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Danaher Corp (DHR) Q1 2019 Earnings Call Transcript

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Danaher Corp  (NYSE: DHR)
Q1 2019 Earnings Call
April 18, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, my name is Laurie, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to Danaher Corporation's First 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, you may begin your conference.

Matthew E. Gugino -- Vice President, Investor Relations

Thanks, Laurie. Good morning everyone and thanks for joining us on the call. With us today are Tom Joyce, our President and Chief Executive Officer; Matt McGrew, our Executive Vice President and Chief Financial Officer; and Dan Comas, our Executive Vice President.

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 the heading Events & Presentations and will remain archived until our next quarterly call. A replay of this call will also be available until April 25, 2019. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. The supplemental materials describe certain additional factors that impacted year-over-year performance.

Unless otherwise noted, all references in these remarks and supplemental materials to Company's specific financial metrics relate to the continuing operations of the Company and the first quarter of 2019 and all references to period-to-period increases or decreases in financial metrics are year-over-year. We may also describe certain products and devices, which have applications submitted and pending for certain regulatory approvals or are available only in certain markets.

During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe, or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date they are made and we do not assume any obligation to update any forward-looking statements except as required by law.

With that, I'd like to turn the call over to Tom.

Thomas P. Joyce -- President and Chief Executive Officer

Thanks Matt, and good morning everyone. We're off to a great start in 2019, delivering first quarter results ahead of our expectations. We achieved 5.5% core revenue growth and believe we expanded our market-leading positions at a number of our operating companies through a combination of new product innovation and strong commercial execution. Our growth was broad based with all four segments delivering better than expected results and we continue to see healthy conditions across our major end markets. Combined with solid adjusted EPS growth and free cash flow generation, our performance is a testament to the power of the Danaher Business System.

Our team's focused execution has continued to accelerate our growth trajectory and drive long-term value creation, and we're excited about what lies ahead for Danaher. Over the past few years, you've heard us talk a lot about building a better, stronger Danaher. An important and transformational component in that pursuit is our pending acquisition of the GE Biopharma business, which we announced on February 25th. GE Biopharma is a leading global player in the attractive biologics production market and will bring complementary strengths to our Life Science platform across the bioprocessing workflow. We expect this acquisition will be accretive to Danaher on multiple levels and will further advance our evolution into a higher growth innovation-driven Company. We could not be more excited about this business, the team and what they'll bring to Danaher. The transaction remains subject to regulatory approvals and we're making good progress toward closing, which we continue to be -- which continues to be on track for the fourth quarter of this year.

Turning to our first quarter results. Sales grew 4% to $4.9 billion, driven by 5.5% core growth. Acquisitions increased revenues by 2.5%, while the impact of foreign currency translation decreased revenues by 4%. Geographically, high growth markets grew high single digits, led by double-digit growth in China. Across the developed markets, we saw mid single-digit growth in the US, and low single-digit growth in Western Europe. Gross margin for the first quarter was 55.7% and operating profit margin was 14.8%. Core operating margin increased 40 basis points, despite a meaningful foreign currency headwinds from a stronger US dollar year-on-year. Excluding this foreign currency impact, core operating margin would have been up 90 basis points. First quarter adjusted diluted net EPS was $1.07, representing 8% growth year-on-year.

Now let's take a more detailed look at our first quarter results across the portfolio. In Life Sciences, reported revenue was up 10% and core revenue grew 7%. Reported operating profit margin was up 60 basis points to 19%, with core margins increasing by 100 basis points. Beckman Life Sciences' core revenue was up double digits, making this the businesses' 7th consecutive quarter of high-single digit or better core revenue growth. Broad based strength across most major regions and product lines was led by double-digit growth in flow cytometry and centrifugation, and we believe the team's combination of high-quality innovation, plus commercial execution continue to drive market share gains across the business.

Leica Microsystems achieved high single-digit core revenue growth. Strength across North America and China was driven by demand in life science research, as we continue to benefit from new product introductions. Most recently, Leica launched the THUNDER imaging systems, a new class of wide-field instruments designed specifically for high-speed, high-quality imaging of 3D biology. Scientists use this imaging technology to study organisms, tissue sections, and advanced cell cultures, for use in microbiology, neuroscience, and Cancer Research.

