Q3 2026 Revvity Earnings Conference Call - REVVITY INC

Explicit Guidance:

• Full Year 2026 Pro Forma Organic Growth: Expected at approximately 5%, raised from a prior outlook of 4-5%.
• Full Year 2026 Pro Forma Revenue: Expected to be approximately $2.86 billion (reflecting ~50 bps FX headwind and ~75 bps ACD Labs contribution).
• Full Year 2026 Pro Forma Adjusted Operating Margin: Expected at 28.8%, up 10 bps from prior guidance and 80 bps from the start of the year.
• Full Year 2026 Pro Forma Adjusted EPS: Expected in the range of $5.40 to $5.45, representing ~12% year-over-year growth.
• Q4 2026 Pro Forma Organic Growth: Expected at approximately 5%, raised from a prior 4% outlook.
• Q4 2026 Pro Forma Revenue: Midpoint expected at approximately $755 million.
• Q4 2026 Pro Forma Adjusted Operating Margin: Expected to be slightly above 32%.
• Q4 2026 Pro Forma Adjusted EPS: Midpoint expected at $1.60.
• Q4 2026 Net Interest Expense: Expected at approximately $22 million.
• Q4 2026 Adjusted Tax Rate: Expected to approach 20%.
• Full Year 2026 Net Interest Expense: Expected at approximately $88 million.
• Full Year 2026 Adjusted Tax Rate: Assumed at 18% (unchanged).
• Shares Outstanding: Expected at 112 million (no buybacks assumed in guidance).
• FX Impact: Expected to contribute approximately 50 bps headwind to full-year growth.
• ACD Labs Contribution: Expected to add approximately 75 bps to full-year revenue growth.
• Segment Growth (Q4): Life Sciences expected to grow in high single digits (up from mid-single digits); Instruments expected to grow in high single digits.

Business-Segment Outlook:

• Life Sciences: Driven by reagents (high single digits in Q3, shifting to mid-single digits in Q4 due to bulk order timing) and software (growing in high teens in Q3, expected to moderate to mid-teens in Q4). Demand is broadening beyond High Content Screening (HCS) to include detection, high-throughput screening, imaging, and in vivo portfolios.
• Diagnostics: Expects to maintain performance similar to Q3 in Q4. Immunodiagnostics expected to grow in high single digits; Reproductive health expected to grow in low single digits.
• Reagent Business: Expects strongest performance in Pharma/Biotech and Academic/Government sectors in over 18 months, excluding bulk order impacts; underlying market demand for lab activity is improving.
• Software (Signals): APV growth in low double digits; expects to deliver double-digit APV growth for the full year 2026. New AI-native launches (e.g., LabGistics) expected to drive future growth, though 2026 contribution remains limited.
• Instrument Backlog: HCS and overall instrument backlog continue to increase and accelerate across almost all instrument groups.
• Geographic Trends: Europe and Americas expected to continue double-digit growth; APAC faces low single-digit decline due to reproductive health pressures in China (offset by life sciences growth).

Market and Competitive Outlook:

• Pharma/Biotech Recovery: Underlying market demand trends from pharma and biotech customers continue to improve following policy-related headwinds; spending behavior moving toward normalization.
• AI Demand Trends: AI-related demand is in "very early days" but expanding beyond high content screening to impact a wider cross-section of offerings (reagents, instruments, software). Customers are building larger biological datasets to train AI models, requiring exponentially more wet lab data.
• Competitive Positioning: Revity expects to deliver "differentiated and above-market growth" with potential for greater separation as AI impacts specific industry areas more than others.
• Customer Cohorts: Strong growth in Pharma/Biotech (low double digits) and Academic/Government (mid-single digits) sectors.

Macro / Industry Outlook:

• Economy/End Markets: Management expects the fundamental recovery in pharma/biotech to be sustainable into 2027, citing mid-to-long-term capital planning by customers rather than spurts.
• Commodities/Inputs: No specific mention of commodity inflation, but focus on "normalized spending behavior" by customers.
• China Market: Reproductive health in China faces headwinds due to declining birth rates, but the business represents only ~1% of total company revenue. Divestiture of the China immunodiagnostics business expected next year.
• FX Rates: Expected to remain a modest headwind (~50 bps for full year).

Strategic Initiatives:

• Investor Day: Scheduled for November 13, 2026, to detail AI impact on science/R&D and the Signals franchise.
• Product Launches (2026): 2026 is the most significant year for new product launches in Signals history, including LabGistics, Synthetica, Biodesign, Signals AI, and Anthropic Connector.
• Diagnostics Expansion: Launched CE IVDR certified GSP T1D triplex kit in Europe for early T1D detection; advancing a broader T1D assay in collaboration with Sanofi.
• Capacity Additions: Taking actions to expand capacity in high-content screening to support elevated demand; building additional capacity in anticipation of further acceleration in 2027.
• Operational Efficiency: Continued consolidation of Life Sciences and Diagnostics activities (e.g., Hopkinton, MA campus) to increase efficiency and collaboration; excluding the divested China business, Diagnostics margins are up >600 bps YoY.
• M&A/Divestitures: Pending divestiture of China Immunodiagnostics business expected to close next year; impact excluded from pro forma guidance.
• Genomics England: Embedding approximately $25 million in full-year contribution; actively negotiating contract extension and expansion into new areas.

Risks and Headwinds to Outlook:

• Timing Variability: Reagent growth outlook for Q4 is tempered by the removal of a one-time bulk screening order contribution (~100 bps impact) that occurred in Q3.
• Software Moderation: Software growth expected to moderate from high teens (Q3) to mid-teens (Q4).
• Macro Sensitivity: APAC growth negatively impacted by reproductive health pressures in China; ongoing uncertainty regarding broader end-market conditions could affect the pace of the AI transition.
• Divestiture: Impact of the China immunodiagnostics divestiture is excluded from pro forma guidance but remains a near-term execution risk.
• Capacity Constraints: Need to monitor if demand accelerates faster than anticipated, requiring further capacity build-out.

Management Tone on the Future:

• Confidence: High confidence in the sustainability of the recovery, citing a "fundamental recovery" and "mid-to-longer term" planning by customers, contrasting with past "false starts."
• Strategic Shift: View AI as a structural catalyst that has begun to impact the portfolio beyond initial use cases; optimistic about the ability to leverage data generation capabilities.
• Operational Potential: Belief that "true potential" is finally being demonstrated after overcoming multi-year headwinds, with sustainable 40%+ incremental margins expected to continue.
• Growth Trajectory: Expectations are progressively moving in the "right direction," with full-year guidance raised three quarters in a row.

Miscellaneous:

• Incremental Margins: Management confirms a 40%+ incremental adjusted operating margin framework is sustainable as revenue growth normalizes.
• Free Cash Flow: Year-to-date FCF exceeds $450 million with 105% conversion to net income; full-year guidance implies continued strong cash generation.
• Balance Sheet: Net debt to adjusted EBITDA leverage ratio expected to approach 2.0x by year-end (down from 2.3x), gross leverage target <3.0x; 100% of long-term debt is fixed-rate with a 7-year weighted average maturity.
• China Impact: Excluding the divested China business, Diagnostics margins improved by over 600 bps YoY.