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01/11 11:26
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong financial performance with raised guidance for sales and EPS. Key growth drivers include robust China sales, product innovation, and synergies from the BD acquisition. Analysts' questions highlight positive sentiment, especially towards the BD transaction and subscription model potential. Despite some uncertainties, like the biosimilars ramp-up, the guidance increase and favorable market dynamics suggest a positive stock price movement.
Sales Growth Sales grew 8% as reported and 8% in constant currency. This growth was driven by strong performance in instruments (6% growth) and recurring revenue (9% growth), with service growing 7% and chemistry growing 13%. The growth reflects innovation, execution, and strategic expansion into high-growth areas.
Non-GAAP Earnings Per Share Non-GAAP earnings per share grew 16% to $3.40, which was $0.20 above the midpoint of guidance. This increase was attributed to strong sales performance and operational excellence.
Instrument Sales Instrument sales grew 11% quarter-over-quarter, representing the largest third-quarter ramp in the company's history outside of the 2020 COVID year. Year-over-year, Alliance iS sales grew over 300%, and Xevo TQ Absolute platforms grew 30%. Growth was driven by customer adoption of flagship products and new launches.
GLP-1 Testing Revenue GLP-1 testing-related revenue more than doubled year-over-year. This was due to wins in development and manufacturing settings in the Americas and Europe, as well as expanding demand from generic semaglutide manufacturing in India.
PFAS Testing Orders PFAS testing orders grew approximately 30% year-over-year. Growth was driven by strong demand in Japan due to new drinking water regulations and continued momentum from U.S. federal, state, and municipal labs.
India Revenue India revenue grew in high teens year-over-year. This growth was driven by strong demand from generics manufacturers and CDMOs, benefiting from volume growth trends tied to the ongoing patent cliff of blockbuster drugs.
Chemistry Growth Chemistry grew 13% year-over-year, fueled by the positive market reception of newly launched SEC and Affinity Bioseparation Columns. Bioseparations grew more than 20%, and small molecule applications grew 10%.
Pharma Sales Pharma sales grew 11% year-over-year, driven by double-digit growth in the Americas and Asia, and high single-digit growth in Europe. Growth was supported by instrument replacement activity, greenfield CapEx projects, and new system deployments in bioanalytical characterization.
China Pharma Sales China pharma sales grew by more than 20% year-over-year. This growth reflects continued spending improvement among Chinese CDMOs and biotech customers.
Gross Margin Gross margin for the quarter was 59%, a 70 basis point sequential increase versus the prior quarter. This improvement reflects normalization of tariff remediation costs.
Xevo CDMS: Launched as a transformative breakthrough in bioanalytical characterization, enabling faster results, easier operation, and smaller sample sizes. It serves a $350 million market growing at high single to low double digits.
Empower Updates: Planned updates to evolve Empower into a modern, connected, and intelligent platform with AI and machine learning features, enhancing compliance and operational efficiency.
New Chemistry Products: Newly launched SEC and Affinity Bioseparation Columns contributed to 13% growth in chemistry, with bioseparations growing over 20%.
India Market: Revenue grew in high teens, driven by demand from generics manufacturers and CDMOs, benefiting from the ongoing patent cliff of blockbuster drugs.
China Market: Pharma sales grew by more than 20%, supported by spending improvement among CDMOs and biotech customers.
PFAS Testing: Orders grew approximately 30%, driven by demand in Japan and U.S. labs preparing for new regulations.
Instrument Replacement Cycle: Sales activity surged with meaningful runway ahead, tracking at a low single-digit CAGR versus 2019.
Recurring Revenue: Grew 9%, driven by 7% service growth and 13% chemistry growth.
Gross Margin: Improved to 59%, reflecting normalization of tariff remediation costs.
BD Biosciences & Diagnostic Solutions Combination: Integration planning is underway, with expected completion by Q1 2026. Synergies and long-term value creation are anticipated.
