Danaher Corporation (DHR) Q4 2019 Earnings Report, Transcript and Summary

Good morning. My name is Christel, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Danaher Corporation's Fourth Quarter 2019 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Mr. Matt Gugino, Vice President of Investor Relations. Mr. Gugino, please go ahead.

Thanks, Christel. Good morning, everyone and thanks for joining us on the call. With us today are Tom Joyce, our President and Chief Executive Officer; and Matt McGrew, our Executive Vice President and Chief Financial Officer. I'd like to point out that our earnings release, the slide presentation supplementing today's call, and the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call 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 heading Events & Presentations and will remain archived until our next quarterly call. A replay of this call will also be available until February 13, 2020. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. The supplemental materials 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 refer to results from continuing operations and relate to the fourth quarter of 2019 and all references to period-to-period increases or decreases in financial metrics are year-over-year. All references to individual operating company operating margins exclude the impact of intangible amortization. We will also refer you to our Form 8-K filing dated December 18, 2019 for pro forma information reflecting Danaher's historical performance on a basis that excludes Envista's results of operation. We may also describe certain products and devices, which have applications submitted and pending for certain regulatory approvals that are only available in certain markets. During the call, we'll 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 might 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. 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 Tom.

Thanks, Matt. Good morning, everyone. Our fourth quarter results wrapped up a tremendous 2019 for Danaher. For the full year, we delivered 6% core revenue growth as we continued to capture market share in many of our businesses through new product innovation and enhanced commercial execution. We also delivered 100 basis points of core operating margin expansion and $3 billion of free cash flow. But the numbers only tell part of Danaher's transformative story in 2019. We continued to evolve into a higher growth company as we announced the GE Biopharma acquisition and completed the IPO and subsequent split-off of our dental segment into an independent publicly traded company called Envista. GE Biopharma, which will be called Cytiva after we close had a very good 2019 as core revenue growth of approximately 10% accelerated relative to the businesses performance over the past couple of years. We continue to be very impressed with this talented team an extraordinary group of passionate and highly engaged associates who provide customers with innovative solutions used in the development and production of biopharmaceutical drugs. During the fourth quarter, we achieved several important milestones related to the acquisition which we continue to expect to close in the first quarter of this year. First, as part of the regulatory approval process we announced that we signed an agreement to sell certain of our businesses to Sartorius. The annual revenue to be divested is approximately $170 million and consists of businesses that are currently part of our Life Science platform. Secondly, we received conditional clearance for the acquisition from the European Commission in December. While the timing around meeting certain closing conditions can be uncertain, we continue to work constructively with the regulators and remain encouraged by the progress we're making. And lastly, we raised approximately $4 billion of U.S. denominated debt in October, which essentially completes the financing needed to fund the acquisition. Overall, financing costs have come in materially better than expected, as we were able to take advantage of favorable credit market conditions, particularly in Europe. When we announced the transaction last year, we anticipated financing $18 billion of debt and cash at a blended interest rate of approximately 2.75%, resulting in a total annual interest cost of $500 million. The actual blended interest rate on this $18 billion will be less than 1% for a total annual interest cost of $150 million. As a result, we now believe GE Biopharma will be approximately $0.60 accretive to non-GAAP adjusted diluted net earnings per share in 2020. This assumes an end of first quarter close and includes the impact of the lower financing cost and the business is better than 2019 core revenue growth, partially offset by the lost earnings related to the pending divestitures. While not included in our formal 2020 guidance, we wanted to provide you with an update given these recent developments. Now, turning to our fourth quarter results. Sales grew 5.5% to $4.9 billion, as the impact of foreign currency translation decreased revenues by approximately 1%, while acquisitions increased revenues by 50 basis points. Core revenue increased 6%. Geographically, high-growth markets increased at a high single-digit rate, led by China and India. In the developed markets, the U.S. remains strong, delivering high single-digit growth, while Western Europe was up mid-single digits. Gross margin for the fourth quarter was 55.5% and operating profit margin was 19.8%. Core operating margin increased 175 basis points in the quarter, bringing full year core operating margin expansion to 100 basis points, a testament to the team's terrific execution across the portfolio. The Danaher Business System continues to be the primary driver of our strong core operating margin performance and 2019 marked the fifth consecutive year that we expanded core operating margins by 70 basis points or more. Fourth quarter adjusted diluted net earnings per share of $1.28 were up double digits year-on-year, bringing full year adjusted diluted net earnings per share to $4.42. All in all, a strong finish to a very important year. So, now let's take a more detailed look at our fourth quarter results across the portfolio. In Life Sciences, reported revenue increased 7% and core revenue increased 6.5% for the quarter. Operating profit margin of 21.2% was up 150 basis points with 190 basis points of core margin expansion. For the full year, life sciences achieved 7% core revenue growth and delivered operating margin expansion of 145 basis points. Core growth at Beckman Life Sciences was up mid-single digits with strength across most major geographies and product lines. This finished off another great year for Beckman as the business grew high single digits and surpassed $1 billion in annual revenue for the first time. New product introductions have been a key driver in Beckman's success and contributed more than 250 basis points to core growth each of the last two years. SCIEX core revenue was up low single digits versus the high single-digit prior year comparison. Performance improved sequentially, with particular strength in the pharmaceutical, food and environmental end markets. Geographically, core growth in the quarter was led by North America and Asia, which was particularly offset -- which was partially offset by softness in China. At Pall, the team achieved its second straight year of high single-digit core revenue growth, with nearly 10% core growth in the fourth quarter. Strong momentum