Hello, and welcome to the Q3 2023 Revvity Earnings Conference Call. My name is Alex. I’ll be coordinating the call today. [Operator Instructions] I’ll now hand it over to your host, Steve Willoughby, Senior Vice President, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Revvity’s Third Quarter 2023 Earnings Conference Call. On the call with me today are Prahlad Singh, our President and Chief Executive Officer; and Max Krakowiak, our Senior Vice President and Chief Financial Officer. Before we begin, I would like to remind everyone of the safe harbor statements that we have outlined in our press release issued earlier this morning and also those in our SEC filings. Statements or comments made on this call may be forward-looking statements, which may include, but are not necessarily limited to financial projections or other statements of the company’s plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties. The company’s actual results may differ significantly from those projected or suggested due to a variety of factors, which are discussed in detail in our SEC filings. Any forward-looking statements made today represent our views as of today. We disclaim any obligation to update these forward-looking statements in the future, even if our estimates change. So you should not rely on any of today’s statements as representing our views as of any date after today. During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measures we plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release. I’ll now turn it over to our President and Chief Executive Officer, Prahlad Singh. Prahlad?

Thank you, Steve, and good morning, everyone. Revvity has been built to help accelerate the advancement of human health through science, while also being able to execute at a high level through various macroeconomic conditions. This unique and differentiated profile is intended to help make a profound impact on the future of healthcare and to insulate our performance during periods of macro pressure, while still allowing us to capitalize when industry tailwinds are at our back. We and others are in the midst of one of those periods of macroeconomic and industry pressure. This is evident with the increased headwinds that we began to experience during the second quarter, which intensified during the most recent quarter. While we attempted to build some cushion into our assumptions, should industry dynamics worsen, the level of increased challenges we face from our pharma and biotech customers, particularly in September, was more than we anticipated. As a result, while our total company organic revenue grew by 1% in the quarter, we finished well below our mid-single-digit assumption from 90 days ago. Our lighter-than-expected revenue was driven by softness that occurred fairly late in the quarter. Given this last minute pressure, I’m very proud of our continued strong margin and earnings’ performance as the incremental headwinds in September left us very little time to try to properly manage our expenses. Our adjusted EPS in the quarter of $1.18 was still in line with the low-end of our implied guidance, despite our revenues coming in meaningfully below our expectations. The downturn in demand from our pharma and biotech customers led our Life Sciences business declining in the low-single-digits organically in the quarter, which was below our low-single-digit growth expectation. The softer spending from pharma and biotech customers also put pressure on our applied genomics and genomic…

Thanks, Prahlad, and good morning, everyone. The company has gone through a significant amount of change over the past year and has continued to execute at a high level as our employees have risen to the occasion to overcome the dynamic environment we’ve been facing so far this year. We are now in the midst of our next challenge as we saw a noticeable step-down in demand from our pharma and biotech customers as we progress through the quarter, especially in September. Although we expect these headwinds to continue, we remain focused on the items that are within our control and remain excited about the opportunities that lie ahead for our new company. As Prahlad has mentioned, we continue to make progress on our strategic initiatives across R&D, operations and sales and marketing, while continuing to rightsize the business. In addition to the previously discussed $60 million of cost actions we have taken so far this year, given the softer top-line trends we experienced as the third quarter progressed, we have identified another $20 million of further cost reductions that will impact the remainder of this year. Since we currently expect the softer pharma/biotech spending to be in place for at least a few more quarters, we are also working to take additional actions to properly align our cost structure as we head into next year, to ensure we appropriately balance strategic investments, while preserving our elevated margin profile. Now, moving on to our third quarter results. The company generated 1% non-COVID organic growth overall in the quarter, which resulted in total revenue of $671 million, which was down 6% due to the drop in COVID-related revenues compared to a year-ago. Of the 400 basis points lower-than-anticipated organic growth we experienced in the quarter versus the midpoint of our guidance,…

Thank you. [Operator Instructions] Our first question for today comes from Patrick Donnelly of Citi. Patrick, your line is now open. Please go ahead.

