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01/10 16:56
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates a mixed outlook: while there are positive aspects such as strong software performance and a stable tax rate, challenges in China and revised growth forecasts temper enthusiasm. The Q&A reveals cautious optimism, especially with expected recovery in diagnostics and software, but management's unclear responses on AI and new product contributions suggest uncertainty. Overall, the sentiment is balanced, reflecting both potential and risks, leading to a neutral rating.
Organic Growth 1% organic growth in Q3 2025, slightly offset by less favorable FX tailwinds due to currency changes. Signals software business grew 20% organically, driven by strong SaaS performance and conversion. Reproductive health business grew mid-single digits year-over-year, with newborn screening growing in the high single digits.
Adjusted Operating Margins 26.1% adjusted operating margins in Q3 2025, modestly above expectations but down 220 basis points year-over-year. Year-over-year decline due to tariffs, FX, and lower volume leverage, particularly in Diagnostics business in China. Partially offset by cost containment initiatives.
Adjusted Earnings Per Share (EPS) $1.18 adjusted EPS in Q3 2025, $0.05 above the midpoint of guidance. Increase attributed to better-than-expected operating margins and additional favorability below the line.
Free Cash Flow $120 million free cash flow in Q3 2025, representing approximately 90% of adjusted net income. Year-to-date free cash flow of $354 million, equating to 89% conversion of adjusted net income.
Share Repurchase $205 million spent on share repurchases in Q3 2025, buying back approximately 2.3 million shares. Total buyback activity since divestiture 2.5 years ago amounts to 12.5 million shares or 10% of total shares outstanding at the end of Q1 2023.
Revenue $699 million revenue in Q3 2025, resulting in 1% organic growth. Diagnostics segment grew 2% organically, while Life Sciences segment was flat. Geographically, low single-digit growth in the Americas, mid-single-digit growth in Europe, and mid-single-digit decline in Asia, with China declining in the low teens.
Diagnostics Business in China Diagnostics business in China declined in the mid-20s in Q3 2025 due to DRG-related declines in volume. Excluding China, the other 80% of the immunodiagnostics business grew in the high single digits, with mid-teens growth in the Americas.
Signals software business: Grew 20% organically in Q3, with stronger SaaS performance and conversion.
NeoLSD 7-plex kit: Received IVDR approval in Europe and awaiting FDA clearance. Expanded assay includes screening for MPS-II (Hunter's syndrome).
AI-based software offerings: Launched products like Signals One, Transcribe AI, Phenologic.AI, and Living Image Synergy AI. These solutions improve productivity and scientific advancements.
Geographic performance: Low single-digit growth in Americas, mid-single-digit growth in Europe, and mid-single-digit decline in Asia. China declined in low teens.
Strategic partnerships: Collaborations with Genomics England for newborn screening and Sanofi for type 1 diabetes assay development.
Adjusted operating margins: Achieved 26.1%, modestly above expectations.
Free cash flow: Generated $120 million in Q3, representing 90% of adjusted net income.
Share repurchase program: Repurchased $205 million worth of shares in Q3, with a new $1 billion authorization for future buybacks.
AI integration: Deployed Revvity AI for 11,000 employees, improving lead generation, software development timelines, and financial operations.
Sustainability efforts: Achieved 6% reduction in Scope 1 and 2 emissions and diverted 47% of waste from landfills in 2024.
Dynamic End Market Environment: The company is operating in a dynamic end market environment, which could pose challenges in maintaining stable demand and customer confidence.
Foreign Exchange (FX) Tailwinds: Less favorable FX tailwinds due to currency changes impacted organic growth slightly in the third quarter.
China Diagnostics Business: The diagnostics business in China faced a low teens organic decline, with immunodiagnostics declining over 20% due to DRG-related volume declines.
Tariffs and FX Impact on Margins: Adjusted operating margins were pressured year-over-year due to tariffs and FX, along with lower volume leverage.
Customer Spending Trends: Customer spending has not yet returned to historically normal levels, creating uncertainty in demand trends.
Regulatory Approvals: Some new products, such as the NeoLSD 7-plex kit, are awaiting regulatory approvals, which could delay market entry and revenue generation.
Economic Conditions in China: Economic conditions in China, including DRG-related declines, are negatively impacting the diagnostics business.
Interest Income Reduction: Lower interest earnings on cash balances due to increased share repurchase activity impacted net interest and other expenses.
Revenue Growth: Revvity expects organic revenue growth of 2% to 4% for the full year 2025, with both Life Sciences and Diagnostics segments projected to grow in the low single digits. The company anticipates total revenue to be in the range of $2.83 billion to $2.88 billion.
Adjusted Operating Margins: The company expects adjusted operating margins to be in the range of 27.1% to 27.3% for the full year 2025, assuming the current tariff environment remains unchanged.
Adjusted Earnings Per Share (EPS): Revvity has raised its adjusted EPS guidance to a range of $4.90 to $5 for the full year 2025, reflecting a $0.05 increase from prior expectations.
2026 Organic Growth Outlook: For 2026, Revvity projects organic growth to remain in the 2% to 3% range, with potential for improvement if customer spending returns to historically normal levels. The company remains confident in achieving a 28% adjusted operating margin baseline for 2026 due to ongoing restructuring activities.
AI-Driven Product Development: Revvity is actively embedding AI capabilities into its product offerings, with a robust pipeline of AI-based solutions expected to come to market soon. These innovations aim to transform scientific paradigms and preclinical discovery.
Strategic Partnerships: The company is advancing key partnerships, including collaborations with Genomics England for newborn genetic screening and Sanofi for early screening of type 1 diabetes. These initiatives are expected to contribute meaningfully to the Diagnostics franchise upon regulatory approvals.
Share Repurchase Activity: In the third quarter, the company spent $205 million repurchasing approximately 2.3 million shares. Since the divestiture 2.5 years ago, the company has repurchased 12.5 million shares, representing 10% of the total shares outstanding at the end of Q1 2023.
New Share Repurchase Authorization: The company received a new $1 billion share repurchase authorization from the Board, replacing the existing program. This new authorization provides capacity for meaningful capital deployment in share repurchases over the next two years.
The earnings call indicates a mixed outlook: while there are positive aspects such as strong software performance and a stable tax rate, challenges in China and revised growth forecasts temper enthusiasm. The Q&A reveals cautious optimism, especially with expected recovery in diagnostics and software, but management's unclear responses on AI and new product contributions suggest uncertainty. Overall, the sentiment is balanced, reflecting both potential and risks, leading to a neutral rating.
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