Core revenue at SCIEX was up low single digits with good performance in pharmaceutical, academic, and applied markets, partially offset by the impact of a tough comparison in our North American Clinical business, which was up meaningfully last year. Pall's core revenue increased at a high single-digit rate, with growth across all major geographies. Pall Industrial was up mid single digits, led by aerospace and process and industrial, and we continue to see solid order trends within both businesses. Double-digit core revenue growth in Pall Life Sciences was driven by our Biotech business, particularly single-use technologies where we're seeing robust demand for our iCELLis bioreactor system in gene therapy applications. The iCELLis provide excellent cell growth conditions for adherent cells, which are used to produce gene therapies and it is the most widely used cell adherent bioreactor on the market today. iCELLis was recently highlighted at the INTERPHEX BioProduction Trade Show along with a number of Pall's other market-leading bioprocessing innovations.

Moving to diagnostics. Reported revenue grew 1% with core revenue growth of 5%. Reported operating margin decreased to 15.2% with both core and reported margins down 110 basis points. This decline is predominantly attributable to the impact of foreign exchange rate movements. At Beckman Diagnostics, core revenue was up mid single digits as we saw continued improvement in North America and double-digit growth in China. By product line, immunoassay and automation led the way and hematology was seeing early sign of the positive impact from our new product introductions, including the DxH 520 and DxH 900 analyzers for low-to-high volume settings. Beckman recently received 510-K clearance from the US FDA for the DxH 520 and for the Early Sepsis Indicator to be run on the DxH 900. These additions in hematology are key examples of how we are enhancing our competitive position and accelerating our growth trajectory at Beckman.

Radiometer delivered high single-digit core revenue growth, led by performance in China and we believe the team continued to gain market share in North America. During the quarter, Radiometer expanded their installed base globally across both our blood gas and AQT product lines. We acquired Radiometer in early 2004 and the first quarter marked their 15th anniversary as part of Danaher. During that time, the team has become a champion of DBS, helping to evolve the tools and processes that are shared across Danaher today. As a result of this strong DBS execution and leadership, Radiometer has achieved tremendous results including more than 1,000 basis points of operating profit margin expansion. And over the last five years, the business has averaged high single-digit core revenue growth compared to low-single digit growth, at the time of acquisition. As one of our longest tenured operating companies today, Radiometer provides a terrific example of the long-term power of DBS. Through a balanced approach implementing growth, lean, and leadership tools, Radiometer has established a market-leading position that it continues to enhance today.

Leica Biosystems, also had an excellent start to the year with core revenue up high single digits, led by advanced staining and core histology across the developed markets and in China. At Cepheid, core growth was down slightly against the prior year comparison of over 40% growth, which was primarily driven by last year's severe flu season. The team continued to expand Cepheid's market leading installed base and is gaining momentum in North America with Integrated Delivery Networks or IDNs. Cepheid's cartridge based molecular test is a uniquely well suited solution for IDNs and their patients as it ensures consistent results across the network, whether the test is done in a large hospital lab, or in a physician's offices.

Turning now to our Dental segment. Reported revenue declined 2% while core revenue grew 2.5%. Reported operating profit margin declined to 7.3% with both core and reported margins down 30 basis points. This decline primarily reflects the impact of ongoing investment spend focused on new product development. We saw growth across our specialty and traditional product lines and we remain encouraged by the stabilization we have seen in the North American end markets. High growth markets led the way geographically with China up double digits. The dental team continues to pursue one of its key strategic priorities that is accelerating growth through innovation. At two recent industry trade shows, IDS and Chicago Midwinter, we featured more than 20 new products and technologies from across the dental platform, really the culmination of strategic investments in R&D and sales and marketing over the last few years.

At Nobel, Xeal and TiUltra, our new implants surface technologies that enable better bone and tissue integration while improving aesthetic results. And the KaVo OP 3D is a scalable modular imaging system that provides clinicians with the flexibility to upgrade to the latest 3D imaging technology as they expand their capabilities and grow their practices. So we're excited about this cadence of new product introductions and believe that this expanding portfolio of solutions will further distinguish our dental business going forward. We're also making good progress as we work to establish the platform as a separate publicly traded company in the second half of this year.

Moving to our Environmental & Applied Solutions segment. Reported revenue increased 3% and core revenue was up 5.5%. Reported operating margin increased 110 basis points to 23.2%, with 140 basis points of core margin expansion due to outstanding execution across the segment. In Product Identification, core revenue increased at a low single-digit rate. Videojet's core revenue was up mid single digits, led by results in the developed markets. Growth was broad-based across all major product lines with good traction for more newly introduced products like the remotely connected CIJ 1580 industrial inkjet printer.