Thank you for taking the questions. Prahlad, maybe one for you, just in terms of the cadence of the quarter, it sounds like you flagged September as being quite a bit worse. Can you just talk about, I guess, what you saw as is kind of that exit rate what you’ve seen so far in October? And maybe specifically on reagents, it seems like those softened maybe more than others, just what you saw from customers and what you’re hearing on the go-forward on that piece?

Sure, Patrick. As we entered September, what we realized is that the pressure on the reagent side was more than we anticipated. And some of it was what we realized is the site consolidations and the closure of some site from big pharma, which obviously impacted the reagents numbers, and we saw that impact. Second one was the CRO side in China, that continue to see more pressure than anticipated as we came closer towards the end of the quarter. Also, if you keep in mind, if our licensing comp revenue shows up in our reagents number. So if you were to – ex-licensing, our revenue for the reagents would have been flat.

Okay. That’s helpful. And then maybe one, just as we think about kind of the end of this year into early next, Prahlad, it was helpful here, you’re kind of talk about the first half of next year, maybe some of these headwinds lingering. It sounds like 4Q is maybe down mid-single non-COVID and, Max, kind of framing up maybe as next year does look similar to this year, you’re kind of in that low-single range. Is it the right way to think about the first half as we model maybe thinking about something in that down mid-single range and then ramping, and is it just going to be easier comps in the second half? Is there any visibility into a level of improvement? Or for now, given, as you said, the range of outcomes, is it just uncertainty?

Yeah, I think it’s a fair question. Patrick, I think what we want to do is, as we said in our prepared remarks, we want to take the time to see how the macro evolves over the next couple of months and provide a more complete update towards the year-end. I think as we look at the line – as we and our peers have pointed out, as we look into the 4Q and especially on the instrument side of the business, generally, if you recall, 4Q generally tends to have a budget flush. That budget flush, we are very comfortable saying that, that’s not – there is no visibility into that. But, more importantly, I think as we look also into the first half of the year, we are not assuming a ramp-up in the first half. But in the second half, as you pointed out, obviously, because a lower comp, but also as things start coming back, our expectation is that it definitely would be better than as we would see in the first half. Max, anything I’m missing?

No, I’m done, Prahlad.

Okay. Thank you, guys.

Thank you. Our next question comes from Vijay Kumar of Evercore. Your line is now open. Please go ahead.

Hey, guy. Thanks for taking my question. Prahlad, maybe just one on your September commentary on the guidance. So the guidance changed by $90 million. Is that all pharma? What is it assuming for China that $90 million change in guidance in that implied minus 5% for Q4? Is that the trend you guys saw in September and that’s what the guidance is as you look into Q4?

I think majority of that, obviously, is on the Life Sciences side of the business, Vijay. Our assumption around instruments is that they would be down double-digits. Our assumption around reagents is that it would be flat versus 3Q. I think, also to keep in mind, on the Diagnostics side, applied genomics is getting impacted, because it’s the overlap of customers that we see on pharma/biotech. Our IDX business in China and everywhere else, while it continues to grow, it’s got a much tougher comp in 4Q versus what we had in 3Q. So it’s probably a combination of all the 3 things that I pointed out, which is what is leading us to what we’ve guided in 4Q.

Understood. Max, one for you. I just want to understand your 2024 comments here. But did you say – did I hear you correctly when you said no operating leverage if revenue outlook was similar to fiscal 2023 on a base organic basis? And, I think you said net interest and other of 40%. Can you just put a dollar number, please? What’s the right base when you say up 40%?

Yes. So a couple of points there, Vijay. One, I would say for 2024, right, I think we were saying there’s a wide range of potential outcomes for next year, and we’re going to take the next couple of months to further refine it. In the event that organic growth did look similar to this year, you are correct, we said that there will be nominal margin expansion, right, very low-single-digit growth year-over-year. In terms of your interest in other question, the 40% growth is off a $57 million number this year, which we provided in our prepared remarks. And the reason for the increase year-over-year is because of the lower cash balance we have on average in 2024. As we mentioned, we paid off the $500 million note in Q3 of this year, and we’ve got another $800 million that we have to pay off in September of next year.

