Title

Presentation

Danaher Corporation beats earnings expectations. Reported EPS is $2.06, expectations were $1.94.

Operator: My name is Chelsea, and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to Danaher Corporation’s First Quarter 2026 Earnings Results Conference Call. [Operator Instructions] I will now turn the call over to Ms. Rachel Vatnsdal, Vice President of Investor Relations. Ms. Vatnsdal, you may begin your conference.

Rachel Vatnsdal: Good morning, everyone, and thanks for joining us on the call. With us today are Rainer Blair, our President and Chief Executive Officer; and Matt Gugino, our Executive Vice President and Chief Financial Officer. I’d like to point out that our earnings release, quarterly report on Form 10-Q, the slide presentation supplementing today’s call, the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call and a note containing details of historical and anticipated future financial performance are all available on the Investors section of our website, www.danaher.com, under the heading Quarterly Earnings. The audio portion of this call will be archived on the Investors section of our website later today under the heading Events and Presentations and will remain archived until our next quarterly call.

A replay of this call will be available until May 5, 2026. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. Our Form 10-Q and the supplemental materials I referenced describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company-specific financial metrics relate to the first quarter of 2026, and all references to period-to-period increases or decreases in the financial metrics are year-over-year. We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future.

These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law. With that, I’d like to turn the call over to Rainer.

Rainer Blair: Thank you, Rachel, and good morning, everyone. We appreciate you joining us on the call today. We’re off to a solid start to the year. Our team executed well in a dynamic environment, leveraging the Danaher Business System to accelerate innovation, drive productivity gains and deliver better-than-expected adjusted EPS growth. On the top line, continued strength in bioprocessing and better-than-expected performance in Life Sciences largely offset the impact of a lighter-than-normal Q1 respiratory season at Cepheid. Now looking across the portfolio, trends in many of our end markets were modestly better than our expectations entering the year. In large pharma and biopharma, commercial monoclonal antibody production remained robust, and we continue to see gradual improvement in R&D spending.

Trends at smaller biotech and academic and government customers were stable sequentially with some pockets of improved order and funnel activity. Meanwhile, clinical and applied end markets performed well, consistent with recent quarters. Geographically, we saw an acceleration in our Life Sciences and Biotechnology businesses in China. Now the global environment has become more dynamic since the start of the year, including the ongoing conflict in the Middle East. And while we have limited direct revenue or supply chain exposure to the region, we’re mindful of potential pressures from a sustained conflict. That said, we remain focused on controlling what we can control, including leveraging the Danaher Business System to proactively manage our supply chain and mitigate inflationary pressures while continuing to invest for the long term.

At the same time, we’re enhancing our portfolio through strategic M&A, including the pending acquisition of Masimo, where we believe there are significant opportunities to improve performance over time through DBS and our global scale. With the strength of our balance sheet and robust free cash flow generation, we’re well positioned for further capital deployment going forward. So with that, let’s take a closer look at our first quarter 2026 results. Sales were $6 billion in the first quarter, and core revenue was up 0.5% year-over-year with a 2.5% headwind from respiratory revenue, partially offsetting 3% core revenue growth in the rest of the business. Despite a lighter-than-typical Q1 respiratory season, underlying momentum across the portfolio improved as many end market headwinds began to moderate.

Geographically, core revenue in developed markets were down slightly with a mid-single-digit decline in North America and a mid-single-digit increase in Western Europe. High-growth markets were up low single digits with solid performance across most regions, including mid-single-digit growth in China. In China, better-than-expected growth in Biotechnology and Life Sciences more than offset the expected high single-digit decline in Diagnostics, which continued to be impacted by volume-based procurement and reimbursement policy changes. Our gross profit margin for the first quarter was 60.3%, and our adjusted operating profit margin of 30.2% was up 60 basis points, reflecting the benefit of year-over-year cost savings, more than offsetting the negative impact from lower respiratory revenue year-over-year.

Adjusted diluted net earnings per common share of $2.06 were up 9.5% year-over-year. We generated $1.1 billion of free cash flow in the quarter, resulting in a free cash flow to net income conversion ratio of 105%. Turning to capital deployment. In February, we announced our intention to acquire Masimo, a leading provider of mission-critical pulse oximetry and patient monitoring solutions in acute care settings. We followed Masimo for over a decade and believe the company is well positioned with its trusted brand, differentiated technology and attractive financial profile. Looking ahead, we believe there are clear opportunities to run the same playbook that has driven value creation across our portfolio for many years, leveraging DBS to drive growth and expand margins while further strengthening our value proposition with customers.