in our biotech and aerospace businesses was partially offset by expected weakness in microelectronics. IDT achieved double-digit core revenue growth, led by synthetic biology and next-generation sequencing product line, where newly launched products are gaining market share. Since joining Danaher in 2018, the IDT team has embraced the Danaher Business System and made excellent progress, both operationally and commercially. Using DBS growth tools, they've enabled cross-functional teams to collaborate more effectively during the product development process, to improve quality and reduce time to market. With this more focused approach to innovation, IDT has increased their cadence of new product launches and expanded their best-in-class offering to further customers' research across a number of genomic application. Moving now to Diagnostics. Reported revenue increased 7% in the quarter, with core revenue growth of 8%. Reported operating profit margin was 19.5%, with reported and core operating margins up 70 basis points. Over the last few years, we've made significant strategic investments, both organically and inorganically, to better position our Diagnostics platform and oriented towards higher growth opportunities. We're seeing the impact of these initiatives, as the Diagnostics team delivered 7% core revenue growth in 2019, a continuation of the market share gains we've achieved over the last few years. Turning to Beckman Diagnostics. While core revenue was up only low single digits in the quarter on a difficult prior year comparison, 2019 was a great year for Beckman, as the team achieved mid single-digit core revenue growth, their best annual core growth rate since we acquired the business in 2011. China continued to perform well and positive results across all major product lines were led by double-digit growth in automation. We've improved Beckman's growth trajectory over the last few years by focusing on impactful new product development and improved commercial execution. Our launch of the DxH series of new hematology analyzers has been a key contributor to improvement in core revenue growth. And on the commercial side, our North American sales team's effective implementation of DBS growth rooms has helped drive double-digit gains in our customer retention rate. Radiometer achieved double-digit core revenue growth in the quarter to close out their 15th consecutive year of mid-single-digit or better core growth, a remarkable achievement. Results were strong across both the developed and high-growth markets, as we believe Radiometer continued to gain share relative to the market. At Leica Biosystems, double-digit core revenue growth was driven by positive results across all major geographies and product lines. In addition to continued strength in core histology and advanced staining, pathology imaging also had a strong quarter, driven by demand for new products, like the Aperio GT 450. The GT 450 is a new automated high-capacity digital pathology slide scanner that enables extensive biopsy databases to be digitized, making them more accessible for researchers around the world. Core revenue at Cepheid was up more than 20% for the quarter, with broad-based strength across all major geographies, led by North America and Western Europe. The business surpassed $1 billion in annual revenue in December and we couldn't be happier for the team to hit this major growth milestone. Since the 2016 acquisition, core revenue has compounded annually at a rate of approximately 20%. The team has done a terrific job incorporating DBS commercial tools and processes, to enhance their go-to-market strategy as well. With an installed base of more than 20,000 instruments and the largest molecular test menu available on the market today, Cepheid is poised to continue taking share in this highly attractive fast-growing space. Moving now to our Environmental & Applied Solutions segment, reported revenue increased 2% with 2.5% core revenue growth. Reported operating margin increased to 25.3% with 265 basis points of core margin expansion. In product identification, core revenue grew at a low-single-digit rate. At Videojet, core revenue was up low-single-digits but performance accelerated sequentially. Strength in North America and Western Europe was partially offset by softness in the high-growth markets. By end market, consumer products and food and beverage led the way. Our packaging businesses, which includes Esko and X-Rite was up mid-single digits. We had a particularly good quarter at Esko where growth rate was led by demand for our brand owner software, including BLUE, a business we acquired 18 months ago. BLUE provides label and artwork management software that enhances Esko's offering in the packaging development and production workflow. As a result, the Esko team is helping customers reduce the time it takes to bring new products to market while improving cost and quality across their packaging value chain. Finally turning to water quality, core revenue for the quarter increased at a low-single-digit rate. Core revenue at Hach increased low-single-digits. However, the fourth quarter represented the last period of tough prior year comparisons driven by China's surface water monitoring regulation Policy 61. Excluding the Policy 61 impact, Hach's core revenue increased mid-single-digits for the quarter and full year. Hach has been a consistent mid-single-digit growth business throughout its 20-year tenure as a Danaher operating company. And this success has been largely driven by the team's commitment to solving challenging customer problems through innovative applications and workflow solutions. One example is the recently launched CL17 FC, Hach's new online chlorine analyzer, which is easy to use and is equipped with Claros, Hach's water intelligence software. This combination of innovative hardware and software solutions helps customers more effectively manage their connected instruments, their processes and data ultimately lowering their operating costs, increasing compliance and reducing risk. At Trojan core revenue declined in the quarter due to the timing of certain large projects, but the team delivered impressive double-digit core growth for the full year. Trojan's growth acceleration in 2019 was driven by a combination of recent new product launches and commercial initiatives focused on expanding field service capabilities. And lastly, core revenue at ChemTreat was up mid-single digits with particular strength in the chemical and food and beverage end markets. So to wrap up, 2019 was an outstanding year for Danaher and marked our 35th anniversary as a company. Over the course of that time, through a combination of organic and inorganic initiatives, we've transformed into a higher-growth higher-margin and higher recurring revenue company. With a resilient portfolio that's built for the future and the Danaher Business System as our consistent driving force, we feel well positioned to continue to deliver long-term shareholder value. We are initiating first quarter adjusted diluted net earnings per share guidance of $1.06 to $1.09. This assumes core revenue growth of 6% to 6.5%, and reflects the impact of three additional selling days versus the first quarter last year. We're also initiating full year 2020 adjusted diluted net earnings per share guidance in the range of $4.80 to $4.90, which implies double-digit growth year-over-year at the midpoint and as mentioned earlier does not include any impact from the pending acquisition of GE Biopharma.