Very clear. Thank you, guys.

Thank you. Our next question comes from Derik De Bruin of Bank of America. Your line is now open. Please go ahead.

Hi, good morning. Thank you taking the question. Just to put a point on it on the 2024 outlook. I mean, can you hold EPS flat or with the cost cutting? Or should we think about it as potentially being down year-over-year?

Yeah, I think as we mentioned, Derik, right, we are not providing a guidance here for 2024. If we said there’s a potential range of outcomes, I think in the event that organic growth did look similar, we’ve given you enough pieces to go ahead and model down to the EPS. But again, we’re going to take the next couple of months to really refine what the organic growth assumption is, which will have a big impact on what our ultimate EPS is for next year.

Got it. And just a little bit more color on what’s going on at BioLegend and Horizon, and just talk about sort of like some of the trends in pharma. Are they just – I mean, are they hesitating on spending? Are they doing it? Just any more incremental color you can sort of like give us on what’s going on with that end market. Thank you.

Sure, Derik. Let me talk about BioLegend. BioLegend did better than our overall reagents business that we talked about and they did quite good. I think, obviously, it also has seen some softening. And primarily, that is what it is seeing, especially as we look at China. We’ve given the CRO business depression in that marketplace. I think on the Horizon side, we get a lot of service business that comes there from pharma/biotech, which has seen softening. So on the Horizon side, on the reagent side, while it’s okay, but the service revenue that comes from Horizon, because of the cell line development work, et cetera, that they do, that has seen softening. So any spending coming out of pharma/biotech has seen softening, which is the general trend that we have observed.

Got it. And services in general being more so than just than the consumables?

Yes, absolutely.

Got it. Thank you very much.

You bet.

Thank you. Our next question comes from Andrew Cooper of Raymond James. Your line is now open. Please go ahead.

Hi, everybody. Thanks for the questions. Maybe first, just on some of the cost actions you called out, I think it was $60 million up to $80 million now with the $20 million coming. Just can you clarify, are those annualized numbers or for the year? And then how much should we think about that being a tailwind as we think about moving into 2024, some of what you pulled out this year that continues to benefit even if you don’t necessarily pull out incremental dollars?

Yeah. Hey, Andrew. So the way I would think about the cost of the $80 million number is the reduction that we have in our P&L and financials for this year. As you think about it for next year, we mentioned a little bit in the prepared remarks, we will have some costs that were a tailwind for us this year that are going to come back into our financials for next year, which is kind of getting offset by some of the annualization of the cost actions we have taken this year. And so that is kind of balance each other out. And then, again, as I mentioned in one of the previous Q&A, it’s going to ultimately depend on what our organic growth looks like for next year as well.

Okay. Helpful. And then, maybe just can you give us a sense for a little bit of the sizing of how you might break up the end market within the Diagnostics business really with kind of the intent of how much of that business is more exposed to pharma/biotech versus what is sort of true clinical and probably not impacted by the same end-market headwinds that we talked about for pharma/biotech?

Yeah, it’s a great question. And so, I think you’ve heard about us talk about the Diagnostics business being impacted by pharma/biotech and really 2 of our business signs. The first is the applied genomics business, which as a reminder, is roughly $250 million of revenue per year, about 60% of that business goes into the pharma/biotech customer base. And then, you’ve got the second piece is our Revvity Omics business, which is last year that was roughly an $80 million business for us. I would say more than half of that business is related to the pharma/biotech customers as well.

Okay. Great. I’ll stop there. Thanks.

Thank you. Our next question comes from Eve Burstein of Bernstein Research. Your line is now open. Please go ahead.

Great. Good morning. Thanks a lot for the question. So as part of your portfolio transformation, you’ve talked a lot about how the new portfolio should allow you to grow well above market average. I know that you’re going to revisit your midterm outlook, and we’ll wait to hear specific numbers on 2024 and longer-term from you. But 2 questions. One is just, do you expect to be more resilient than your peers on average next year? And do you expect to grow significantly above market growth next year, whatever that average is?