FDA Draft Guidance: Proposed framework to modernize biosimilar drug development could increase demand for analytical instruments and workflows.
Pending Combination with BD's Bioscience & Diagnostic Solutions: The integration planning for the combination with BD's Bioscience & Diagnostic Solutions business is complex and involves significant operational and strategic risks. There is a risk of delays or challenges in achieving the planned synergies and operational efficiencies, which could impact financial performance.
Tariff Structure Impact: The current tariff structure, including recent increases in tariff rates, poses a risk to the company's cost structure and profitability. This could affect gross margins and overall financial performance.
Instrument Replacement Cycle: While the instrument replacement cycle is driving growth, there is a risk of market saturation or a slowdown in replacement activity, which could impact future sales growth.
Regulatory Changes: The U.S. FDA's new draft guidance on biosimilar drugs could increase demand for analytical instruments, but it also introduces regulatory uncertainties that could impact product adoption and market dynamics.
Global Trade Conditions: Although global trade conditions are currently stable, any future disruptions or policy changes could negatively impact the company's operations and financial performance.
Currency Translation: Fluctuations in currency exchange rates pose a risk to reported sales growth and financial results, especially given the company's global operations.
Supply Chain Risks: While not explicitly mentioned, the complexity of global operations and reliance on various suppliers could pose risks of supply chain disruptions, impacting production and delivery timelines.
Revenue Growth: Full year 2025 constant currency sales growth is expected to be in the range of 6.7% to 7.3%, with a midpoint of 7%. Reported sales growth is expected to be in the range of 6.5% to 7.1%.
Earnings Per Share (EPS): Adjusted EPS guidance for full year 2025 is raised to a range of $13.05 to $13.15, representing 10% to 11% growth. Fourth quarter 2025 adjusted EPS is expected to be in the range of $4.45 to $4.55, reflecting 9% to 11% year-over-year growth.
Gross Margin: Full year 2025 gross margin is expected to be approximately 59.2%, above prior outlook.
Operating Margin: Adjusted operating margin for full year 2025 is expected to be approximately 31%.
Market Trends and Drivers: Key growth drivers include instrument replacement cycles, higher service attachment, increased product adoption through e-commerce, and innovation in bioseparations and bioanalytical characterization. External environment improvements, such as stable global trade conditions and clearer policy backdrops for pharma customers, are also expected to support growth.
Product Launches and Innovation: New product launches, including the Xevo Charge Detection Mass Spectrometer and advancements in Empower software, are expected to drive growth in 2026. Empower will evolve into a more intelligent platform with AI and machine learning features, supporting a transition to a subscription-based model.
Combination with BD's Biosciences & Diagnostic Solutions: The pending combination is expected to be completed by the end of Q1 2026, with plans for near-term synergy realization and long-term value creation. Integration planning is underway, with a focus on operational readiness and synergy delivery.
2026 Outlook: The company expects to build on 2025 momentum with continued contributions from growth drivers, new product launches, and the BD combination. The Xevo CDMS system is expected to address a $350 million market growing at high single to low double digits.
The selected topic was not discussed during the call.
The earnings call reveals strong financial performance with raised guidance for sales and EPS. Key growth drivers include robust China sales, product innovation, and synergies from the BD acquisition. Analysts' questions highlight positive sentiment, especially towards the BD transaction and subscription model potential. Despite some uncertainties, like the biosimilars ramp-up, the guidance increase and favorable market dynamics suggest a positive stock price movement.
The earnings call summary and Q&A indicate strong financial performance, particularly in industrial and pharma segments, with positive growth across end markets. The company raised its sales and EPS guidance, suggesting optimism. Despite some concerns about operating margins and conservative growth assumptions, the overall sentiment is positive due to strong market positioning, innovation, and new product launches. The management's confidence in addressing challenges, along with strategic initiatives like the BD acquisition synergy plan, further supports a positive outlook for stock price movement.
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