Thanks, Tom. That concludes our formal comments. Christel, we're now ready to take questions.

Thank you. [Operator Instructions] Your first question comes from the line of Tycho Peterson with JPMorgan.

Good morning, Tycho.

Good morning. I'll start with Pall. For life sciences, you had previously baked in a slowdown for the fourth quarter. Obviously that didn't happen. So just curious, if you could talk a little bit about why you thought things might slow why they did not and I guess what's embedded in the guide for Pall Life Sciences going forward? And as we think about kind of capacity supply-demand dynamics and adding GE Biopharma into the portfolio, how are you feeling about the sustainability of the platform of business?

Thanks, Tycho. We're really, really very pleased with how Pall performed in the quarter double-digit core growth in the quarter that, I've mentioned was led by biotech and aerospace. And if you sort of break that down and go in specifically into the life science side of Pall, you have double-digit core growth in life sciences. We've talked in the past about single use technologies that certainly was a portion of that growth. Single-use continues to grow at better than 20%. And so I think the combination of just looking at life sciences overall breaking it down into biotech and then looking specifically at that high-growth area of SUT all combined to give us a tremendous amount of confidence both in terms of Pall's positioning in that market, but also the end market strength. And so I think we feel very good about that. Now, we try to be prudent here early in the year in terms of how we embed different segments of the business into our overall guide. And so I think we sort of look into 2020 and think about the overall biopharma market and our position there is perhaps a little bit more normalized at high single digits in 2020. But overall that's not to suggest that we think this is about a market slowdown or there's any overcapacity issues. It's really about just saying that, hey, this 2019 was a great year. We're probably a little prudent going into the – into 2020, but this is absolutely a fantastic market to be a part of. We don't really see any issues relative to what – as we've been asked about in terms of overcapacity in the market. We continue to track the volumes of individual drugs that are being produced, and that really is the indicator. And we continue to see just tremendous progress both in terms of the drug development pipeline and the volume ramps of individual biopharmaceuticals where essentially we are integrated into the process. Relative to GE Biopharma that obviously improves our position in the overall market. It gives us broader exposure, specifically to the biopharmaceutical market, large molecules and those more advanced technologies given GE's exceptional position in chromatography. And so we're looking forward to closing that transaction here in the first quarter. And we think, it will be just a tremendous addition to the overall portfolio albeit as a separate standalone operating company distinct from Pall.

