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    TMO
    Earnings call· Dec 2024(Q4 FY24)

    THERMO FISHER SCIENTIFIC INC. TMO

    Jan 30, 2025 Source

    Executive summary

    Thermo Fisher Scientific Q4 FY24 — Strong Finish to 2024 with Differentiated Performance and Robust 2025 EPS Guidance

    Thermo Fisher Scientific delivered a strong Q4 FY24, exceeding expectations with robust revenue and earnings growth, driven by operational execution and market share gains. The company is well-positioned for 2025, initiating strong adjusted EPS guidance, despite anticipated headwinds from pandemic revenue runoff and foreign exchange, with market conditions expected to improve throughout the year. The Accelerator Drug Development solution is gaining traction, leveraging combined CDMO and CRO capabilities.

    Highlights

    5

    • Q4 revenue grew 5% year-over-year to $11.4 billion, exceeding expectations.

    • Adjusted operating income grew 7% to $2.72 billion, expanding margins by 50 basis points to 23.9%.

    • Adjusted EPS grew 8% to $6.10 per share in the quarter.

    • Full-year 2024 free cash flow was very strong at $7.3 billion.

    • Initiating 2025 adjusted EPS guidance of $23.10 to $23.50, representing 6% to 8% growth.

    Concerns

    3

    • 2025 guidance includes a 1% headwind from the remaining runoff of pandemic-related revenue.

    • 2025 guidance incorporates a 1.5% revenue headwind from foreign exchange, equivalent to approximately $650 million.

    • Q1 FY25 organic growth and adjusted EPS growth are expected to be flat due to 2 fewer selling days and phasing of services revenue.

    Guidance & targets

    16
    CategoryTargetConfidence
    Full-year 2025 Revenue
    $43.5 billion to $44 billion
    high materiality
    High
    Full-year 2025 Organic Revenue Growth
    3% to 4%
    high materiality
    High
    Full-year 2025 Adjusted EPS
    $23.10 to $23.50
    high materiality
    High
    Full-year 2025 Adjusted Operating Margin Expansion
    approximately 90 basis points
    medium materiality
    High
    Full-year 2025 FX Revenue Headwind
    approximately $650 million or 1.5 points
    medium materiality
    High
    Full-year 2025 Pandemic-related Revenue Runoff Headwind
    1%
    medium materiality
    High
    Full-year 2025 Net Interest Expense
    approximately $350 million
    low materiality
    High
    Full-year 2025 Adjusted Income Tax Rate
    11.5%
    low materiality
    High
    Full-year 2025 Net Capital Expenditures
    $1.4 billion and $1.7 billion
    medium materiality
    High
    Full-year 2025 Free Cash Flow
    $7 billion to $7.4 billion
    high materiality
    High
    Full-year 2025 Share Buybacks
    $2 billion
    high materiality
    High
    Full-year 2025 Average Diluted Share Count
    between 378 million and 379 million shares
    low materiality
    High
    Full-year 2025 Dividends
    approximately $600 million
    medium materiality
    High
    Q1 FY25 Organic Growth
    flat
    medium materiality
    High
    Q1 FY25 Adjusted EPS Growth
    flat
    medium materiality
    High
    Full-year 2025 Industry Market Growth
    slightly positive, improving as the year progresses
    high materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Life Sciences Solutions
    Growth in this segment was driven by bioproduction and biosciences businesses. Strong productivity and good volume pull-through in Q4 were partially offset by unfavorable mix and strategic investments.
    Organic Revenue Growth: 3%Full Year Reported Revenue Decline: 3%Full Year Organic Revenue Decline: 4%Q4 Adjusted Operating Income Growth: 6%Full Year Adjusted Operating Income Growth: 2%Full Year Adjusted Operating Margin: 36.4% (up 210 bps)
    		—5%—36.6%
    Analytical Instruments
    Strong growth in Q4 was led by electron microscopy and chromatography and mass spectrometry businesses. Strong productivity, good volume pull-through, and favorable FX in Q4 were partially offset by unfavorable mix and strategic investments.
    Organic Revenue Growth: 8%Full Year Reported Revenue Growth: 3%Full Year Organic Revenue Growth: 3%Q4 Adjusted Operating Income Growth: 13%Full Year Adjusted Operating Income Growth: 2%Full Year Adjusted Operating Margin: 26.2% (down 10 bps)
    		—7%—30.5%
    Specialty Diagnostics
    Growth in Q4 was led by transplant diagnostics and immunodiagnostics businesses, as well as the healthcare market channel. Good productivity in Q4 was more than offset by strategic investments.
    Organic Revenue Growth: 5%Full Year Reported Revenue Growth: 2%Full Year Organic Revenue Growth: 3%Q4 Adjusted Operating Income Growth: 3%Full Year Adjusted Operating Income Growth: 3%Full Year Adjusted Operating Margin: 25.7% (up 20 bps)
    		—5%—23.6%
    Laboratory Products and Biopharma Services
    The runoff of vaccines and therapies revenue had a mid-single-digit impact on growth in Q4, offset by very good growth in pharma services and the research and safety market channel. Strong productivity in Q4 was offset by strategic investments and unfavorable mix.
    Organic Revenue Growth: 4%Full Year Reported Revenue Growth: 1%Full Year Organic Revenue Growth: FlatQ4 Adjusted Operating Income Growth: 3%Full Year Adjusted Operating Income Decline: 8%Full Year Adjusted Operating Margin: 13.3% (down 130 bps)
    		—4%—14%