Yeah. Hey, good morning, Eve. I think there are 2 ways to look at it, right? We definitely feel very confident that our portfolio continues to remain differentiated. As we even in this tough market environment, let me point out to a couple of things that we feel are bright spots. Our immunodiagnostics business globally grew in the high teens, especially in China, it has continued to grow in the high teens and will grow 10%. China performance, we had low-double-digits growth there. For the full year, we will expect mid-single-digits growth there. So, I think if you look at China, if you look at our immunodiagnostics business, that continues to be resilient. Our neonatal business despite pressure from both rate continues to do very well. Even on the Life Sciences side, despite the depression that we saw in 3Q, our reagents business will still grow mid-single-digits for the year even when you include the licensing comp headwinds that we have for this year. And going forward also, we expect our reagents business to be resilient and continue to do very well. At the end of the day, what it comes down to is the pressure from pharma/biotech on CapEx spending, which is on the Life Sciences instrument side and also on some on the software renewal side that we had. So that pressure, we expect, as I pointed out, to sort of elongate into the first half of next year. But from a portfolio perspective, we feel very confident that we will be differentiated.

Got it. And then maybe just one follow-up. You talked about immunodiagnostics in China being quite strong and a high point for your portfolio. Some of your peers have also had positive things to say about the market environment for Diagnostics in China, volumes being up, being spared by anti-corruption crackdown. Has there been any signs of weakness or of the crackdown scope expanding to include Diagnostics or from where you’re standing today, does it just look like smooth sailing?

From our business perspective, we have seen no to very minimal impact in our business. If anything, it’s just more delays versus any cancellation. I think in the longer-term, Eve, this will probably benefit multinationals more given the anti-corruption initiative that the government has going on.

Great. Thank you.

Thank you. Our next question comes from Jack Meehan of Nephron Research. Your line is now open. Please go ahead.

Thank you. Good morning. I wanted to ask the Diagnostics business, Max, I think I heard down low-single-digits forecast for the fourth quarter. I just want to confirm that’s on a non-COVID basis. And then if you compare it versus the third quarter results, it’s a bit of a moderation. Just talk about what’s changing kind of in the year-end?

Yeah, sure. Hey, Jack. So actually, for the fourth quarter guidance for our Diagnostics business will be roughly flat for the fourth quarter. And so, when you then look at it versus the third quarter, really the drop versus the mid-single-digits growth in the third quarter was driven by the fact that our applied genomics business, as I previously mentioned, continues to face increased headwinds from the pharma/biotech. That is really the only thing that I would say is changing dramatically from the third quarter to the fourth quarter. The other 2 pieces of it, albeit they’re smaller is: one, we have a heavier CapEx instrumentation comp in our reproductive health business in the fourth quarter; and the second is, immunodiagnostics China does have a tougher comp in the fourth quarter. If you remember, third quarter of last year was down high teens, and the fourth quarter was down mid-single-digits. So I would say, those are the kind of 3 key pieces quarter-over-quarter.

Great. Okay. And then sticking on Diagnostics in China, getting a lot of questions about the volume-based procurement initiatives in the region. Prahlad or Max, just curious how you kind of frame any exposure there for your Diagnostics business and kind of thoughts on what that can mean for pricing over the coming years? Thanks.

Yeah. And, Jack, we’ve talked about this earlier, right? I think our NPIs are differentiated enough. I mean, I think if you just to frame it, roughly high-single to probably 10% of our DX business will see some impact from value-based pricing. And over the years, we’ve continued to see mid-single-digit price rate declines in China on our portfolio. However, we’ve continued to compensate for that with newer NPIs and increased volume that we have seen, and we expect to continue to see that more than offset the price decline and result in double-digits immunodiagnostics growth for our portfolio there into the future. As we assume sort of flat growth for reproductive health and applied genomics in China DX are in mid-single-digits overall for the whole year though. I think the future potential impact from VBP price expanding, we will see it decline each year, given the mid-single-digit gradual price decline that we currently continue to see in China.

Thank you. Our next question comes from Matt Sykes of Goldman Sachs. Your line is now open. Please go ahead.