Hey, Tycho this is Matt. Just to kind of clarify. From a planning assumption perspective for biopharma for this year we're kind of thinking low double digits versus the mid-teens that we saw sort of last year. So just kind of clarify, where we think that will be here.

Okay. That's helpful. And then one follow-up on China up high single digits, can you maybe just talk about what's embedded in guidance for China? And then obviously with coronavirus just curious how you're thinking about that as it relates to particularly for your diagnostics business over there.

Sure. It was overall a very good quarter in China Tycho up high single digits in the fourth quarter and that was across all four of the platforms. And we saw high single digits in Dx and that was broad based in terms of the strength that we saw. Within life science, you know, as well as we do there's some policy and regulatory noise around the food and to some extent, the pharma market around four by seven that had some impact on SCIEX. But generally, we expect continued good performance from both of those platforms and both of those markets. Even PID was up high single digits and that was largely Esko and Videojet. And in water quality, I think I commented on ex Policy 61 terrific. So I think as we look forward in China, we see continued good growth opportunities there. Specific to the coronavirus situation. Obviously, it's a very challenging situation to get a clear handle on in terms of what its overall impact is. We have not seen any specific impact to this point on our business. That was before everyone left for the New Year. And as you know, certain provinces are extending, the Chinese New Year at this point. And that's obviously a little bit of a wildcard here in the first quarter. So, losing potentially an extra week could have an impact on both sales and the supply chain. But given that it's early in the quarter, we'll be working to offset that certainly, here in the first quarter. And could see some impact moving to second, but we continue to work to offset. So, we haven't incorporated any of that into any guidance. But it's just too early to tell. We're hoping for the best. We have businesses by the way Tycho that are actively involved in taking on this challenge. Both Cepheid and IDT are engaged in -- with outside parties on a global basis both public and private, including the CDC to support their efforts -- particularly at CDC supporting the CDC efforts around releasing just in the last couple of days, a panel of two PCR probes and primers that are designed specifically to detect the virus. So, we are in the fight here, but the impact of this both in terms of the overall Chinese market, our business. And any of our specific businesses it's just far too early to tell.

Okay. Thank you.

You're welcome.

Your next question comes from the line of Derik De Bruin, Bank of America.

Hi Derik.

Hi.

Hey. Good morning.

Hey, Could you sort of talk about the embedded margin assumptions for the business ex-GE right now as sort of what's embedded in the guide? Just sort of want to walk through now that dental is out what you're sort of thinking about the margin expansion and gross margin expansion would be in 2020.

Yeah. So kind of embedded – Derik, its Matt, kind of embedded in our guide here is sort of a 5% core growth which we talked about. And kind of -- the typical 50 to 75 basis points of margin expansion on that is sort of how we get to the range $4.80 to $4.90.

Great and the -- when GE comes into that, I mean it's going to -- obviously the margins are higher than that. Would you expect incremental boost to that immediately? I'm just sort of thinking about, sort of how it rolls through.

Well, I mean, it's going to roll through. And we talked about the initial accretion and kind of what we updated here today. So, that would have obviously included the fact that that is a higher-margin business than what we have. So, I think the way to think about that rolling through is it is in that $0.60. And then, as we go forward, we sort of talked about that as this being -- even though it's high-margin business. I don't think it's going to have much of an impact on our 50 to 75 basis points of core margin expansion every year. Higher-margin businesses tend to, kind of not necessarily have the best margin expansion, at the highest highs then given the VCM and the fall-through they already have. So, I still think going forward using 50 to 75 basis points of margin expansion, even post-GE is the right way to think about it. And you'll capture the uplift in the margin, in that $0.60 if you will in 2020.

Great, and just a quick follow-up to Tycho's question on, the China situation, have you embedded anything into your organic core growth guide for any sort of slowdown in the market at all?