    Operational metrics

    46
    Reported revenue growth
    5%YoY
    Q4 FY24

    Total company revenue was $11.4 billion.

    Organic revenue growth
    4%YoY
    Q4 FY24

    Component of reported revenue change.

    Acquisitions contribution to revenue growth
    1%
    Q4 FY24

    Component of reported revenue change.

    FX impact on revenue growth
    slight headwind
    Q4 FY24

    Component of reported revenue change.

    Core organic revenue growth
    5%
    Q4 FY24

    Total company core organic revenue growth.

    Adjusted operating income
    $2.72 billionup 7%
    Q4 FY24

    Total company adjusted operating income.

    Adjusted operating margin
    23.9%up 50 bps
    Q4 FY24

    Total company adjusted operating margin.

    Adjusted EPS
    $6.10up 8%
    Q4 FY24

    Total company adjusted EPS.

    Full-year revenue
    $42.9 billion
    FY24

    Total company full-year revenue.

    Full-year adjusted operating income
    $9.71 billion
    FY24

    Total company full-year adjusted operating income.

    Full-year adjusted EPS
    $21.86
    FY24

    Total company full-year adjusted EPS.

    Full-year reported revenue growth
    flatYoY
    FY24

    Total company full-year reported revenue growth.

    Full-year organic revenue growth
    flatYoY
    FY24

    Total company full-year organic revenue growth.

    Full-year core organic revenue growth
    flatYoY
    FY24

    Total company full-year core organic revenue growth.

    Pandemic-related revenue
    $520 million
    FY24

    Total pandemic-related revenue for the full year.

    Organic revenue growth
    mid-single digits
    Q4 FY24

    Organic revenue growth in North America.

    Organic revenue growth
    low single digits
    Q4 FY24

    Organic revenue growth in Europe.

    Organic revenue growth
    high single digits
    Q4 FY24

    Organic revenue growth in Asia Pacific.

    Organic revenue growth
    mid-single digits
    Q4 FY24

    Organic revenue growth in China within Asia Pacific.

    Full-year organic revenue growth
    declined low single digits
    FY24

    Full-year organic revenue growth in North America.

    Full-year organic revenue growth
    flatYoY
    FY24

    Full-year organic revenue growth in Europe.

    Full-year organic revenue growth
    low single digits
    FY24

    Full-year organic revenue growth in Asia Pacific.

    Full-year organic revenue growth
    low single digits
    FY24

    Full-year organic revenue growth in China within Asia Pacific.

    Full-year adjusted operating margin
    22.6%
    FY24

    Total company full-year adjusted operating margin.

    Adjusted gross margin
    43.2%170 bps higher
    Q4 FY24

    Total company adjusted gross margin.

    Full-year adjusted gross margin
    42.2%increase of 100 bps
    FY24

    Total company full-year adjusted gross margin.

    Adjusted SG&A as % of revenue
    16.1%
    Q4 FY24

    Total company adjusted SG&A.

    Full-year adjusted SG&A as % of revenue
    16.3%
    FY24

    Total company full-year adjusted SG&A.

    R&D expense
    $374 million
    Q4 FY24

    Total company R&D expense.

    Full-year R&D expense
    $1.39 billionup 4%
    FY24

    Total company full-year R&D expense, reflecting ongoing investments.

    Full-year R&D as a percent of manufacturing revenue
    7.2%
    FY24

    Total company full-year R&D as a percentage of manufacturing revenue.