Using DBS growth and innovation tools, Videojet has continuously expanded its product portfolio and getting higher impact product to market faster. This strong innovation execution differentiates Videojet's customer solutions and is a key driver of the team's consistent market outperformance. Core revenue in our packaging business, which includes Esko and X-Rite was flat, but recent order trends are improving and we expect better performance as we move through the year.

Finally, turning to water quality. Core revenue growth for the platform was up high single digits. Hach core revenue increased at a mid single-digit rate as end market demand remained healthy, Europe and China led the way, and we continue to see solid order trends across both municipal and industrial applications globally. Hach has consistently grown above the market over the last several years in part driven by best-in-class commercial execution. The team has aligned their go-to-market strategy to better meet customers' needs and a great example of this is the expansion of Hach's e-commerce platform. The teams double-digit e-commerce revenue growth in the quarter is a testament to how our innovative commercial strategy is delivering even greater value to customers.

At Trojan, core revenue increased by more than 20% as a result of a few large municipal projects in North America and in China. The team sustained a solid customer win rate and continues to benefit from recent new product introductions like UV Signa and UV Flex. Lastly, ChemTreat delivered mid single-digit core revenue growth with the team's sales execution, driving strong performance in North America. By end market, chemical, metal processing and oil and gas led the way.

So, to wrap up, we're very pleased with our first quarter results, and look forward to building on this momentum as we move through the year. Our team's commitment to continuous improvement helped us achieve our 6th consecutive quarter of 5.5% or better core revenue growth, high single-digit adjusted EPS growth and solid operating margin expansion. We are initiating second quarter adjusted diluted net EPS guidance between $1.13 and $1.16, which assumes core growth of approximately 4% to 5%. We now expect full year 2019 adjusted diluted net EPS to be in the range of $4.72 to $4.80, which reflects the dilutive impact of our recent equity offerings, partially offset by our first quarter performance.

Looking ahead, 2019 will be a transformational year for Danaher. We will be welcoming the GE Biopharma business through our Life Sciences platform and are establishing our Dental platform as a separate publicly traded company. These are incredibly important portfolio moves that we expect will maximize value for our shareholders, customers and associates and help all of us realize greater potential. With DBS as our foundation, we're well positioned to continue building on our growth trajectory and are excited about the opportunities to come.

Matthew E. Gugino -- Vice President, Investor Relations

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

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from the line of Tycho Peterson of JPMorgan.

Tycho Peterson -- JPMorgan -- Analyst

Hey, thanks.

Thomas P. Joyce -- President and Chief Executive Officer

Good morning, Tycho.

Tycho Peterson -- JPMorgan -- Analyst

Good morning. I want to start with China, you guys continue to put up really good numbers there. We had some interesting data points lately, one of your peers talked about destocking on the diagnostic side yesterday. And then there's been more noise on the crackdown on generics kind of impacting the pharma market. So can you maybe just looking ahead talk a little bit about how your expectations for China have evolved? Are you seeing any headwind from either of those dynamics?

Thomas P. Joyce -- President and Chief Executive Officer

Thanks Tycho. Tycho, we actually feel really good about where we are in China right now. Double-digit growth across the businesses -- this by the way, was the 9th consecutive quarter. And I think what's most encouraging is it's the growth that we're seeing is broad based, all four of our segments were up double digits in the first quarter. So whether you look at Diagnostics or Life Sciences, the Dental platform certainly Water Quality, everybody I think doing a nice job by driving the four segments to double digits in the quarter. I think if we looked at anything where there might be a little bit of slowness, I think I'd probably point to PID, Product ID, over the past couple of quarters, but not in the sense of a meaningful step down. And of course PID is only about roughly 5% of our China revenue.

So we feel very good about how we're positioned and these end markets, as you know well are terrific end markets to be in China. So over the span of time three to -- last three to four years, we've been high single-digit to low double-digit kind of across the Board. Could we see a little bit of a softness in the second half? I think that would only be a function right now related to the comps that we have particularly in water. I think middles of the year, it's a back-end of the year, our water business was up, greater than 25%. So I think that'll be a tough comp. But in terms of the fundamentals in China right now, and by the way, Tycho, I was just there.

I was there two weeks ago and met with each one of our teams, spent some time with customers, time with our certainly DX customers in the hospital market, as well as in Bioprocessing and the tone was really quite good. So I think we feel good about the markets, we feel good about our position in those markets.