Thanks for taking my questions. Good morning. Maybe just to start on the academic government end market. You showed pretty solid growth in the quarter. How are you thinking about that end market in the context of some of the budgets being set over time, whether it’s NIH or others in terms of the stability of that end market as we move into 2024?

Yeah. Hey, Matt, how’s it going? So as we look at our academic and government customer base, as a reminder, that’s about 25% of our Life Sciences portfolio. And in the quarter, it did grow low-double-digits. The other point I would call out is that instruments makes up about 50% of that, while reagents makes up the other 50%. Our reagents business has continued to kind of grow at a mid-teens level year-to-date in the academic and government portfolio. We expect that to continue really maybe the, I would say, unique dynamic this year is really more around the instrument growth in academic and government. If you remember, they had much easier comps in 2022, they were coming off of. So instruments are posting, I would say, a healthier growth rate than what we would probably suspect long-term. But, again, you’re only talking about half of that portfolio is really instrumentation.

Got it. Thanks, Max. And then just more of a high-level question. As you saw some of that demand from pharma/biotech drop off in September, could you maybe characterize the nature of that slowing in spend, just given the fact that a lot of these large pharma companies have big budget decisions to make and turning that around and respending sometimes takes a lot of time. I’m just wondering, do you see these sort of the slowdown in spending is sort of a transitory in terms of 2023 budgets? Or do you think there’s some bigger reprioritizations and spending and budget decisions moving forward into 2024?

Yeah, Matt, I think from my perspective and just looking at the customer buying behavior, it’s not that. As we entered September, we saw more of a pausing or a cancellation rather than saying that this is going to be continuous. I think just given the IRA Act, customers are more than anything just ensuring that they calibrate and get their costs in line now. So I think it’s just more planning and ensuring that their cost structure is ready to address the IRA Act as it comes into play into 2025. So from our perspective, it is transitory and it will be there for a few quarters.

Thanks, Prahlad. I appreciate it.

Thank you. Our next question comes from Josh Waldman of Cleveland Research. Your line is now open. Please go ahead.

Good morning. Thanks for taking my questions. 2 for you. First, Max, can you help us think about the right earnings base for 2024? I mean, you have $80 million of cost reductions this year. I guess, how much of that is discretionary comp that will be coming back into the business? And then it sounds like you have higher interest expense, maybe tax rate and share count or tailwinds. Just curious if you think the $455 million guide for this year is the right way to think about the base entering next year? Or is it below that?

Yeah. Hey, Josh. Look, I appreciate the question. I think as I mentioned before, in 2024, we are not giving guidance on EPS or anything of that nature or getting specific. We’re going to take the next couple of months to really refine our organic growth outlook of what we anticipate for next year. I think we were trying to get ahead in saying in one of the possible scenarios that it did look similar to this year, we wanted to kind of get out front in terms of some of the margin commentary and what that would look like. But, again, we’re going to take the next couple of months to really refine what we expect our organic growth to be for 2024.

And, again, I’ll just add to this, Josh, because I know, obviously, people are curious on 2024. We really need to take the time to ensure that we understand what customer buying behavior looks like and how it evolves, the macro evolves over the next few months. But I think more importantly, as Max said, we are taking the right measures. We are taking action to protect our top quartile margin profile, despite revenue growth weakness and that includes the cost-cutting measures that we’ve already taken, and we will continue to take to protect and even expand our margins.

Got it. Okay. And then, Prahlad, I wondered if you could provide more context on how the quarter progressed in the Life Science business. You obviously mentioned tighter reagents, but curious how instrument demand progressed. And then, I guess, how confident are you that you fully capture the potential downside? I mean, I think Max said, the Life Science business is expected to be down double-digits in the fourth quarter. It’s a wide range, I guess, any more context you can provide on kind of the right landing point for the Life Science business.

Look, I mean, I think on the Life Sciences instruments side, we’ve assumed double-digit decline in the fourth quarter, and we’ve kept our reagents flat versus our third quarter. And essentially, the way I would say it is that we pattern that based on the buying behavior of our customer towards the end of the quarter, which was – as we said, and both Max and I pointed out, it was more of a steeper decline in the second half of the quarter.

