timeline for the FDA.

Vijay Kumar inquired about Danaher's fourth-quarter diagnostics assumptions, specifically for the business excluding respiratory and China, noting that it has been in the mid-single digits for the past two quarters but the Q4 guide implies double-digit growth. He asked what sequential changes drive this optimism. Additionally, he questioned Danaher's capital deployment strategy, particularly the balance between M&A and share repurchases given the recent large buyback and new authorization, and the current deal pipeline.

Answer

Matt McGrew, Executive Vice President and CFO, clarified that the implied uptick in Q4 diagnostics is primarily due to the lapsing of Volume-Based Procurement (VBP) headwinds in China from the prior year's Q4, not a change in the underlying ex-China, ex-respiratory base business, which remains mid-single digits. Rainer Blair, President and CEO, affirmed Danaher's strong bias towards M&A, actively cultivating opportunities while maintaining discipline around attractive end markets, company value, and valuation. He noted that while M&A is preferred, share buybacks at current levels generate attractive financial returns, and all capital allocation decisions are evaluated through an ROIC lens.

Vijay Kumar inquired about the fourth-quarter diagnostics assumptions, specifically for the business excluding respiratory and China, noting that while it has been mid-single digits for the past two quarters, the guide implies double-digit growth for Q4. He asked what sequential changes drive this optimism. He also questioned Danaher's capital deployment strategy, balancing M&A versus share repurchases, given the recent large buyback and new authorization, and the availability of assets in the deal pipeline.

Answer

Matt McGrew (EVP and CFO) clarified that the Q4 uptick in diagnostics ex-Respiratory, ex-China is primarily due to VBP lapsing in China, not a change in the mid-single-digit base business outside China. Rainer Blair (President and CEO) stated a strong bias towards M&A, actively cultivating opportunities within their framework (attractive end market, company with value reserves, valuation). He also noted they are not opposed to buybacks at current levels, evaluating all capital allocation with an ROIC lens.

Vijay Kumar asked about the drivers behind the implied Q4 acceleration in the biotech segment and questioned if there was any customer pull-forward of orders due to tariff concerns. He also asked about the sustainability of high single-digit bioprocessing growth into 2026.

Answer

President & CEO Rainer Blair and EVP & CFO Matt McGrew clarified that they expect steady high single-digit growth in both Q3 and Q4, with the Q4 increase driven by normal seasonality rather than a fundamental acceleration. Blair stated they have not seen any meaningful customer pull-forward and reiterated confidence in high single-digit long-term growth for bioprocessing, deferring specific 2026 commentary to the October call.

Vijay Kumar requested details on the $350 million tariff headwind, its geographic breakdown, and its impact on Q2 margins, and also asked about Danaher's exposure to potential pharma R&D cuts.

Answer

EVP and CFO Matt McGrew clarified that the Q2 margin decline is driven by normal Cepheid seasonality, not tariffs. He stated the $350 million tariff impact is for the remainder of 2025 and is split between U.S.-to-China and U.S.-from-Europe trade. President and CEO Rainer Blair noted that overall pharma R&D exposure is less than 10% of sales, with the bioprocessing business being roughly 75% commercial.

Vijay Kumar sought clarification on one-off headwinds impacting the Life Sciences segment in Q1, specifically at Pall. He also asked about capital deployment plans, including Q1 share repurchases and the current M&A pipeline and criteria.

Answer

President and CEO Rainer Blair identified the Q1 headwind as a difficult comparison at Pall, which had a very large energy project in Q1 2024. EVP and CFO Matt McGrew confirmed the repurchase of 8 million shares for approximately $1.9 billion across Q4 and Q1. On M&A, Mr. Blair noted that activity is increasing, valuations are improving in some areas, and Danaher will remain disciplined with its established criteria.

Vijay Kumar asked about trends within the genomics business, specifically the performance of sequencing versus gene editing, and the potential for the new Rapid Genes product to drive share gains. He also inquired about the slight downward revision to Q4 operating margin guidance and its implications for incremental margins in fiscal '25.