You asked about generics, we understand there's some policy moves afoot there. That can have an impact on pricing. At the same time it may have an impact on access and volumes. And generally we'd benefit from expanding access and volumes, but we're not -- that's a dynamic that we're really in the crosshairs of, we would be a second or third derivative of how we might actually benefit from an expansion of generics in that market. So those would be our thoughts.

Matthew R. McGrew -- Executive Vice President and Chief Financial Officer

Yeah. And Tycho, just -- sorry, to your earlier question on the Diagnostics, we clearly are not seeing that dynamic from a de-stocking perspective either.

Tycho Peterson -- JPMorgan -- Analyst

Okay, that's helpful. And then on, Beckman, you're continuing to put up great numbers there. Obviously, you've had a couple of competitive launches, one of your peers talked about I think winning two-thirds of competitive accounts in Europe at this point. Can you maybe just talk about your confidence in holding share. I know you're going to have a product refresh at some point, but just talk a little bit about chemistry in immunoassay and your ability to hold share there. And then any metrics you can put on customer retention rates for the news in pathology systems and your confidence in that driving growth?

Thomas P. Joyce -- President and Chief Executive Officer

Sure, Tycho. We continue to have an ever-improving cadence of new product introductions at Beckman. Hematology was -- has been a big step forward and that has been one of the areas that where we had a challenge over a year since we acquired the business. But we think we've stabilized that and really around the cusp of starting to improve our position there on a more material basis. If we look at what the flow of new products that are coming on the core clinical chemistry and immunoassay side, we feel very good about those products, particularly how they will enhance our competitiveness in low and mid volume environments and we'll see those really over the next year to two years. Those will also come with enhanced menus, there's been a couple of menu gaps over time. Those will -- those new products, those new architectures will also bring along enhanced menus that will improve our competitiveness.

So we feel very good about that. We've always led the way in larger volume environments, particularly with automation. We've even stepped up our automation game recently with the introduction of the DxA line of automation equipment. And so I think the combination of the product that have just come to the market more recently, the recent FDA approval, also clearances, and those that are coming over the next year to two years, I think, we feel very good about improving the trajectory of Beckman from a core growth perspective. And you see that in the numbers this quarter, starting the numbers last quarter, you look at the overall diagnostic platform of which Beckman obviously is a big part, now putting up 6% core growth in the past and in that 5% to 6% range now, with a little bit more consistency we feel very good about that. And of course, that was against a very tough comp of a quarter ago.

Relative to metrics that we track, we do track retention and win rates very carefully across our businesses, Beckman included. We don't, -- we don't publish those numbers, but I can tell you that we look at those numbers consistently every month and we see a continuing improving trend and have for some time now in both retention and win rates.

Tycho Peterson -- JPMorgan -- Analyst

Okay, that's great. One very quick one for McGrew, before I hop off, I promised two, so I would ask on GE Biopharma, how much actual free cash flow is this business generating?

Matthew R. McGrew -- Executive Vice President and Chief Financial Officer

They're generating about $1 billion or so.

Tycho Peterson -- JPMorgan -- Analyst

Okay, perfect. Thanks.

Thomas P. Joyce -- President and Chief Executive Officer

Thanks, Tycho.

Operator

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

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Hi, good morning.

Thomas P. Joyce -- President and Chief Executive Officer

Good morning, Derik.

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Hi. Just one quick question. Did you see any sort of impact and all in the US from the government shutdown earlier in the year?

Thomas P. Joyce -- President and Chief Executive Officer

No. Well, we saw it in traffic, here in Washington, of my window in Pennsylvania Avenue. Everybody loves being able to get to work a lot faster, but in all seriousness, no, we can't -- we can't point to anything in the shutdown that would be of any consequence at all acquit. We don't -- we have -- to say almost zero -- I would tell you is almost zero revenue that actually is directly attached to federal government activity. Utmost, we are linked to funding that comes from the federal government to NIH and then out from NIH into the broader life science market. But in terms of any direct linkage to federal government spending, I would say -- I would say none at all.

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

So, can you elaborate a little bit more on the Diagnostics operating margin. I mean, your -- all your businesses have essentially the same -- has headwinds with the same FX rates. And what was it about, what is it about your diagnostic mix that took the core operating margin down in the -- in this quarter from FX, whereas the other segments I mean you saw good expansion in EAS and good expansion in Life Sciences?