    Net interest expense
    $89 millionslightly higher than Q4 2023
    Q4 FY24

    Total company net interest expense.

    Full-year net interest expense
    $312 milliondecrease of $183 million
    FY24

    Total company full-year net interest expense, driven by effective debt management and strong cash flow.

    Adjusted tax rate
    10.9%
    Q4 FY24

    Total company adjusted tax rate, in line with expectations.

    Full-year adjusted tax rate
    10.5%
    FY24

    Total company full-year adjusted tax rate, in line with expectations.

    Average diluted shares
    383 million5 million lower
    Q4 FY24

    Driven by share repurchases net of option dilution.

    Share repurchases
    $1 billion
    Q4 FY24

    Amount of shares repurchased in Q4.

    Total share repurchases
    $4 billion
    FY24

    Total share repurchases for the full year.

    Net capital expenditures
    $1.3 billion
    FY24

    Total company full-year net capital expenditures.

    Capital deployment
    $7.7 billion
    FY24

    Total capital deployed for the full year.

    Dividends
    approximately $600 million
    FY24

    Amount of dividends returned to shareholders.

    Cash and short-term investments
    $5.6 billion
    Q4 FY24

    Balance at quarter end.

    Total debt
    $31.3 billion
    Q4 FY24

    Balance at quarter end.

    Gross debt to adjusted EBITDA
    2.9x
    Q4 FY24

    Leverage ratio at quarter end.

    Net debt to adjusted EBITDA
    2.4x
    Q4 FY24

    Leverage ratio at quarter end.

    Industry market growth
    down low single digits
    FY24

    Estimated industry market growth for 2024.

    Industry KPIs

    8
    MetricValueDetails
    FCF conversion ROIC11.6%%
    Revenue EPS guidance—
    China revenue exposure—
    Diagnostics testing demand—
    M a contribution synergies—
    Clinical research cro bookings—
    Segment organic revenue growth—
    Organic core revenue growth by end market—

    Product announcements

    8
    ProductTypeDetails
    Thermo Scientific Stellar mass spectrometerlaunch
    Thermo Scientific Dionex Inuvion Ion Chromatography Systemlaunch
    Thermo Scientific Iliad scanning transmission electron microscopelaunch
    Applied Biosystems MagMAX Sequential DNA/RNA kitlaunch
    Bio-based film for single-use technologieslaunch
    Thermo Scientific iCAP MX Series ICP-MSlaunch
    Gibco CTS Detachable Dynabeads platform additionsexpansion
    Accelerator Drug Development solutionlaunch

    Deals & partnerships

    4
    OlinkAcquisition of a leading provider of advanced solutions for proteomics research.$3.1 billion

    Completed in 2024, Olink is now the company's Proteomic Science business. Integration is progressing smoothly.

    National Cancer InstitutePartnership on the myeloMATCH precision medicine umbrella trial.

    Announced in July 2024, demonstrating close collaboration with customers.

    University of Arkansas for Medical SciencesEstablishment of a Thermo Fisher Scientific Center of Excellence for Proteomics.

    Entered into during Q4 2024, demonstrating close collaboration with customers.

    U.K. Biobank Pharma Proteomics ProjectSelection of Olink technology to support the world's largest human proteomic study.

    Occurred just after quarter-end, validating the value of Olink's capabilities.

    Risks & headwinds

    7
    Runoff of COVID-19 testing-related revenueQ4 FY24, Full Year FY24

    Impacted reported growth in Diagnostics and Healthcare segment

    Mitigation: Good core revenue growth in the segment.

    Runoff of vaccine and therapy related revenueFull Year FY24, Q4 FY24, FY25

    Mid-single-digit headwind to full-year pharma and biotech growth; mid-single-digit impact on Laboratory Products and Biopharma Services segment growth in Q4.

    Mitigation: Offset by good growth in pharma services and research and safety market channel; 2025 guidance assumes 1% headwind from remaining runoff.

    Unfavorable mixQ4 FY24

    Offset productivity and volume pull-through

    Mitigation: Strong productivity and good volume pull-through enabled funding of strategic investments.

    Foreign exchange headwindFY25

    Approximately $650 million or 1.5% of revenue

    Mitigation: Embedded in 2025 guidance.

    Fewer selling days in Q1 FY25Q1 FY25

    2 less selling days

    Mitigation: Expected to result in flat organic growth and adjusted EPS growth for the quarter, embedded in guidance.

    Phasing of services revenueQ1 FY25

    Impact on Q1 growth

    Mitigation: Expected to result in flat organic growth and adjusted EPS growth for the quarter, embedded in guidance.