At this point, we have not. We kind of -- as Tom said, it's -- we know as much as you guys know and we've sort of kind of -- if everything gets back to normal very quickly here it's still early enough that. We think we'd probably be able to offset that largely. So too early to tell and we have not put anything into either Q1, or the full year at this point.

Great, thanks, I will get back in a queue.

Your next question comes from the line of Vijay Kumar with Evercore ISI.

Hey guys. Congrats on a nice print here. Thanks for taking the question, Tom, maybe one big picture question on the Biopharma, I think, the commentary on the assumptions around 2020 growth low-double digits that was helpful. In GE, that business has been running double digits in 2019. So I'm just curious your thoughts around the growth of the GE Biopharma assets. And not -- why 6% to 7% is still the right way to think about the outlook for that business?

Hey, thanks Vijay. I appreciate the question. You're right. We had an initial planning assumption of 6% to 7% for that business. As I mentioned, in my remarks, they performed better than that, here in 2019. We just need to get the business closed and we need to get in underneath the covers and really understand at a deeper level kind of the order rate trajectory ,the backlog and those kind of things to make sure that we're comfortable as we go through 2020 at rates higher than our original projection. So we're excited about getting inside and getting with the team and trying to understand those opportunities. Obviously, if we were closed in the business a year ago and had this visibility that we would normally get to 2019, we would have had a higher view, but we'll need a little time to get inside and see what 2020 ultimately might look like.

That's helpful, Tom. And, Matt, one quick on the guidance. Margin execution shown in Q4 really strong. Was this because core revenues came in better with this volume-related leverage, or -- I'm just curious on what drove margin execution. And when you think about the context of three extra days in Q1, any assumptions on what the contribution is to the top line in Q1 from extra days? Thank you.

Sure. Maybe start with the second question first. So from -- I think, the three extra days in Q1 is probably worth -- it's sort of hard to tell. Its inexact science, but I think it's probably 50 to 100 basis points in Q1, would be probably what its worth. And then, kind of, talking to the Q4 fall through, I mean, gross margins were up 50 bps year-over-year, which was helpful. Price was okay here in the quarter. And the rest was good. It was kind of running the Danaher playbook. SG&A was down. Gross margins are up. And the volume coming through at 6% was a little bit better than we thought and that led to a pretty good finish here to the year with 100 basis points of margin expansion. And I think that's probably the way to think about it.

Thanks, guys.

Thanks, Vijay.

Your next question comes from the line of Doug Schenkel with Cowen.

Hi, Doug.

Hey, guys. Good morning.

Good morning.

How does the favorable financing outcome -- we knew about, but you described very well in your prepared remarks, how does that impact your flexibility on capital deployment? Specifically, I'm really thinking about M&A, maybe more near-term than we might have thought a quarter or two ago. And related to that, based on your forecasts for free cash flow this year, it appears you can delever to about 3.5 times EBITDA by the end of 2020. Am I doing math the right way there?

I mean, it's going to be close to that, I suppose, have -- I mean, yes, I think that's probably a pretty good spot. As far -- I'm sorry, that's on the second question, the free cash flow. As far as any impact, I think, on your first question, does that change in a material way, the interest -- would change in a material way in the near term, I don't think it's going to have a big difference on what we -- how we think about M&A here in the near term. I think we've talked about, we're still going to be active and in the market for sure. We will probably be focusing more on some of the bolt-on activity in smaller deals. But also, like we've said, if something was of interest and strategically out there for us. We also have talked in the past that, if we had to issue equity, we would. So, I don't think the financing necessarily changes anything in the near-term here.

Okay. Thank you for that. In your prepared remarks as well as in the press release, you called out market share gains as a driver of revenue growth. I'm wondering if you'd be willing to elaborate a little bit more on that and maybe be a bit more specific on where this most -- this is most evident, based on what you're seeing recently. And how we should think about the sustainability of these share gains moving forward?