Thomas P. Joyce -- President and Chief Executive Officer

Yes. Well, there's a couple of factors going on there. First of all, FX and tariffs together. And so when you take those kind of things, FX and tariffs alone would bring those otherwise negative OMX numbers up to probably flat or maybe even a hair above that. And then there is a little bit of a mixed component that was going on there. Obviously, Cepheid's operating leverage that we had last year coming off of greater than 40% core growth. And then add to that Beckman Dx improving the mid single digits at somewhat lower margins, obviously you get the combination of those two factors, Cepheid against Beck Dx, and then some targeted investment spend. No question, we continue to ramp up our new product, spending at Beck Dx, as well as at Cepheid. So, I think it's really a combination of those things. But as we look forward, those certainly the FX and tariff headwinds will continue a little bit in Q2. But as you look into the second half of the year, we'll see better OMX in the second half for sure.

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Great, thanks. I'll get back in queue.

Thomas P. Joyce -- President and Chief Executive Officer

Okay. Thanks, Derik.

Operator

Your next question comes from the line of Ross Muken of Evercore.

Thomas P. Joyce -- President and Chief Executive Officer

Good morning, Ross.

Ross Muken -- Evercore ISI -- Analyst

Good morning guys, and congrats on a great quarter.

Thomas P. Joyce -- President and Chief Executive Officer

Thank you.

Ross Muken -- Evercore ISI -- Analyst

So, maybe on the Biopharma side, and it feels like across a number of parts of the business that end markets, customer vertical remains quite robust. It seemed like Pall had quite good growth in the quarter on, what's I think increasingly tough comps, so the strong underlying. I guess how are you thinking about sort of that end market broadly? And then in terms of Pall specifically, in terms of sustaining kind of the elevated growth we've seen, you feel like you've got pretty good visibility on that remaining kind of that these kind of high single-digit, low double-digit kind of levels on the Biotech side?

Thomas P. Joyce -- President and Chief Executive Officer

Sure. Let's start with the overall market. In general, the life science end markets remain very good. We put up 7% core growth across our life science businesses in Q1. So another really strong quarter. This is the fourth straight quarter of high single-digit growth across our life science businesses. And we're making it happen organically through better innovation at each one of the businesses, more innovative new products launched on time, commercialized effectively, and some tremendous investments in taking our products to market in each one of the businesses.

And that's by the way without IDT being core, IDT goes core here in this quarter and they're off to a terrific start and really beating our initial expectations. So, I think the combination of our good execution in fundamentally solid end markets sets up really well for continued performance in life sciences. We continue to see good performance across the biopharma end market, our single-use technologies, and the work that we're doing around continuous bioprocessing has garnered tremendous interest in the end markets and we're seeing sales continue to grow in those areas. But applied markets have been solid, academic and research has been solid, and even the smaller portions of sort of the industrially oriented life science market have been solid as well.

Geographically, China, as you heard me mention already, continued strong, US a good quarter. And Europe, I would say is stable, but that's a market that we're watching closely and it's held up so far. But there are always some concerns about what's going on in Europe at the moment, so we're watching that carefully. In terms of Pall going a little deeper there, we have very good visibility to the product development pipelines of both large and small pharma customers and biotechs, we continue to work those early stage opportunities well, and I think that's what's bodes very well for continuing this high single-digit growth across Pall and the double-digit growth across our biotech business around SUT continuous bioprocessing. And really innovative products like the iCELLis bioreactor that I talked about in my prepared remarks. So overall it's -- that end market is good place to be right now.

Ross Muken -- Evercore ISI -- Analyst

And maybe just on Dental. Obviously, we've seen the margin a little bit more investment there. But the growth albeit an easier comp kind of improved. I guess how are you thinking in general about sort of the trajectory there and kind of what you're putting into the business and sort of types of investments that are being made now ahead of sort of the potential separation?

Thomas P. Joyce -- President and Chief Executive Officer

Sure. We're very encouraged, actually to see the better top line performance that we've put up and the underlying market stabilization that underpins some of that. But our performance, we believe beyond the market stabilization has really been driven by the new product innovation that we continued to invest in as well as some of the investments around commercialization. Some of those investments are really specific to things like our clear aligner program and our intraoral scanner and a number of new products that I mentioned really around Nobel.

And so these are -- we believe these are really important investments to be made strategically to set this business up for success. If we look at the quarter, we saw sellout continue to be pretty encouraging and that's pretty broad based. Even more encouraging I think around the traditional consumables and equipment, which had struggled in the past, and where we had adjusted inventories with the channel in the past. Now channel inventories are really in good shape. So I think you combine those investments with an improved cost structure that we've worked so hard to establish and you've heard me talk about this before about how we've rationalized the cost structure around the overall footprint of the business over the last three to four years. I think we'll continue to see some incremental improvements in the growth rates and particularly in the second half around core operating margins. So I think second straight quarter of solid low single-digit core growth and a little better than our expectations and I think we're positioning the business well for later in the year.

