Bioprocessing Recovery and Guidance
Q: How confident are you in bioprocessing recovery and exiting at high single-digit growth?
A: We are confident because destocking is largely behind us, with order patterns returning to pre-pandemic levels. - In Q2, our core revenue improved nearly 1,000 basis points from down high teens to down high single digits. - Orders grew high single digits sequentially, showing strength in both consumables and equipment. - Large customers with on-market drugs continue to grow, and development pipelines, especially Phase III, remain strong. - We expect to exit 2024 with high single-digit or better growth. -

China Stimulus Impact
Q: When will China stimulus funding impact orders and revenue?
A: Increased activity levels in our China funnel are due to customers preparing for stimulus funding with shovel-ready projects. - However, customers are delaying purchasing decisions as they await financing terms, decreasing funnel velocity. - We don't expect this to convert into orders in any meaningful way in 2024; we view that more as a 2025 event. - The slowdown is broad-based, particularly affecting our Life Sciences equipment with research and academic focus. -

Capital Allocation and Share Buyback
Q: What's the rationale behind the share buyback, and how does it relate to M&A activity?
A: While we maintain a strong bias towards M&A, in today's environment, the relative value of a buyback generates attractive financial returns. - We're buying a great business we know well, confident about its future, while maintaining a meaningful M&A envelope. - Our free cash flow is nearly $6 billion, and net leverage is about 2 turns, positioning us well with various alternatives. - From a return perspective, we're getting as good of a return, if not better, on the buyback than some current M&A multiples. -

Pricing Environment in Bioprocessing
Q: Are you seeing any changes in the competitive pricing environment?
A: Overall pricing was up 100 basis points in Q2, and for 2024 as a whole, we expect to be a little above our historical average of 75 to 100 basis points. - In bioprocessing, we achieved about 2.5% price increase in the quarter, which is a good marker for the full year. - We are not seeing significant price pressures from a competitive perspective. -

Sequential Guidance and Seasonality
Q: What's driving the sequential step-down in bioprocessing revenue guidance for Q3?
A: We are returning to normal seasonality patterns, with an expected mid-single-digit sequential decline from Q2 to Q3 in bioprocessing revenue. - Prior to the pandemic, we typically saw a mid-single-digit step-down between Q2 and Q3. - With destocking largely behind us and order patterns normalizing, we are planning for that seasonal decline in our guide. -

Life Sciences Instruments Outlook
Q: What is the outlook for Life Sciences instruments and the replacement cycle?
A: In Life Sciences, capital equipment remains more constrained, particularly in China, while consumables and services hold up comparatively better. - The additional funding and market subsidies during the pandemic pulled forward demand, replacing a lot of equipment. - We are now experiencing a normalization period, and the replacement cycle is expected to return to normal by 2025. -

Diagnostics Business Performance
Q: How is the Diagnostics segment performing outside of respiratory testing?
A: We saw mid-single-digit growth in our non-respiratory businesses, with good customer activity globally. - At Cepheid, non-respiratory reagents were up mid-teens, with virology assays up 20% in Q2. - Beckman Diagnostics grew low single digits, with recurring revenue growing at mid-single digits. - The moderation is related to challenging equipment comps, but overall, our Diagnostics businesses are poised well with a full innovation pipeline. -

New Modalities Impact
Q: How are new modalities affecting your bioprocessing business?
A: New modalities are exciting but represent a small part of our business and the overall market. - Our business is driven by protein therapies in their various forms. - Smaller biotech customers working on advanced modalities have been disproportionately impacted by funding contractions, but that's improving. - With our broader portfolio skewed towards commercialized drugs and late-phase therapies, we feel good about our growth expectations. -

Yield Improvements and Capacity in Bioprocessing
Q: How do yield improvements and industry capacity affect your bioprocessing business?
A: Improving customer yields is a focus for us, helping lower manufacturing costs and improve drug accessibility. - We don't view yield improvements as an inhibitor to growth; rather, they create opportunity for differentiation. - We believe capacity, especially for commercial production and Phase III, needs to increase, and we expect capacity to continue to expand, supporting equipment order growth. -

Book-to-Bill Ratio in Bioprocessing
Q: Has the bioprocessing book-to-bill crossed 1 in Q3?
A: Our book-to-bill is 0.9, and to meet our full-year guidance of bioprocessing being down low single digits, we need to maintain that ratio. - This has been consistent in the first half, and we are confident it will continue. - The guide assumes that with a 0.9 book-to-bill for the year, we'll exit with high single-digit or better growth. -

Respiratory Testing Trends
Q: What are the expectations for respiratory testing revenue in Q3?
A: We are assuming $200 million of respiratory revenue in Q3 versus $300 million in Q2. - This contributes to the step-down in revenue and impacts operating margins, as respiratory has a higher margin profile. -

Capital Equipment Constraints
Q: How are capital equipment sales performing in Life Sciences?
A: Capital equipment is more constrained, particularly in China. - Consumables and services are holding up better, but capital equipment remains soft due to customers delaying purchases awaiting stimulus funding. - We don't expect significant improvement until 2025. -

M&A Environment
Q: What is holding back M&A activity, and what's your confidence in deploying capital?
A: We like our portfolio and how we're positioned for the future. - In today's environment, we observe a disconnect between our trading multiples and current M&A multiples. - From a return perspective, the buyback made sense now, but our bias still is towards M&A, and we are confident in deploying capital when conditions are favorable. -

Competitive Positioning in Bioprocessing
Q: How does your bioprocessing business compare to peers who reported declines?
A: Each competitor has different positioning by product category, geography, and customer type. - We have one of the broadest and deepest portfolios, both upstream and downstream. - While it's hard to have a perfect read across, our business is recovering as expected, and we're confident about the future. -

Operating Margin Expectations
Q: What are your expectations for operating margins moving forward?
A: Over time, we expect 35% to 40% incremental fall-through, and in normal times, our adjusted operating margin should be in the low 30s. - We have optimized our cost structure to sustain these margins as we return to growth in bioprocessing. -