We expect Masimo to be accretive to adjusted diluted net earnings per common share in the first full year post acquisition and to deliver high single-digit return on invested capital by the fifth full year of our ownership. The transaction remains subject to customary closing conditions, including regulatory approvals, and we look forward to welcoming the talented Masimo team to Danaher later this year. Now alongside M&A, we made significant progress on organic growth initiatives across Danaher, including new product introductions and strategic partnerships. These efforts are strengthening our competitive positioning while helping customers improve quality and yield, reduce costs and accelerate the delivery of life-changing therapies and diagnostics.

So let me highlight a few examples. In Biotechnology, Cytiva launched Fibro dT, a next-generation mRNA purification platform that improves manufacturing speed and efficiency. By eliminating diffusion limitations associated with traditional purification methods, Fibro dT reduces processing time, increases yield and lowers material usage, enabling more cost-effective higher throughput production of mRNA-based therapies. Additionally, Cytiva will showcase its next-generation automated perfusion system, or APS, at the INTERPHEX trade show this week. APS is a cutting-edge tangential flow filtration platform designed to address key challenges of currently available process intensification systems, including product loss, filter clogging and scalability.

In Life Sciences, Beckman Coulter Life Sciences announced a strategic partnership with Automata, combining its liquid handling genomic and cell analysis technologies with Automata’s AI-ready automation platform. This partnership is positioned to empower scientists with AI-driven tools in an automated workflows to improve throughput, workflow reliability and data integrity and increasingly autonomous research environment. Lastly, Beckman Coulter Diagnostics continued to make progress on menu expansion for the High Resolution DxI 9000 Immunoassay Analyzer with FDA clearance of the HBc IgM assay for acute hepatitis B. With this clearance, nearly all core blood virus assays for the DxI 9000 are now cleared in both the U.S. and the European Union.

This closes a historical gap in Beckman’s immunoassay test menu and positions Beckman to accelerate new placements, customer wins and growth as the DxI 9000 rollout continues. So now let’s take a closer look at our results across the portfolio and give you some color on what we saw in our end markets. Core revenue in our Biotechnology segment increased 7%. Core revenue in Discovery and Medical declined low single digits. Growth in medical filtration and research consumables was more than offset by declines in protein research instrumentation as academic customers continue to face funding constraints. Core revenue in bioprocessing grew high single digits in the first quarter. High single-digit growth in consumables was driven by robust demand for commercialized therapies globally with notable strength in China.

Equipment declined modestly in Q1, but we were encouraged to see orders growth of more than 30%, marking the first quarter of year-over-year equipment order growth in nearly 2 years. Stepping back on bioprocessing, monoclonal antibody production remains robust and is expected to continue growing at historical or better rates, driven by new molecules, biosimilars and increased utilization of existing therapies. In fact, we saw a sustained pace of new biologic drug approvals in the first quarter of 2026, building on a robust level of approvals in 2025. At the same time, equipment investment has been relatively muted, which we believe creates a growing need for incremental capacity in the coming years. We’re encouraged by improved trends in bioprocessing equipment and believe we’re in the early stages of a multiyear investment cycle.

We see activity in brownfield projects today with larger greenfield investments expected to follow. Given Cytiva’s expansive global footprint, broad portfolio and depth of technical expertise, we’re well positioned to benefit from this capacity expansion across biologic drug production. Turning to our Life Sciences segment. Core revenue increased by 0.5%. Core revenue in our Life Sciences Instruments businesses declined low single digits, primarily driven by weakness in North America academic research customers as we expected. While demand at academic research customers remain muted in the quarter, we saw early signs of momentum building in our order book. We continue to see a gradual improvement in large pharma and biopharma investment. Instrumentation demand at biotech customers remain muted but stable, but we were encouraged to see recovery in the funding environment drive improved funnel activity.

Core revenue in our Life Sciences consumables businesses collectively grew low single digits. Aldevron grew in the quarter, driven by solid commercial execution and an improved biotech funding environment. And we also saw early pockets of improvement in academic customers and research consumables, contributing to growth at Abcam. We’re particularly pleased by Abcam’s recent performance as DBS-driven commercial execution has gained traction and cost structure initiatives have driven meaningful margin expansion since acquisition. As end markets improve, we expect continued progress on both growth and margins at Abcam. Moving to our Diagnostics segment. Core revenue declined 4%. Core revenue in our clinical diagnostics businesses grew low single digits, with mid-single-digit growth outside of China.