Yeah, the one other piece I would add, Josh, is that normally, we do see sort of a sequential dollar step-up in the fourth quarter from our Life Sciences instrumentation. Usually, that’s about a 20% volume step-up quarter-over-quarter, we have taken that now fully out of our guidance for the fourth quarter. I think the last time we spoke on our second quarter earnings call, we had reduced it, but we had not fully eliminated the step-up between the third and the fourth quarter, and now we have fully taken out any sequential step-up on instrumentation.

Got it. That’s helpful. Thanks, guys.

Thank you. Our next question comes from Dan Brennan of TD Cowen. Your line is now open. Please go ahead.

Great. Thanks for taking my questions, guys. Just maybe on the immunodiagnostics business since that’s been such a driver here. You guys sounded very positive on the continuation. Can you just give us a little color on kind of what you’re seeing there globally and the confidence that that kind of double-digit growth continues here in 2024?

Hey, Dan, good morning. Yeah, I mean, again, that has been a bright spot, as you pointed out, and we continue to expect that to do well. Look, as we’ve said about EUROIMMUN and Max pointed out today, you should assume that our EUROIMMUN business is going to continue to grow in the double-digits. And, I mean, there are 2, 3 reasons, our growth drivers that we’ve pointed out, one is obviously the awareness of autoimmune disease and the continued growth of that, especially as we see that in emerging markets, launch of new NPIs, more specifically in the United States, but also in other markets, they have come out with a few new assays and instruments that are starting to see traction and they have a very healthy pipeline, more importantly, as we look going forward, which is what gives us the confidence in the growth of that business.

Great. Thanks. And then maybe just on the free cash flow. You talked about some of the one-off headwinds here with the divestiture and also some of the rebranding. How should we be thinking about today if we think about conversion into 2024 at this point on free cash flow?

Yeah. Hey, Dan. Yeah, so I think starting with the free cash flow number, Brennan, we mentioned a little bit in the prepared remarks, if you were to sort of normalize for some of these AES outflows, et cetera, our year-to-date conversion is roughly about 160% on a free cash flow conversion basis. We would expect to finish this year above 100% once you adjust for those items. And, I think we do feel confident that our new portfolio as Revvity will enable us to do better cash flow performance than we have done historically. And so we remain encouraged that we’re going to continue that strong performance into 2024.

All right. Thanks, Max.

Thank you. Our next question comes from Luke Sergott of Barclays. Your line is now open. Please go ahead.

Great. Thanks. Good morning. I have 2 quick cleanups and then I have better question on the quarter. So you talked earlier about the instruments being down double-digits in the quarter. Is that year-over-year or quarter-over-quarter? And then can you update us what EUROIMMUN did?

Yeah. Hey, Luke. So from an instrument standpoint, that is a year-over-year stat. When you look at it again, quarter-over- quarter, as I think I just mentioned, it’s relatively flat volumes from a sequential standpoint versus the third quarter for the instrumentation. In terms of EUROIMMUN, I think that we don’t necessarily disclose individual business lines, but our overall immunodiagnostics business, as we mentioned, grew in the high teens in the third quarter and EUROIMMUN is the, by far, the largest piece of that business.

Got you. And then, so just trying to figure out here how the quarter sounded like it could continue to get worse. And so, is it safe to assume like the step-down in September was something like 25%, 30%? And then does your current guide contemplate the demand environment getting worse? Or is it just kind of steady state at these levels that you exited September in?

Yeah. So, I think it depends on what piece of the portfolio you’re really talking about in terms of the September performance. I would say just though overall for our guidance and the way that we thought about the fourth quarter is contemplating those exit rates we saw in September and October, and that is what we have sort of baked into our guidance here to the fourth.

All right. That’s helpful. Thanks.

Thank you. Our next question comes from Dan Leonard of UBS. Your line is now open. Please go ahead.

Thank you very much. I just want to make sure I understand all the moving pieces in China. I think you said the expectation is mid-single-digit growth for the year. How would you break that down between Life Sciences and Diagnostics?