Answer

President and CEO Rainer Blair explained that the gene reading (sequencing) market remains softer due to cautious spending from smaller biotechs, while gene editing is performing well. He expressed excitement for the new Rapid Genes product, expecting it to provide tailwinds over time. EVP and CFO Matt McGrew attributed the Q4 margin outlook to lower anticipated respiratory revenue, timing of bioprocessing revenue, and planned investments. He noted that 2025 margins will depend on volume and mix.

Vijay Kumar asked about the implied quarterly revenue cadence for the second half of the year, potential seasonality, and clarification on the clinical volume growth assumptions. He also inquired about the market opportunity for the company's planned heme assay.

Answer

Luke Power, SVP, CFO & Chief Accounting Officer, explained that Q4 is typically a stronger quarter for the pharma business, leading to a back-half weighting. He confirmed the guidance assumes mid-to-high teens clinical volume growth. Dr. David Spetzler, President, detailed the heme strategy, stating they will initially target myeloid disorders covered by an existing MolDX LCD, leveraging their current sales channel and anticipating reimbursement similar to existing assays.

Vijay Kumar from Evercore ISI asked for clarification on the implied back-half revenue guidance, including any seasonality, and questioned the market opportunity and reimbursement strategy for the new heme assay.

Answer

SVP & CFO Luke Power explained that the pharma business typically sees seasonality, with Q4 being stronger than Q3, and confirmed the guidance assumes mid-to-high teens clinical volume growth. President David Spetzler detailed the heme assay strategy, stating the initial focus will be on myeloid disorders covered by an existing MolDX LCD, targeting the same physician call point and anticipating similar reimbursement to established assays.

Vijay Kumar of Evercore ISI questioned the assumptions in the back-half revenue guidance, including seasonality, and inquired about the market opportunity and reimbursement strategy for the company's planned heme assay.

Answer

SVP & CFO Luke Power explained that the guidance anticipates seasonality in the pharma business, which is typically weighted towards Q4. President David Spetzler detailed the heme strategy, stating it will initially target myeloid disorders covered by an existing MolDX LCD. He noted it leverages the same sales channel and anticipates reimbursement similar to the existing ChromaSeq assay.

Vijay Kumar of Evercore ISI questioned the drivers for the expected second-half acceleration in the Recon segment, given the delay in the ARVIS launch and flat U.S. Hip & Knee growth. He also asked for management's confidence in its adjusted EBITDA reporting and the timeline for normalizing free cash flow conversion.

Answer

CEO Damien McDonald stated that the back-half acceleration will be driven by the broader launch of the Nebula hip system and the ARG shoulder system, along with international cross-selling opportunities. CFO Ben Berry reaffirmed the company's commitment to transparent accounting, explaining that a recent royalty model shift was non-cash. He noted that free cash flow was positive in Q2 despite tariff pressures and expects a significant step-up toward 70-80% conversion as Lima integration and EMDR costs diminish next year.

Vijay Kumar questioned the drivers behind the strong U.S. bracing performance, asked if the U.S. large joint performance was in line with expectations, and inquired about the sustainability of the strong Q1 gross margins.

Answer

CEO Matthew Trerotola attributed strong bracing results to a healthy market environment and successful clinic conversions. He confirmed that Q1 U.S. surgical performance was in line with their expectations and poised to build momentum. CFO Phillip Berry explained that the robust gross margin was driven by a positive business mix from new products and extremities, stating the underlying performance is sustainable, excluding second-half tariff headwinds.

Vijay Kumar asked for clarification on the strong Q1 organic growth guidance, the impact of selling days, and the dynamics of the Q4 U.S. Recon performance. He also questioned the drivers behind the 2025 margin expansion guidance.

Answer

CFO Phillip Berry explained that Q1 benefits from 2-3 extra selling days, which will be offset in Q4. CEO Matthew Trerotola added that Q4 U.S. Recon had a slow start but a strong finish, lapping integration headwinds. Berry clarified that the 2025 adjusted EBITDA margin is expected to expand by 60-70 basis points, driven by core leverage, mix, and Lima synergies.