In China, pricing headwinds in the quarter from volume-based procurement and reimbursement policies were consistent with our expectations and the anticipated impact from remaining policy changes remains consistent with our expectations from the start of the year. At the same time, volume growth in China was slightly better than our expectations, an encouraging indicator for future demand and growth as we move past the most significant year-over-year impacts from current policy headwinds. Beckman Coulter Diagnostics delivered another strong quarter with mid-single-digit growth outside of China, led by immunoassay reagents and instrumentation. In Molecular Diagnostics, Cepheid’s revenue declined in the quarter as respiratory revenue was down approximately 25% year-over-year, given lower than typical seasonal respiratory infection rates.

Cepheid’s core nonrespiratory test menu was up mid-teens, led by our 20% growth in sexual health and hospital-acquired infection assays. Now we’ve seen strong early demand and several notable customer wins for Cepheid’s recently cleared Xpert GI panel, a multiplex PCR test that quickly detects 11 common gastrointestinal pathogens from a single patient sample. This strong momentum supports Cepheid’s broader multiplexing strategy, and we believe it provides a long runway for continued installed base growth and increased utilization. Now let’s briefly frame how we’re thinking about the second quarter and the full year 2026. For the full year 2026, there is no change to our expectation of core revenue growth in the 3% to 6% range. This includes an assumption that a slightly lower respiratory revenue outlook of approximately $1.6 billion to $1.7 billion will be offset by modestly better core growth in the rest of the business.

Additionally, given our strong Q1 performance, we’re raising our full year adjusted diluted net EPS guidance to a range of $8.35 to $8.55 versus our previous range of $8.35 to $8.50. In the second quarter, we expect core revenue to be up low single digits. Additionally, we expect the second quarter adjusted operating profit margin of approximately 26.5%. So to wrap up, we’re encouraged by the first quarter momentum across our portfolio and expect growth to accelerate throughout the year as we continue on the path towards consistent, higher core revenue growth. Cost and productivity execution translated into strong Q1 earnings growth, enabling us to raise our 2026 adjusted EPS expectations. During the quarter, we also announced the pending acquisition of Masimo.

And with the strength of our balance sheet and more than $5 billion of expected 2026 free cash flow, we’re well positioned for further capital deployment going forward. Now we see a bright future ahead for Danaher. Across the portfolio, we’re helping customers solve some of the world’s most important health care challenges from enabling faster, more accurate diagnoses to accelerating the discovery, development and manufacture of therapies. Over time, we also believe the emerging opportunity in AI will further accelerate the pharma development and commercialization flywheel, improving success rates, lowering development costs and driving increased demand. This in turn is expected to drive incremental demand for our Life Science solutions as well as in bioprocessing as commercial drug production expands.

So with the combination of our differentiated portfolio, our talented team and balance sheet optionality all powered by DBS, we’re positioned to drive long-term shareholder value while making significant strides in applying science and technology to advance human health. So with that, I’ll turn the call back over to Rachel.

Rachel Vatnsdal: Thanks, Rainer. That concludes our formal comments. We’re now ready for questions.

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Operator: [Operator Instructions] And our first question will come from Michael Ryskin with Bank of America.

Michael Ryskin: Great. Congrats on the results. Rainer, I want to ask a little bit on that progression through the year. As we look at 1Q, you guys did 0.5%. I’m backing into something like 2% core growth in the second quarter, given the various segments. I think that’s what the low single-digit implies. So you’ve got a little bit of an acceleration in the second half of the year. Can you just talk to what’s driving that across the segments? I think you’re lapping, obviously, some of the respiratory headwinds in some of the Aldevron and VBP, but just confidence in the rest of the business to get that second half ramp and sort of the progression that’s implied in the guide through the year?

Rainer Blair: Mike, good morning. Well, there’s certainly a lot going on in the world today. But as we’ve said, we’re focusing on controlling what we can control, and there’s really no change to how we view the progression throughout the year that we laid out in January. In January, we said there are 3 things really needed to happen to support the ramp throughout the year. And all 3 of those things played out as we expected or actually even a touch better in Q1, and we feel good about the balance of the year and here’s why. In Diagnostics, the China diagnostic policy headwinds are playing out as we expected and actually patient volumes are higher. We also saw good momentum across the rest of Diagnostics, which showed another quarter of mid-single-digit growth without China and respiratory.

And while respiratory was a touch softer, we continue to take share and our core molecular business grew mid-teens. So we expect our broader Danaher portfolio compensates for the touch of softness that we saw there in respiratory. But the quarter also demonstrated strong high single-digit EPS growth even if respiratory was a little bit softer. So those are some important proof points here around the resilience of our portfolio and the work that we’re doing. Now as you think about bioprocessing, here, we see strong underlying commercial biologic drug production continue and it drives strength in consumables, and notably, we are really encouraged to see improvement in our equipment order book with over 30% year-over-year growth. Now turning to Life Sciences and the progression there, both China and Life Science consumables globally performed better than we expected.