Yeah. So for China, you’re right, mid-single-digits for the full year. Life Sciences will be roughly low-single-digits growth and Diagnostics will be high-single-digits growth.

Appreciate that. And then on Diagnostics in China specifically, I appreciate you had that high teens result, a growth result in immunodiagnostics, but that was off of a high teens’ decline. So in aggregate, it doesn’t seem like the business is growing a whole lot, but you’re not overly concerned about volume-based procurement. It sounds like there are several offsets and you’re bullish on the long-term. So I was hopeful that maybe you could help me reconcile some of those comments. Thank you.

Yeah, I think that’s right. We do remain very bullish on our immunodiagnostics franchise, not only in China, but globally. To your point on the comp, that’s correct, those 2 KPIs were the right numbers. The thing I would mention though is we’ve been pretty consistent in saying that we were not expecting a huge jump from pent-up demand, right? There’s still only a certain amount of volume that can go through the hospitals from a testing perspective. And so what we have seen is that the third quarter does return to sort of normalized volumes from our testing business.

Thanks for the color.

And even if you look at the full year, immunodiagnostics China will continue to grow double-digits.

Understood. Thank you.

Thank you. Our next question comes from Dan Arias of Stifel. Your line is now open. Please go ahead.

Good morning, guys. Thanks for get me in here. Max, just going back to applied genomics, the comp gets several points easier in the coming quarter. I think you were down year-over-year in 4Q last year. But, obviously, you are talking about these incremental pharma headwinds. So what sequentially are you expecting there? Does the low-double-digit decline this quarter moved to something lower? Or can you kind of be in that same neighborhood, just given the easier comp?

Hey, Dan. No, I think it will – similar to the Life Sciences instrument side, we are not expecting much of a volume step-up, if anything maybe in the applied genomics side, there might be a little bit of pressure quarter-over-quarter from a sequential volume standpoint. And so, I do think it will continue to be pressured here in the fourth quarter, maybe even so a little bit more than what we saw in the third quarter.

Okay. And then maybe, Prahlad, just big picture. I mean, is the state of the end-market environment right now impacting your view on M&A? Are you more or less enthused about doing another deal and does the priority list of the preference list, does it change at all just given the way that things are moving around here? Just curious about your appetite for additional M&A here?

Yeah, it’s a great question. We continue to keep our M&A pipeline right, and we continue to look for opportunities. Obviously, we are going to be very diligent in terms of the valuation, et cetera. But strategically, the fundamentals of the business that we’ve established are focused on growth, which is differentiated. Obviously, the market has shifted in the short-term, but we are focused on ensuring that, A, we can control what we can right now and also we continue to build for the future. So we will continue to be active. I think the timing is something that is not predictable because, as you know, we are not really always looking for targets which are out in the public environment.

Okay. Helpful. Thank you.

Thank you. Our final question for today comes from Catherine Schulte of Baird. Your line is now open. Please go ahead.

Hey, guys. Thanks for taking the questions. Maybe just on the comments on reexamining your midterm growth outlook. Is that more of a comment on the Life Sciences side of the business? Or do you think the Diagnostics side needs to be reevaluated as well?

I think the way I would look at it, Catherine, is on the Diagnostics side, obviously, the applied genomics side of the business, where there is overlap with pharma/biotech. I would say that I would call out that, that’s probably a component that we would look at. But outside of that, the immunodiagnostics, the neonatal business that that is not something that we would see any impact on.

Okay. And then I just want to clarify your comments on reagents for the fourth quarter. I think you both said that those would be flat versus the third quarter. Is that on a dollar basis sequentially? How should we think about reagents year-over-year growth rate in the fourth quarter?

Yeah. Hey, Catherine. So for the reagent standpoint, the flat is actually the growth performance year-over-year. In terms of a dollar change versus the third quarter, it will be slightly up versus the third quarter.

All right. Thank you.

Thank you. I will now hand back to Steve Willoughby for any further remarks.

Thank you, Alex. I hope everyone has a good day, and we’re here all week. Take care.

Thank you for joining today’s call. You may now disconnect your lines.