Vijay Kumar inquired about the Q4 guidance, asking for details on segment assumptions and how impacts from extra selling days were being offset by IV fluid shortages and hurricanes. He also asked about margin execution and free cash flow trends.

Answer

CEO Matthew Trerotola confirmed that early Q4 was impacted by storms and IV shortages, which is conservatively reflected in the guidance without assuming a full recovery. CFO Phillip Berry added that the company is very confident in its $40 million synergy target, with at least $10-15 million realized in 2024. Regarding cash flow, he noted heavy 2024 investments but expects positive free cash flow in 2025 and a return to 70-80%+ conversion over time.

Vijay Kumar of Evercore ISI requested a bridge for the updated 2025 operating margin guidance, asking for the moving parts including tariffs, acquisitions, and FX, and the outlook for margins exiting the year.

Answer

CFO & EVP Suketu Upadhyay explained the margin uplift was driven by four factors: a lower tariff headwind ($40M vs. $60-80M), lower interest expense from better cash flow and reduced borrowings, ongoing operational improvements, and a modest FX benefit. He noted the year-over-year decline is still primarily due to the Paragon 28 acquisition.

Vijay Kumar sought clarification on the fiscal 2026 mid-single-digit growth guidance, asking if it excludes COVID and the discontinued Fluoriscan product, and questioned the drivers behind the strong growth of the Endomagnetics business.

Answer

CFO Karleen Oberton confirmed that the discontinued Fluoriscan product should be excluded from organic growth calculations and that excluding COVID is now inconsequential. CEO Stephen MacMillan explained that Endomagnetics' strong performance was driven by solid commercial execution after Hologic took over direct U.S. distribution, not by any one-off factors.

Vijay Kumar asked for clarification on the Breast Health and Surgical guidance, questioning the implied organic growth rates and the expected cadence of improvement throughout the year.

Answer

CFO Karleen Oberton confirmed that the organic decline for Breast Health would be in the mid-single digits, with Q2 performance similar to Q1 before improving in the second half, culminating in strong year-over-year growth in Q4. For Surgical, she noted that while the Q1 IV fluid shortage has resolved, Q2 is seasonally softer due to deductible resets, with growth expected to improve in the back half of the year, aided by the Gynesonics acquisition.

Vijay Kumar asked for clarification on how to bridge the fiscal 2025 ex-COVID growth guidance of 3.4-4.7% to the company's long-range plan of 5-7%. He also questioned the commentary on the IV fluid shortage, asking if Hologic was seeing a unique impact compared to other medtech companies.

Answer

Chief Financial Officer Karleen Oberton explained the guidance gap is due to transitory headwinds in the first half, including the Skeletal stop ship, respiratory conservatism, and IV fluid shortages, with growth expected to accelerate in the back half. Chairman, President and CEO Stephen MacMillan and CFO Karleen Oberton confirmed they are seeing the impact of the fluid shortage, noting Hologic's highly elective surgical procedures are more susceptible to hospital prioritization and that other medtech companies have also cited this issue.

Vijay Kumar of Evercore ISI sought clarification on the implied gross and operating margins for the second half of 2025, including the assumed impact from the GenaValve acquisition. He also asked for confirmation of operating leverage expectations for 2026.

Answer

CFO Scott Ullem confirmed that a mid-20% operating margin is the correct assumption for the second half, reflecting deferred spending and the GenaValve acquisition, which is expected to close in Q3. He also corrected a premise, stating the company targets an *average* of double-digit growth annually, not specifically for 2026, and confirmed the goal of 50-100 bps of EBIT margin expansion starting in 2026.

Vijay Kumar of Evercore ISI sought clarification on the second-half margin outlook, including gross and operating margins, and the assumed impact from the GenaValve acquisition. He also asked for confirmation of operating leverage expectations for 2026.

Answer

CFO Scott Ullem confirmed that a mid-20% operating margin is the correct assumption for the second half, incorporating the expected GenaValve impact and deferred spending. He clarified that while double-digit growth is an annual average target, it was not specific guidance for 2026, but did reaffirm the target of 50-100 bps of annual operating margin expansion starting that year.