And that includes growth at Abcam and Aldevron, which is really encouraging. And we saw a broad stabilization in our life science end markets with pockets of improvement. So we’re also seeing better funnel activity there as a result. So all in, look, we feel really good about how we started the year, and we believe this momentum continues.

Matthew Gugino: And Mike, maybe just to give some details around the numbers and the specifics here on the progression. So the way we’re thinking about it is core growth, low single digits in the first half of the year, sequential improvement from Q1 to Q2, you see this reflected in the Q2 guide. Together, the headwinds that we’ve talked about, China diagnostics, respiratory, some of the comps in Life Sciences, they’re collectively about a 300 basis point, maybe a little bit higher impact in the first half of the year. These essentially go away by the end of the year and why we believe we’ll exit Q4 in that mid-single-digit range. So for the purpose of the guide, the way we’ve laid it out is we’re not really assuming any improvement in our end markets to exit the year at that mid-single digits, and that’s why we feel comfortable about that progression through the year.

Michael Ryskin: Okay. That’s both those super helpful answers. And let me squeeze a follow-up on the bioprocess specifically. Like you talked about, Rainer, strength in consumables, the 30% or greater than 30% equipment order book. It doesn’t sound like you’re assuming any of that will come through later this year? Or could you see some benefit in the fourth quarter? Should that inform how we think about equipment growth next year? I mean just sort of how do we take those end points — those data points of consistent high single-digit consumables and order book turning to think about [ BT ] later this year and into 2027?

Rainer Blair: Well, we continue to see that strength in consumables. And so we see that progressing through the year consistently. Equipment, what we’re seeing there in the order book certainly underwrites and reaffirms the year-over-year improvement that we expected. Recall last year, we were down double digits. This year, the guide assumes that we’re flat on equipment. But we do like the activity levels here in equipment, and that marker of 30% year-over-year growth is an important one that is certainly supportive of the out years, and we’ll have to continue to see how customer readiness plays in here. Sometimes these equipment orders come and it gets to be a little bit lumpy as customer readiness is a real important factor here as to when you actually end up recognizing the revenue. So we certainly see the guide underwritten here going forward, and we think positively about what this means certainly for the out years.

Operator: Our next question will come from Vijay Kumar with Evercore ISI.

Vijay Kumar: And want to pass along my congratulations to Matt Gugino and Rachel. Good to have you both on the call. Rainer, maybe my first one for you on your comment around Masi acquisition. I think initially, when people saw the deal, it was a little confusing. People thought this was a MedTech deal. But maybe just walk us through on this strategic rationale. I think you guys mentioned call point synergies between Radiometer and Masimo. My understanding is Masi, some of their tech board sales are perhaps tied to players like Philips, GE HealthCare. So how do you see the call point synergies and potential for DBS driving high single-digit ROI for the business?

Rainer Blair: Thanks, Vijay. Look, we see the Masimo transaction as a very typical Danaher deal. And by way of update, the process continues to progress well there, and we’re excited to get the Masimo team on board. So all things are positive in that regard. And look, we’ve been following Masimo for over a decade based on the learnings that we had with Radiometer, which is really our Diagnostics acute care strategy, where we believe that Masimo is a mission-critical player, differentiated technology, all the things that we like to see when we talk about our 3 dimensional acquisition framework. This is a great end market with long-term secular growth drivers. Two, this is the premier asset in pulse oximetry and other applications in acute care diagnostics.

It’s supportive of what we’re doing at Radiometer. In fact, there’s geographic synergies as well as Masimo is a little stronger than Radiometer in the U.S., and that reverses as you think about Europe. So those are all very positive. And really, these solutions sit next to each other here in these acute care settings. So to your call point synergies, they are significant, and they are direct synergies as well. And then I’ll also add, from a financial profile, this is a transaction that’s accretive at all levels, whether it’s growth, whether it’s gross margins or operating margins. And at the same time, we’ve been able to identify some pretty significant value reserves here to help us drive that return on invested capital to that high single-digit ROIC in year 5.