Ross Muken -- Evercore ISI -- Analyst

And quick one, Matt, it look like with the dilution from the equity deal, net of sort of the underlying operating guide actually came up by maybe a nickel or so. I guess if we think about the Q1 being fairly balanced top and margin line, is there anything notable in terms of that delta, in terms of any of the segments or if it's more an organic versus OMX type tweak?

Matthew R. McGrew -- Executive Vice President and Chief Financial Officer

No, I think your frame of kind of talking about kind of got the -- for the full year, the change being kind of $0.09 of dilution from the equity offering, kind of offset by that $0.04 feed and that $0.04 feed is very operational, it was pretty broad across most of our segments I think came in better than we thought here. So yeah that nickel reduction I think is the way to think about it is that it's $0.09 of dilution, offset by $0.04 operational here in the quarter, and yeah kind of results, if you take a step back and we kind of look at it, we're going to have EPS growth here for the full year, call it 6%, 7% now. And effectively we've got all the dilution from the equity issuance kind of behind us as we get into the second quarter.

Ross Muken -- Evercore ISI -- Analyst

Perfect. Thanks.

Thomas P. Joyce -- President and Chief Executive Officer

Thanks, Ross.

Operator

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

Thomas P. Joyce -- President and Chief Executive Officer

Good morning, Doug.

Doug Schenkel -- Cowen -- Analyst

Hey, good morning guys. Thanks for taking the questions. Maybe just building off of Ross's last question. Q1 core growth was 5.5% and you expect core growth of 4% to 5% in the second quarter against a tougher year-over-year comparison. While Q3 has another tough comp you get an extra selling day in Q4. I understand why you might not want to provide a formal update top line guidance given we're only two weeks into the second quarter and only around three months into the year. That said, I haven't heard anything coming off of a strong Q1 that would suggest there is any change in positive trend or that there were any transitory issues that made Q1 uniquely strong. So mathematically it does seem like you're on track to exceed your original full year core revenue growth guidance of 4% by at least 50 basis points, if not a little bit more. Is there anything I'm missing here?

Thomas P. Joyce -- President and Chief Executive Officer

No, I mean I think what you said, we are very encouraged by Q1. The underlying market does remain good. I don't think we would dispute that. But kind of that being said, like we've talked about before, we are, as you mentioned, we're three months in, and we typically like to kind of get through the second quarter here, we'll kind of comeback folks in July, talk to the second half and the full year, we'll kind of update everybody there, we've done that last couple of years and that's worked out well. So, clearly feel good about where we're at. But we're going to kind of do that again and reupdate everybody in July here.

Doug Schenkel -- Cowen -- Analyst

Okay, that's helpful. The second topic is SCIEX. I was hoping to get a bit more color on performance in the quarter, I believe you indicated growth moderated to low single-digit levels, if I heard that correctly. So one way or the other, it would be helpful to get a bit more color on product mix, geographic trends and recognizing you're a bit under indexed to biopharma within this business relative to peers. It's still would be good to hear how demand in that end market shaped up in the quarter. And then looking ahead, I think you noted that you were up against a tough clinical comp within this business. But that said, SCIEX grew at least high single digits every quarter last year. I'm just wondering if you're expecting continued moderation in SCIEX growth over the balance of the year, if you expect this to pick up?

Thomas P. Joyce -- President and Chief Executive Officer

Thanks, Doug, I think you've got most of the facts. We did have a tough comp overall. We were high single digits, in fact in the first quarter. A year ago, and at this point, we're sort of coming off our fourth straight quarter as I think of high single-digit core growth. It was as I mentioned, largely driven by pretty meaningful declines in the clinical market which is skewed toward North America and that was up meaningfully in the first quarter of '18 . So we can kind of do the direct comp to those to that particular our end markets.

The other end markets are generally pretty solid. The pharma market really pretty good. If we look geographically, that market is pretty solid on a global basis. The applied markets are good, that's a kind of a food testing oriented market, there's sort of a nascent market around cannabis testing where -- that we expect to grow over time. And the academic market is pretty good. So I think, aside from that challenging comp around clinical, we feel pretty good about where we sit relative to those end markets. We have a broader footprint today with Phenomenex and Separations Consumables, that business was up mid single digits. And our service business, which has always been an important part of both growth and margin expansion at SCIEX continues to be good as well, generally tracking high single-digit to low single-digit. So we feel good about how that business has positioned despite that tough comp, and I think we'll see some improvement over time.