Vijay Kumar sought clarification on whether the EPS guidance implies a complete offset of headwinds or if results might fall in the lower half of the range. He also asked about performance trends in Japan.

Answer

CFO Scott Ullem responded that it is premature to specify where EPS will land within the $2.40-$2.50 range, as it depends on the timing of the JenaValve acquisition close. CEO Bernard Zovighian acknowledged that results in Japan were disappointing due to a weaker procedure environment and competition, but stated the company is enhancing its capabilities there and remains optimistic long-term.

Vijay Kumar questioned why Q1 TAVR growth wouldn't be stronger, given the absence of certain Q4 headwinds. He also asked for perspective on the proposed NCD for tricuspid valve replacement, questioning if the criteria were more onerous than for TAVR.

Answer

CFO Scott Ullem clarified that Q4 headwinds were not exceptionally noteworthy, while Larry Wood, Global Group President of TAVR, reiterated that a slow start to January is typical. Regarding the NCD, CEO Bernard Zovighian and Daveen Chopra, Global Leader of TMTT, stated the proposed language was in line with expectations, with the CED and heart team requirements seen as positive for enabling timely and safe patient access.

Vijay Kumar requested a breakdown of the Q4 TAVR guidance headwinds, specifically the impact of hurricanes and a one-time China distributor rebate, and asked about selling day comparisons and the implied Q4 operating margin.

Answer

CFO Scott Ullem clarified the China impact is a one-time $5 million distributor rebate adjustment with no lingering operational effect. He noted Q4 has three fewer selling days than Q3, but daily procedure volume is expected to grow sequentially. He confirmed the implied Q4 operating margin is in the mid-20s, with a 2025 target of 27-28%.

Vijay Kumar of Evercore ISI asked for details on the physician feedback and reception to the PANOVA-3 pancreatic cancer data at the ASCO conference. He also sought clarification on the nature of revenue recognized from prior period claims.

Answer

Executive Chairman William Doyle described the ASCO reception as the most exciting in 25 years, highlighting that the discussant called the therapy a new standard of care. CEO Ashley Cordova added that the positive momentum continued at ESMO GI. CFO Christoph Brackmann clarified that recognizing revenue from prior periods is a recurring feature, typically in the 3-5% range, and was in line with that this quarter.

Vijay Kumar questioned the NSCLC prescription ramp, the reimbursement pathway in Germany following CE Mark approval, the strength of the France business, and the gross margin outlook considering the updated tariff situation.

Answer

CEO Ashley Cordova affirmed the NSCLC prescription numbers were positive and in line with their controlled launch strategy. She explained German reimbursement would begin on a case-by-case basis. CFO Christoph Brackmann reiterated the full-year low-to-mid-single-digit revenue growth guidance and stated that the low-70s gross margin outlook for 2025 remains unchanged, as HFE array cost reductions are expected to offset tariff impacts.

Vijay Kumar asked about the expected growth trajectory for lung cancer prescriptions from the Q4 starting point, payer coverage timelines, the reason for the sequential decline in Q4 China revenue, and the outlook for gross margins and operating expenses in 2025.

Answer

CEO Ashley Cordova stated that while prescription numbers should grow, it's too soon to give specific targets, and commercial payer coverage would be the focus in 2025. She attributed the China revenue dip to the timing of purchases and the roll-off of royalty amortization. CFO Christoph Brackmann projected gross margins would temporarily dip to the low 70s due to the HFE array rollout and at-risk lung launch, with moderate OpEx increases.

Vijay Kumar of Evercore ISI asked for clarification on the "Together Take Me Home" program's $4 million headwind in 2025 and the status of exploring alternative avenues. He also sought an update on the large, lumpy SMS genomics customer's ordering activity and the quantified impact of PEPFAR funding disruptions for Q2.