Matthew Gugino: And Vijay, just to follow up, I mean Rainer talked about some of the synergies here, but what we outlined here a couple of months ago when we announced the deal was, we expect both cost and revenue synergies, $125 million of cost synergies realized by year 5, call it, $50 million of that is on the gross margin side, $50 million on the OpEx side and about $25 million of public company costs and then about $50 million of revenue synergies. Rainer outlined some of the opportunities there where we can probably help Masimo through our Danaher Diagnostics platform, get stronger in positioning around the IDNs or integrated delivery networks. And then there’s probably some opportunity for Masimo to help us, including Radiometer, in the U.S. So really excited as Rainer said, to get the team on board here later this year.

Vijay Kumar: That’s fantastic. Matt, maybe my second one was on margins. I think typically, you guys have some seasonality Q1 to Q2 on respiratory, but I just feel like second quarter, maybe margins, the step down. It’s a little bit more than what we saw in the last 2 years. Maybe just talk about sequential margins just given Q1 was such a good execution from a margin standpoint?

Matthew Gugino: Yes. Sure, Vijay. I mean like you mentioned, I mean, we typically see a several hundred basis point step down in operating margins Q1 to Q2, that’s driven by that typical step down — seasonal step-down in respiratory. There’s probably a little bit more FX impact here Q2 versus Q1, just given where the dollar has moved over the last couple of months. And then also, I think given the Q1 beat here, we wanted to take some of that beat, accelerate some growth investments from the second half of the year into Q2. So the way we’re thinking about it is we just did — we’re expecting mid- to high single-digit earnings growth in the first half of the year, all in, and that puts us on the right path here for the rest of the year as we go forward.

Operator: Our next question will come from Scott Davis with Melius Research.

Scott Davis: Congrats. Can you talk about raw materials, just resins, cost?

Rainer Blair: Sure. So with the spike in oil prices and the associated increases in petrochemical derivatives, we have our eyes firmly focused on what’s going on there. And while we see some of that pressure out there, it hasn’t been really meaningful yet as it relates to our own cost position. That said, we’re incredibly vigilant there and leveraging the Danaher Business System as well as our contract positions to mitigate any pressures that are there. And I’ll just say, as you would expect of us, Scott, here with the Danaher rigor, we — every month, with every business, every operating company work through the entire P&L to understand what measures we’re taking and how raw material volatility might affect the business. So we are all over that proactively, and to date, we haven’t seen any meaningful pressure there.

Scott Davis: And same with Middle East, Rainer?

Rainer Blair: Well, the Middle East is really driving a good part of that pressure, Scott, in the sense that the volatility in oil prices are driving that. In terms of supply from the Middle East, that really doesn’t affect us. So our supply chain is not directly affected by the Middle East, but of course, the indirect effects that you’re alluding to here are something that we have to address head on.

Operator: Our next question will come from Jack Meehan with Nephron Research.

Jack Meehan: One of the big topics in the market at the moment is AI, wanted to get your thoughts on that. The first question is, as you look across the business segments, how do you think AI is influencing customer spending behavior? Your referenced bioprocessing could be a beneficiary. I was curious what you also thought about Life Sciences and Diagnostics, any signs of increased or reduced spending in the business?

Rainer Blair: Sure. So let me get started here. You were a little bit in and out in terms of the volume on the question, but I think I’ve got it. Let me start with the conclusion here, which is we think AI is going to be a growth accelerator for the pharma and biotech industry, both in the near and in the long term. And the reason for that is we think that AI will accelerate the drug development and commercialization flywheel and result in better development pipeline yields. So as you know, the average yield in the drug development pipeline today is just above 10%. There’s an enormous opportunity here to improve the yield of the pipeline and to accelerate the biopharma flywheel along with the flywheels of life science tool providers like ourselves.

And so this improved yield drives both growth and profitability and reinvestment in the pharma industry. And that, of course, in turn, drives more investment into discovery, including wet lab validation, development in the clinic as well as commercial drug manufacturing. So in the short term, what we’re seeing actually is incremental more demand, which we expect to accelerate in the building of biologic models. Autonomous science is the current buzzword that refers to the building of biologic models, and of course, that requires automation, which we’re very well represented in. It requires more analytical instruments and it requires more reagents as well. So that’s the short-term impact as this practically new market segment of autonomous science starts to play out here, and that plays out first in discovery and then continues to accelerate through the development pipeline.

And of course, we’re very well positioned here with our life science tools. I mentioned automation, analytical instruments that, of course, increasingly are AI-enabled reagents that support all of those models going forward. And that’s a several year driver. These biologic models are in the single-digit percentage of information coverage required, very different than large language models. These biologic models require significantly more information in order to become general use type of model. So that’s the short term. And as I indicated then in the long term, what we’re going to see is the cycle time of pharma development being compressed and the hit rate, i.e., the yield to be increased. And that flywheel is going to be very good for patients.