Matthew R. McGrew -- Executive Vice President and Chief Financial Officer

Yeah, Doug, we're -- like Tom just said, I mean we're kind of expecting here kind of mid-single digit for the second quarter and the balance of the year here from a outlook perspective.

Doug Schenkel -- Cowen -- Analyst

Okay. Thank you.

Thomas P. Joyce -- President and Chief Executive Officer

Thanks, Doug.

Operator

Your next question comes from the line of Dan Leonard of Deutsche Bank.

Dan Leonard -- Deutsche Bank -- Analyst

Hello. I will stick with the question on the tools business. So first off, you mentioned strength in flow cytometry and centrifugation in Beckman tools. Can you flag for me, what are the applications driving that strength? And I'm specifically wondering if there's any play here on some of the cell therapy that you're seeing strength in other parts of your platform?

Thomas P. Joyce -- President and Chief Executive Officer

Sure, Dan. In terms of flow cytometry, the real strength of that business is around leukemia lymphomas. And I think the combination of our historical technologies with the more breakthrough technologies have been associated with our acquisition, just a few years ago of Cytogen (ph) that has now led to the innovations embedded in our CytoFLEX product line. The combination of those strong application areas with more novel technologies have really helped to drive the flow cytometry business pretty consistently. It's been a key growth driver for Beck, last for -- for a number of quarters.

Centrifugation is a much more broadly defined set of applications. We play in a number of different segments from an end market perspective and with an architecture that's generally oriented toward higher volumes certainly, above the tabletop kinds of volumes. And -- but I wouldn't attribute centrifugation purely to any particular end market. I think the team has done a nice job with innovation around centrifugation. They've done a nice job in terms of positioning their commercial organization more effectively, in terms of being able to take those products to the market more broadly across that fragmented end market. And I think those are the underlying sources of growth at Beck LS.

Dan Leonard -- Deutsche Bank -- Analyst

That's helpful. And just a quick follow-up. Can you offer us the Cepheid growth rate in the quarter excluding the flu comp, and is it safe to assume that that business gets back to double-digit growth in Q2 and beyond?

Matthew R. McGrew -- Executive Vice President and Chief Financial Officer

Yes. So if you think about Cepheid excluding kind of flu in the high growth markets HBDC stuff, it was up double digits.

Dan Leonard -- Deutsche Bank -- Analyst

Okay. Thank you.

Thomas P. Joyce -- President and Chief Executive Officer

Thanks, Dan.

Operator

Your next question comes from the line of Erin Wright of Credit Suisse.

Thomas P. Joyce -- President and Chief Executive Officer

Good morning, Erin.

Erin Wright -- Credit Suisse -- Analyst

Great, thanks. Hi, good morning. So on the Dental side, do you think we're at an inflection point here, have you seen stabilization continuing quarter-to-date? And can you break down the trends that you're seeing across both North America and Rest of the World, what's driving more growth? And if you could just give us an update on the timeline of the spend, and when we should hear more about your outlook for RemainCo business et cetera? Thanks.

Thomas P. Joyce -- President and Chief Executive Officer

Sure. Thanks, Erin. Erin, I don't know that I would call as an inflection point. I think we've seen now over at least the last two, maybe even three quarters a progressing level of stabilization. And we would measure that stabilization in terms of some things that caused some disruption in the past, a series of adjustments in the channel, relative to exclusive relationships between manufacturers and distributors, some disruption among some channel sales forces, some inventory build that needed to be rectified. All of those things really over -- that was really over a couple-year period, I think evolved to a point where we now have a much more stable end market. And we're seeing that both in terms of the alignment between our sell-in and sell-out through the channel. We look at it in terms of inventories, we look at it by category to see how the traditional consumables and equipment are trending versus the more specialized products. And so, in general, I would say the overall trend in the market today could certainly be called a far more stable than it was a year or two ago.

In terms of the broader trends that are happening in the market, I would say a continued move toward what would be broadly described as digital dentistry. The importance of imaging systems particularly and there are scenario where our KaVo Kerr business is a real leader in imaging technologies. And the linkage of those imaging technologies through software, through treatment planning and treatment execution with important novel innovations happening in term -- in the specialty areas. Our implant business around Nobel continues to be a leader in those areas where digital dentistry really matters, where imaging leads to treatment planning, leads to Novel implant systems and procedures that end up with greater levels of patient satisfaction. And I think that's a broad based trend, not just in North America, but really on a global basis.