Sure. Absolutely. I'd be happy to, Doug. I'll pick a couple of examples, looking across the portfolio. I mentioned in my prepared remarks about some terrific performance at Beckman Life Science. So to give you an example of what's driving the share gains there, if you look at our -- the cadence of new products, we've introduced over 20 new products in the last three years at Beck LS. In the three years pre-acquisition, that business launched three new products. So we've 7x the cadence of new product introductions. And specifically those are going into higher growth applications like biologics and genomics, obviously, our CytoFLEX product line in flow cytometry and the reagents associated with that, the new automation products and the Biomek series that I've talked about, the Vi-CELL products in particle counting, all those things are really contributing from a new product innovation standpoint to share gains at Beck LS and that's why we're seeing that meaningful step-up in growth at Beck LS, which by the way was virtually a flat growth business when we acquired it. You know, if I look over at -- in the diagnostics -- a couple of businesses that again are clearly gaining share. You got to look at Cepheid as one really good example and menu expansion continues to be a part of that certainly the menu expansion in flu and strep, but really good commercial execution. Expansion into IDNs our integrated delivery networks has made a big difference. I think if you look at that installed base that we've now grown from 13,000 systems at acquisition to 23,000 in the installed base over 40 major health systems that have been converted, 11 new assays and three point-of-care systems. I mean these are the things that I think underpin our confidence and our belief in the share gains at a place like Cepheid. If I look at a business that has been with us certainly a lot longer, but where the performance continues to be terrific I talked about the 15th consecutive year of good performance at Radiometer and their share gains. We've seen a 50% increase in blood gas competitive takeaways in 2019 alone. So we track every competitive situation and we can be clear about where we have in fact displaced a competitive instrument. So I think good examples there. One last one maybe I'll turn over to water quality where Hach has really improved their new product cadence. A lot of terrific products beyond the CL17 that I talked about in my prepared remarks, but a part of what's driven their cadence is they have cut their new product development time by 50% in the last two years. And at the same time, they've driven ideation and improved the nature of what's in the funnel I think substantially. And so again, we track our installed base as we track competitive win rates. And I think those trackers clearly give us confidence in the areas where we're gaining share.

That’s great. Thanks for taking the questions, guys.

Your next question comes from the line of Steve Beuchaw with Wolfe Research.

Hi, Steve.

Good morning, and thanks for the time. Just a couple of easy ones here from me. One is as we go into 2020 and you've laid out the 5% core objective for the broader company pre-GE can you just speak to expectations for growth within the different businesses around that 5%?

Sure, Steve. I think maybe the simple kind of at a high level the way to think about it is that we're expecting life sciences and diagnostics both to be kind of in the 5% to 6% range, sort of, versus the high single digits that they were last year. And that EAS is kind of continues in call it the 3% to 4% range.

Okay. Great. Much appreciated. And then over the course of the year, I wonder if you could speak to a couple of points just within the non-op so we've got our models with many moving parts subsequent to the changes in the last several months and those still coming as tight as we can. I wonder if you could speak to how you would imagine corporate expense plays out over the course of the year relative to that 1Q starting point and maybe relative to 2019.

Yes.

And then I wonder if over the course of the year how you would imagine share count playing out. Of course there have been a lot of moving parts but is where we are for 1Q just a good benchmark for the full year? Thanks so much.

Yes. Yes. Sure. No. Lot of moving parts. We appreciate that. So corporate expense Steve I would probably think about $60 million to $65 million per quarter is a good place to start from a modeling perspective. And from a share count perspective in Q1 it's going to be call it 718 million, 719 million shares. I would model in, sort of, kind of our typical share creep of maybe 1 million to 2 million shares a year. And maybe for a full year that 718 million -- call it 720 million 721 million at the end, I think I'd ramp it that way.

Got it. Just all I needed. Thank you so much.

Thanks, Steve.

Your next question comes from the line of Dan Brennan with UBS.

Great. Thanks, everyone.

Good morning.

Good morning. Good morning. Thanks for the questions. I was hoping to dig into a little bit on the diagnostic front. Beckman obviously a nice year in 2019. What do you see for 2020 there? Can you comment on some of the competitive launches? And in particular you mentioned a lot of the new product introductions there in hematology for Beckman. Kind of what's on the horizon for Beckman Diagnostics?