It’s going to be very good for the pharma industry and those partners like ourselves that support that industry. Now as you think about that going through development, Jack, sorry, just to finish up, of course, these more commercialized drugs means more business for our bioprocessing business. We’re the best positioned there with the broadest and deepest portfolio. I talked about the innovations that we’re launching there. And then lastly, a lot of these drugs are going to be more sophisticated. They are going to require more sophisticated, more accurate diagnostics. If they’re not personalized diagnostics, they will require near personalized diagnostics to come online. So again, I start with the conclusion, which is AI is a tailwind in the short and in the long term and is healthy for all market participants, and of course, we’re very well positioned there.

Jack Meehan: Excellent. Yes, it’s clear. There’s a lot of exciting things across the business. Maybe for you, Rainer, or for Matt, just extending that from a DBS perspective, are you seeing any tangible signs of productivity benefits from AI in the business? Any cost savings or revenue targets that you’d be comfortable sharing at this point?

Rainer Blair: We are getting to the point, Jack, where DBS and AI are synonymous to us in terms of accelerating cycle times and driving efficiencies, and we bring those together. So we talk about AI-enabled DBS and DBS-enabled AI in one sentence, and that will continue to drive efficiencies. Let’s just tee it up this way. As you think about the conversation I just had as it relates to the pharma development pipeline, think about Danaher’s flywheel also being accelerated by AI-enabled DBS. That will result in more and better products that are AI-enabled, it’s going to result in lower costs that we gained through efficiencies, and together, that’s going to drive growth and earnings expansion going forward.

Operator: Our next question will come from Tycho Peterson with Jefferies.

Tycho Peterson: Rainer, I want to go back to bioprocessing. I appreciate you touched on order trends and how that may translate to revenues. But wondering if you can unpack a little bit more what you’re seeing pharma versus biotech versus CDMOs? Secondly, are you seeing any replacement cycle demand? We’ve heard about replacement cycle heating up a little bit as we’ve done some checks. And then how are you sizing the China opportunity in biotech? I think it was around $1 billion, $1.3 billion if you go back a couple of years, but how are you sizing that opportunity today?

Rainer Blair: Thanks, Tycho. Well, starting with China here where you ended up, China continues to be in recovery mode. We’re very encouraged with what we saw in China here in the first quarter with double-digit growth in the bioprocessing business. The China biologics and — driven by the biotech market that you referred to is accelerating. The monetization of the therapies being developed there has been resolved with both the license deals that you see with multinationals, but also the stock exchange and IPOs, once again, functioning properly. And so we expect that to continue to be a growth driver here as we get back to normality. So is the original $1.3 billion that we saw there at the peak in the cards? Well look, we’re on the way to improved markets.

We’re happy to see that. We want to get through 2026 here to see that continued positive progression on China. As it relates to the equipment orders that we saw there, we think that continues to be very constructive to our hypothesis around 2026 and beyond. Both the funnel activity is encouraging as well as you saw that year-over-year orders growth. As I said, that underwrites how we’re thinking about the year here. And let’s see how the next quarters progress to see whether that has any impact here in 2026, but certainly, it will as we go beyond 2026.

Tycho Peterson: Okay. And then maybe just shifting over to Life Science. Encouraging to see the turn there. I think you talked about improved funnel activity, obviously, Aldevron. I think coming out of 4Q, you hadn’t assumed Aldevron will grow in the first half of the year. So that’s encouraging to see. And then A&G consumables a bit better for Abcam. I guess maybe just talk a little bit about where you’re feeling better as we think about the remainder of the year for the Life Science business?

Rainer Blair: So in Life Sciences, and you just touched upon it in the consumables area, we expect it to be slightly down here in the year, albeit off of an improved second half of the year. I think as we go forward, we see positive growth for our Life Science consumables business here. For the full year, while that might be a little bit lumpy as we go through the next quarter or 2, we do expect that to go from slightly negative to slightly positive, and that’s quite encouraging. And then we also saw China. China is continuing or, let’s say, starting up and investing again also in Life Science instruments that was nice to see here in the quarter and the funnels there continue to be quite constructive. So all in all, we see some nice pockets of improvement there.

Pharma was strong, continued to improve here quarter-over-quarter. Clinical was robust. The applied markets are playing out as we thought. Only academic remains a bit muted, albeit stable. So we’re encouraged here by what we saw in Life Sciences in the first quarter and expect that to play out positively for the rest of the year.

Operator: Our next question will come from Casey Woodring with JPMorgan.