Answer

CFO Ken McGrath confirmed the $4 million headwind for the "Together Take Me Home" program would be realized over the first three quarters of 2025 and that alternatives are being explored. CEO Carrie Eglinton Manner stated they expect no revenue from the large SMS customer in Q2 and have no further visibility, but noted the rest of the SMS business grew year-over-year. She clarified the Q1 PEPFAR/NIH headwind was approximately $1 million as expected, and the positive update is that the impact is projected to remain at a similar level in Q2 rather than worsening.

Vijay Kumar of Evercore ISI sought clarity on Q4 gross margin and OpEx expectations, the appropriate baseline for future margin expansion, the potential revenue and margin profile of the Saphris partnership, and the P&L impact of exiting the risk assessment business.

Answer

CFO Ken McGrath guided for Q4 gross margins and OpEx to be consistent with Q3, suggesting a mid-40s percentage is a more appropriate baseline for future modeling than the recent results, which were affected by a high international mix. He confirmed the exit from the slightly unprofitable risk assessment business would be accretive to margins. CEO Carrie Eglinton Manner deferred specifics on Saphris until the next call but highlighted its significant potential, with Ken McGrath adding that such deals are expected to be accretive on an operating basis.

Vijay Kumar of Evercore ISI asked for the instrument growth outlook for the rest of the year following the strong Q1 performance and questioned the rationale for raising the share count assumption while not including buybacks in the guide.

Answer

CEO Udit Batra explained that despite the strong Q1, the guidance for the rest of the year prudently assumes a more moderate 4-5% instrument growth, while recurring revenues are expected to grow 6-7%. CFO Amol Chaubal clarified that the higher share count assumption and lower net interest expense assumption were net neutral to the EPS guidance.

Vijay Kumar asked about the confidence in the 2025 guidance of 4.5% to 7% growth, considering macro risks like tariffs and potential government spending cuts. He also sought details on the contribution from specific growth drivers like PFAS, GLP-1, India, and pricing.

Answer

President and CEO Dr. Udit Batra expressed confidence, citing strong Q4 momentum, a robust product portfolio, and the beginning of an instrument replacement cycle. He confirmed expectations of 30 basis points of growth accretion from both GLP-1 and PFAS, and 70-100 basis points from India. SVP and CFO Amol Chaubal added that pricing is expected to contribute close to 200 basis points.

Vijay Kumar asked whether Waters' strong performance reflects market share gains or a broader end-market recovery. He also sought clarification on the Q4 guidance, questioning if it was conservative given extra days and if any revenue was pulled forward into Q3.

Answer

President and CEO Dr. Udit Batra stated that while precise data is unavailable, he is confident Waters is 'winning more than we're losing,' citing strong execution and a leading portfolio. CFO Amol Chaubal confirmed the Q4 guidance is intentionally 'prudent,' modeling a sequential ramp similar to last year's weaker Q4 despite having two extra days. Batra explicitly denied any Q4 revenue was pulled forward, highlighting that order growth outpaced sales, leading to a build in backlog.

Vijay Kumar of Evercore ISI asked for details on the Oncodetect MRD test, including the algorithm used post-Alpha-CORRECT, the timing of Beta-CORRECT data, and the company's strategy to ramp revenue and compete in the space.

Answer

Brian Baranick, GM of Precision Oncology, explained the algorithm was validated and then applied to the Beta-CORRECT study, which will confirm performance and extend its use. He stated the data is promising and will be shared at ASCO in June. He highlighted competitive advantages including the ExactNexus platform, the strong Oncotype brand, and a tenured sales team to drive the launch.

Asked for details on the MRD test (Oncodetect), including the algorithm used in the Beta-CORRECT study, the timing for that data, the expected revenue ramp, the importance of MolDx reimbursement, and the competitive strategy.

Answer

Brian Baranick (GM of Precision Oncology) responded that the algorithm was validated and used in the Beta-CORRECT study. The data, which looks 'very promising,' will be shared at ASCO in June. He highlighted competitive advantages for Oncodetect, including the ExactNexus platform, the strong Oncotype brand, and a deep, tenured sales team.

Vijay Kumar requested details on the Oncodetect (MRD) test, asking about the algorithm used, the timing and expectations for the Beta-CORRECT data, and the strategy for revenue ramp and competition.