Sure, Dan. Thanks. As I mentioned in my remarks, we're really pleased with how Beckman performed – Beck Dx performed in 2019 at a mid-single-digit core growth. And as I think you know, well, that's 100 basis points higher than where we were two years ago. And a number of things have combined here. The new product launches that we've talked about in the last year or so. Automation being one the DxA 5000. We've always had a competitive advantage we believe in the – in higher volume environments and the DxA 5000 and our automation capability take us, I think to an even more important level. You mentioned hematology. Hematology the DxH 900 with the early sepsis indicator as well as the 500 series both big upgrades to that product line and those are making a difference without a doubt. And they will continue to be, because it's still early days in terms of the penetration of those new products into the market. So we're expecting as we go forward, we'll continue to see solid mid-single-digit growth from that business. And I think that will come from some of the things I just mentioned, but also I think some important product launches that are in the funnel, closing the menu gaps around infectious disease and blood virus and ensuring that we are architecting the hardware side of the house in a way that positions us well at lower volumes. Relative to competitive launches, obviously, this is a business where every competitor cycles through new product launches over a five, seven, 10 year period. There have been – there certainly is – are one or two out there right now. At this point, we haven't really seen any material impact to us on our retention or our win rates, but it's always a competitive market and we'll be keeping pace in terms of the competitiveness of our product line. And I think some of the things, I've talked about already are what underpin that.

Great. And then maybe switching gears over to Pall bio process. Obviously, terrific growth there and you've commented earlier on some of the outlook earlier Tycho's question. I'm just wondering with regards to gene therapy obviously you have nice exposure there as well. But are there any opportunities to maybe expand the portfolio whether internally or externally to kind of capture the expected growth rate in gene therapy? Thank you.

Sure. Well, it's certainly early days as you know in gene and cell therapy, and there's a lot going on. And Pall is working very closely with a number of customers in that area. But given the nascent nature of those the development of those therapies right now, it will be a while. It will be measured in years before the impact of that may very well become sort of material to Pall in the aggregate. So, a very exciting space for us one that we think we're really well positioned to support, but one that will take a while to evolve.

Excellent. Thanks a lot.

Your next question was – your last question comes from the line of Patrick Donnelly with Citi.

Hey, Patrick.

Hey, Tom. Great. Maybe just one on Cepheid. That's been as you kind of noted a 20% grower since the deal margins obviously moved significantly higher as well. How should we think about that asset going forward? I mean, it seems like there's still significant opportunities. You talked about the menu expansion areas like China, obviously still underpenetrated. I think you guys are still talking about kind of that low double-digit growth. Now that we've been three years here at 20%-plus, what's the right way to think about that one?

Thanks, Patrick. It – when we first acquired Cepheid we were very confident in it sustaining a double-digit core growth rate. And obviously, since that acquisition at 20% better that's been higher than we've expected and it's – there's a number of factors there a lot of which I think – a couple of which you might say are somewhat a function of the nature of that business being impacted by flu. We've just come through, I think at least two years in a row here with a particularly strong flu season. We don't bank on that obviously. That's something that we can have a strong season, which is unfortunately for patients and – but obviously good for that business. And you can have businesses where – or a season where that's not the case. And so we tend to be somewhat prudent in terms of how we anticipate those seasonal factors to play out. That said, the growth of that business has been certainly sustained by more than just flu. The work they've done in expanding the menu. And driving that installed base. The numbers that I quoted earlier have been a big part of that. So, I think you put all that together. And you say hey! Plan prudently relative to an uplift from something like a flu season, but have confidence that we can sustain that at least a low double-digit growth rate for sure, if not better. And based on the fact that they continue to innovate effectively and have really stepped up their commercial execution.

That's helpful. And maybe just a quick follow-up on Europe, pretty solid mid-single-digit growth there, obviously continue to get some mixed data points around that region. You guys always have a pretty good handle given your diverse exposure. Can you just talk through the trends you've seen there, expectations into 2020 visibility, would be really helpful.

Yeah. I mean, Patrick, we're not a great sort of macro proxy. But relative to our end markets, Europe in some respects has been a pleasant surprise in terms of its being relatively solid in the last couple of quarters. So, I'm not sure that gives me a lot of optimism, in terms of anything that might improve substantially in Europe right now. But I think it's certainly been a solid market for us. If you look across how each of our four platforms are performing there, each of them are doing quite well, but it's obviously a little bit weaker than the other parts of the world.

Yeah, Patrick maybe just to put some numbers to that, that has been a pretty solid 3% to 4% grower for us for probably six, eight quarters now. And looking forward, I think that's about where we still think it will be. As Tom said, it's probably not as good as some of our other markets like, China and the U.S. which are more mid-to-high single. But I think that 3% to 4% is a pretty good place to -- sort of been, I think it's sort of where we'll be.

Got it, great, thanks, Matt, I appreciate it.

And presenters, that does conclude the allotted time for questions. Do you have any closing remarks?

Thanks everyone, for joining us. We're around all day for questions.

This concludes today's conference call. You may now disconnect.