Casey Woodring: So nice to see the greater than 30% bioprocessing equipment order growth in the quarter, but I assume that number is probably coming off of a lower base year-on-year. So can you just give us any sense of what orders grew sequentially in 4Q or what book-to-bill was in the quarter? Any sense of how those came in relative to your expectations? And then, I’d also be curious to hear more about the brownfield versus greenfield investment dynamic that you talked a little bit about? You highlighted brownfield investments are flowing through and said greenfield would be expected to follow. Just curious on your expectations of when we could potentially see those greenfield orders start to flow through? Is that something you wouldn’t be surprised to see in the second half?

Rainer Blair: Yes. So Casey, the first quarter orders growth was the first positive year-over-year orders growth that we have seen in nearly 2 years. So by definition, then the comp is a little bit lighter. But if we look at the activity level here quarter-over-quarter, while the first quarter orders were actually down a little bit sequentially, that’s absolutely expected as a result of the first quarter activity seasonality step down. So we always see that, and that’s why that year-over-year comparator is so important. But at the same time, we see our funnel activity continue to be robust on the equipment side. So I wouldn’t focus as much on that as a data point that we’re seeing year-over-year growth now, whereas previously, it was sequential growth.

So very encouraged, as I mentioned earlier about what we’re seeing in the equipment orders. Some of those orders are starting to get a little bit larger. And that dovetails into the second part of your question. So we see equipment orders growth and the funnel activity driven by 2 different dimensions. The first one is that we have seen underinvestment in the industry for the last 2 years as it relates to capacity. Despite the fact that we’ve seen very robust growth, our consumables business demonstrates that the activity level has been robust and strong here for the last couple of years now. And that means that capacities require expansion. We have biosimilars coming on the market. We have new compounds coming on to the market and, of course, a little bit of underinvestment.

So that really explains what we’re seeing there, both in terms of brownfield investments as well as the one or the other additional line or even greenfield investment. The second vector is this reshoring dynamic. And here we see, again, increased dialogue, already some funnel activity, even the one or the other order here for brownfield expansions as it relates to reshoring. So we’re really encouraged by what we’re seeing here. On the equipment side, as I say, it underwrites our hypothesis for the year, and it further supports how we think about the equipment progression and the bioprocessing strength beyond ’26.

Casey Woodring: Great. That’s helpful. If I can just squeeze one more in quickly. Rainer, you talked about solid growth across nonrespiratory within Diagnostics, and you held the guide for the year in Diagnostics, even with the lower respiratory number. So maybe can you just walk through what exactly is offsetting that lower respiratory number for the year? And what’s getting better in that nonrespiratory piece that’s enabling you to hold the guide?

Rainer Blair: Well, there’s a couple of things going on there, Casey. The first one being that we continue to take share at Cepheid in the core business, which is very important, and our hypothesis around Cepheid continues to play out. We’re launching new assays there. The gastrointestinal — GI panel is doing very well. Our MVP panel is doing very well. So even within Cepheid, you see strength here that is playing out. And then in our nonrespiratory business and you take out China, we continue to see mid-single-digit growth there with our innovation strategy playing out. We’ve launched at Beckman Coulter an entire series of new instruments and equipment there, none more important than the high resolution DxI 9000, which opens up entirely new pieces of menu to us.

We’ve closed that blood virus menu gap. And of course, we have that fast track device certification for Alzheimer’s disease testing. So we continue to see positive momentum there. And then we haven’t even talked yet about the implications of Masimo joining the portfolio. So then the last point I would make, as it relates to China, VBP and the guideline discussions that we have, we’re in a very strong dialogue with the China government here. And we’ve had visibility of what has been going on there for some time. So we feel good about our assumptions around the $75 million to $100 million headwind there in China, and that’s only been validated by what we’ve seen in China here in the first quarter, even if the patient volumes were actually a little higher.

Operator: Our next question will come from Dan Brennan with TD Cowen.

Daniel Brennan: Maybe just on M&A, the balance sheet is in good shape post Masi. Just wondering how you’re prioritizing M&A today if you look at your 3 business segments? Where do you see the biggest opportunities? It’s a question we get a lot from investors. And kind of what does the funnel look like? Do you think you could see another sizable deal this year?