    Challenged economic and end-market environment in ChinaFY24, assumed for FY25

    Muted conditions, similar to last year

    Mitigation: Team delivered strong performance and gained market share; stimulus expected to be a benefit.

    What to watch in Q1 FY25

    5

    Q1 FY25 Organic Growth

    Q1 FY25
    Current4% (Q4 FY24)
    TargetFlat

    Why it matters

    This indicates the immediate impact of fewer selling days and services revenue phasing📎, and the start of the year's organic growth trajectory.

    Embedded in the guidance for the year is an assumption that organic growth is flat in Q1, as is adjusted EPS growth in Q1. This is largely driven by Q1 having 2 less selling days than the prior year quarter and also the phasing📎 of our services revenue within the year.

    Q&A highlights

    7

    How much conservatism is built into the 2025 guidance given policy uncertainties (tariffs, NIH, export controls), and what are the assumptions regarding these factors?

    Marc Casper stated that the company's philosophy is to manage through changes unless they are of such magnitude to be articulated. The guidance assumes a business environment focused on economic growth and a more reasonable M&A regulatory environment. Science and medicine are non-discretionary, and the company will navigate the environment.

    “Within reason of changes or within reasons of opportunities, we just manage through it. It becomes -- it's our job to manage through the unanticipated changes, unless there is such a magnitude, on the good side or the bad, that we would articulate it, right?”

    asked by Michael Ryskin · answered by Marc Casper

    2 min read7 chapters

    Detailed Narrative

    01

    Q4 FY24 Performance Highlights

    Thermo Fisher Scientific concluded 2024 with strong Q4 results, reporting $11.4 billion in revenue (up 5% YoY), $2.72 billion in adjusted operating income (up 7% YoY), and $6.10 adjusted EPS (up 8% YoY). The company expanded adjusted operating margins by 50 basis points to 23.9%, reflecting strong operational and commercial execution and exceeding prior expectations for organic growth by nearly 2 points and adjusted EPS by $0.14.

    02

    Full Year 2024 Achievements

    For the full year, revenue reached $42.9 billion, adjusted operating income was $9.71 billion, and adjusted EPS was $21.86. The company generated $7.3 billion in free cash flow and returned $4.6 billion to shareholders through buybacks and dividends, including $1 billion in Q4 share repurchases. Total capital deployed in 2024 was $7.7 billion, with $3.1 billion for M&A.

    03

    End-Market Performance and Improvement

    Underlying market conditions improved sequentially throughout 2024, with Q4 showing positive revenue growth across all end markets. Pharma and biotech grew mid-single digits, academic and government high single digits, industrial and applied high single digits, and diagnostics and healthcare low single digits. This performance demonstrated meaningful market share gains and strengthened the company's trusted partner status with customers.

    04

    High-Impact Innovation and Product Launches

    The company highlighted significant product launches in 2024, including the Thermo Scientific Stellar mass spectrometer, Dionex Inuvion Ion Chromatography System, Iliad scanning transmission electron microscope, Applied Biosystems MagMAX Sequential DNA/RNA kit, and a bio-based film for single-use technologies. Q4 innovations included the iCAP MX Series ICP-MS and additions to the Gibco CTS Detachable Dynabeads platform, reinforcing industry leadership.

    05

    Accelerator Drug Development Solution

    Thermo Fisher introduced its Accelerator Drug Development solution in Q4, leveraging combined CDMO and CRO capabilities to enable customers to move critical drug development programs forward with speed, quality, and efficiency. This unique offering, developed after three years of proving its value, has received positive customer feedback, is winning new business, and is expected to accelerate growth in 2026 and beyond.

    06

    PPI Business System and Generative AI

    The PPI Business System continued to enable outstanding execution, driving share gains, improving quality, productivity, and customer allegiance. The company is also benefiting from the application of generative AI, with colleagues deploying it to enhance customer experience, streamline internal processes, and improve products and services, contributing to both financial results and customer success.

    07

    2025 Outlook and Market Conditions

    For 2025, the company expects market conditions to strengthen, with overall market growth being slightly positive and improving throughout the year. The guidance assumes strong share gains and differentiated financial performance, with a focus on delivering robust adjusted EPS growth of 6% to 8%, despite some pandemic-related runoff and FX headwinds🌐. The company aims for approximately 90 basis points of adjusted operating margin expansion.

    AI-generated summary of the company’s earnings call. Not investment advice.