Answer

Brian Baranick, GM of Precision Oncology, clarified that the algorithm was validated and then applied to the Beta-CORRECT study. He stated the data is under embargo but looks "very promising" and will be presented at ASCO in June. He highlighted key competitive advantages for the launch, including the ExactNexus platform, the trusted Oncotype brand, and a deep, tenured sales team.

Vijay Kumar from Evercore ISI asked if the Q3/Q4 performance change was concentrated in a specific age group or region, and what specific changes will be made to fix the commercial execution issues.

Answer

CEO Kevin Conroy did not provide specific regional or age-group breakdowns but emphasized that the upcoming Cologuard Plus launch will provide the sales force with greater access to providers. CFO Aaron Bloomer added that the 45-49 cohort remains a large, underpenetrated opportunity and that rescreens are a growing, high-margin revenue source, now representing 25% of screening revenue, up from 20% in 2023.

Asked if the Q3/Q4 performance change was concentrated in a specific age group (45-49 vs. over 50), if there was regional variance, and what specific changes will be made to fix the commercial execution issues.

Answer

Management did not provide specific details on execution changes but reiterated that growth drivers like rescreens, care gaps, and Cologuard Plus are significant. They highlighted that rescreens now represent 25% of screening revenue and that the 45-49 age cohort is a large, underpenetrated opportunity where they can grow faster.

Vijay Kumar from Evercore ISI inquired if the slowdown was concentrated in a specific demographic, like the 45-49 age group, or had any regional variance. He also asked what specific changes would be made to fix the commercial execution issues.

Answer

CEO Kevin Conroy did not provide specific demographic or regional breakdowns but reiterated that the company can improve execution across the board. He highlighted the launch of Cologuard Plus as a key tool that will provide the sales force with new data and greater access to providers. CFO Aaron Bloomer added that the 45-49 cohort remains a large, underpenetrated opportunity where the company knows it can grow faster, partly through care gap programs.

Vijay Kumar asked about operating expenses, questioning if the sequential decline included any one-offs and how to model the OpEx ramp in the second half of the year. He also inquired about how payers might react to two blood-based tests being available at different price points.

Answer

CFO Aaron Bloomer confirmed there were no significant one-offs in adjusted OpEx and advised to expect consistency in G&A, with sequential step-ups in Sales & Marketing and R&D in the back half. CEO Kevin Conroy addressed the pricing question, stating that payers are adept at managing costs and will use tools like prior authorization to ensure the right test is used. He believes payers will recognize the performance differences between tests and that a test not included in quality measures will have a more limited, appropriate role.

Mackenzie from Evercore ISI asked about the expected phasing of cash burn through 2025, questioning if it would be evenly spread or improve sequentially. She also inquired about the timeline for the new Galleri version to reduce COGS and the potential impact on gross margins.

Answer

CFO Aaron Freidin explained that cash burn is expected to decrease in subsequent years as revenues grow and investments in key programs, like the PMA submission and new test version, begin to roll off. Regarding the new Galleri assay's impact on costs, Freidin noted there will be an immediate benefit on the variable cost front. However, the full cost and margin benefits will only be realized once test volumes increase significantly. He indicated that more specific guidance on margins would be available after the new test has been operational for several quarters.

Vijay Kumar asked for clarification on the fiscal 2025 guidance, specifically the 125 basis point headwind from China and bioscience pharma, and whether the guidance conservatively assumes flat performance in these areas compared to peers. He also inquired about Q1 phasing and any potential hurricane impacts.

Answer

Chairman, CEO, and President Tom Polen explained that the guidance prudently assumes a mid-single-digit decline in China and a continuation of FY24 trends for the bioscience pharma space, despite seeing a slight uptick in Q4. He noted no significant hurricane impact is currently anticipated. EVP and CFO Chris DelOrefice added that the Q1 revenue growth rate will be impacted by tougher prior-year comparisons and market dynamics, but the full-year earnings growth profile is expected to be balanced at around 10%.