Rainer Blair: We’re very encouraged by what we’re seeing in the funnel. As you know, multiples have come in and our 3 — vector filter on M&A is becoming more and more relevant here. As we’ve talked about so often, one, our bias to capital deployment is M&A; two, we will not compromise on our discipline as it relates to being in the right end market with the secular growth drivers that we like to see, two, having a premier asset that has defensible positions or the opportunity with real value reserves. And then lastly, of course, the financial model has to work. And what we’ve been seeing in the current context is that the financial models are becoming more viable. So just to reiterate, one, the Masi deal for us was one that we have envisaged for a long time and the timing of that deal is defined ultimately by the processes that are run and we were ready with the balance sheet and the point of view to execute on that deal, and we’re really excited about that.

And that fits right into our acute care strategy. Now what is not is a broader investment thesis around the broader MedTech market on the one hand. But on the other hand, it is also not indicative of our point of view as it relates to Life Sciences, Diagnostics and Bioprocessing. We see here plenty of opportunity to deploy capital and are fully prepared to do that as the opportunities arise.

Matthew Gugino: And Dan, I mean, from a balance sheet perspective, post close of Masimo, we’ll go to about 2.5x net debt EBITDA. Given our strong free cash flow of $5 billion plus per year as well as EBITDA generation, I mean, this leverage will come down fairly quickly. So it gives us the ability to remain active on the M&A front even in the near term. So feel good about how we’re positioned from a balance sheet side of things.

Daniel Brennan: Yes, that sounds great. And maybe back to a question, I think Mike started off the call with. Your core growth is anchored at 3% this year. I think consensus is around 5% next year. So assuming the consensus is in the right ZIP code, can you just walk through the key levers to generate 5% growth next year, including what could push down or higher up in your LRP towards the high single-digit level?

Matthew Gugino: Yes, Dan, I mean it’s April of 2026, I think we’re a little bit too early to talk about ’27, but I’ll just kind of go back to what we talked about with Mike here at the beginning of the call, where we’re talking about low single-digit core growth in the first half of this year. There’s about 300 basis points or a little bit more of impact from the headwinds that we talked about. China Diagnostics, respiratory, the comps in Life Sciences, that’s why we feel comfortable about exiting Q4 in that mid-single-digit range. And really getting through those headwinds enable us without really any improvement on the end market side to get comfortable into that mid-single-digit range.

Operator: And our last question will come from Doug Schenkel with Wolfe Research.

Douglas Schenkel: Matt, maybe a follow-up on your comments there at the end in response to Dan’s question. What gets you to the high end of guidance for the year? Is it really just what you described there moving past the headwinds and maybe those actually reversing in a more robust way than we’re seeing right now? And maybe related to that, as we sit here today, should — would you recommend that we essentially stay at the lower end of the guidance range for the year until we see some improvement, both in terms of those headwinds abating and maybe some improvement in end markets. So that’s the first topic. And then another follow-up on M&A. Just to be clear there, from a readiness standpoint, could you do something in any segment as we sit here today, or given the pending Masimo deal, would it be less likely that you would do something in Diagnostics as you’re in the process of integrating that business or getting ready to integrate that business?

Matthew Gugino: Thanks, Doug. So look, we talked about in January, continue to anchor to that — the low end of the 2026 core growth guide for planning purposes. In terms of what gets us to the higher end of the guide, I think you need to see a couple of things, Doug. First, you need to see some further improvement across the Life Sciences end markets. I think we’re encouraged by what we saw here in Q1, but we need to see some of those policy headwinds further abate, especially in the U.S. and what we’ve seen there. I think China, good start to the year, but we need to see further growth acceleration as well. And then on the biotech funding side, again, starting to see some improvement, but we want to see that funding turn more quickly into orders.

I think the second thing, bioprocessing, we probably need to see it a little bit better than the high single-digit growth. We need to accelerate on the consumable side as well as get that equipment growth going here, again, encouraged by the order patterns, but probably need to see it move a little bit quicker. And then the other thing here that we talked about on the respiratory side, we probably need to see a little bit above normal respiratory season to finish the year here in Q4 back to that kind of endemic $1.8 billion rate that we see going forward. So I think all in all, we’re encouraged by the start to the year. We’re already at 3% ex respiratory today and encouraged to see some of the underlying trends improve as we talked about.

Rainer Blair: And Doug, as it relates to M&A, we have both the balance sheet capacity as well as the leadership bandwidth here to execute additional acquisitions in any of the 3 segments and feel very good about how we’ve positioned our talent and develop that talent in order to be able to do that.

Operator: We’ve now reached our allotted time for questions. So I’ll turn the call back over to management for any additional or closing remarks.

Rachel Vatnsdal: No, perfect. That is all we have. You can reach us with questions today. Thank you so much for joining.

Rainer Blair: Thanks, everyone.

Operator: Thank you, ladies and gentlemen. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.

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