I think the other thing that's certainly noteworthy is the emerging middle class and the importance of dentistry in our -- in high growth markets. China being one that we've talked a lot about being double digits, but you're going to see -- we're going to see good growth across our dental platform in a number of markets where an emerging middle class is putting greater demands on the practice of dentistry. And then finally, around -- your question around the timeline of the of the spin, we remain focused on the timeline as we've laid it out, which is to effect that it's been late this year. And the intention is to launch an IPO of that business and that would largely be a business that would probably put 19.9% of that equity into the market, and we would retain the balance of that for a period of time. And so there's been no change to those plans.

Erin Wright -- Credit Suisse -- Analyst

Okay, great. And then this is a bigger picture kind of broader question, just, there's been a lot of volatility in the market, primarily this week alone, just on reimbursement regulatory kind of concepts here in the US. And in regardless of the actual likelihood of anything actually being implemented, how do you think about some of the opportunities, risk factors across your business when it comes to some of these concepts related to reimbursement pressures, drug pricing scrutiny, more recently, PAMA for instance, what are you seeing there? And are there -- is there anything that you're more meaningfully concerned about from a reimbursement perspective that could impact your business or your customer base? Thanks.

Thomas P. Joyce -- President and Chief Executive Officer

Thanks, Erin. To cut right to a simple answer to your question about, are we incrementally concerned about something around the dynamics that you just mentioned, the answer would be no. Yes, there is -- there are lots of things being bandied about around healthcare and reimbursement today. And the Affordable Care Act, those at the moment are not having any material impact on us, whatsoever or immaterial impact. PAMA, we've seen occasional impacts of that. But then again price pressures us our standard operating procedure in the diagnostic market. I think and probably if you step back from our business for a moment and you think about what we do in diagnostics, providing diagnostic capabilities to hospitals in the Central Laboratory and anatomical pathology and Acute Care in the emergency room in molecular diagnostics for acutely ill patients infectious disease.

Diagnostics today, it represents about 2% of the cost of healthcare broadly defined. And yet it informs well north of 60% of the decisions that are ultimately made in healthcare today. So we play a vital role in the overall market, but are relatively small portion of the overall cost structure. And while the factors that you mentioned are very important for us to attend to and keep in mind and be aware of any potential impact. Today, there hasn't been any meaningful change in any of those in the recent quarter.

Erin Wright -- Credit Suisse -- Analyst

Okay, great. Thank you.

Thomas P. Joyce -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Brandon Couillard of Jefferies.

Thomas P. Joyce -- President and Chief Executive Officer

Hi, Brandon.

Brandon Couillard -- Jefferies -- Analyst

Hi, good morning.

Thomas P. Joyce -- President and Chief Executive Officer

Good morning.

Brandon Couillard -- Jefferies -- Analyst

Tom, just to follow up on the dental business. It seems since you could tease out the performance of the traditional portfolio versus the specialty lines in the first quarter and then specifically curious how that your best consumables business did in the period?

Thomas P. Joyce -- President and Chief Executive Officer

Sure, Brandon. I think pretty solid, as I mentioned, second straight quarter of low single-digit growth across the platform, so we feel pretty good about all that. The orthodontics business was up mid single digits, and we see really good performance across those businesses. Nobel was up low single digits, but on a tougher Q1 comp, but still mid single digits on a two-year stack basis and generally in line with what we've seen in the last couple of years. I think in both of these cases, around specialty consumables, we're making significant investments in new product innovation. Obviously around round clear aligners and then the digital support through intraoral scanners that will really make a difference in our orthodontics business over time. We have new Damon level -- Damon line products that have been introduced into the market as well. And then at Nobel these new surface technologies, our exciting new technologies that are going to make a difference over time.

And so, I think today, those businesses are tracking reasonably well, but we're really encouraged by the new product innovations that are coming out in both of them. North American traditional consumables and equipment remain good, low single-digit growth with a reasonably stable market. The imaging business, the trends are good, we're seeing mid single-digit growth around imaging. And when we look at sell-out, the sell-out looks pretty solid. So we are continuing to manage sell-in, to make sure that channel inventories are in line, so we don't have that kind of disruption in the future. And I think overall, we feel pretty good about where the dental platform sits today.

Brandon Couillard -- Jefferies -- Analyst

And then maybe a follow-up for Matt. EAS segment continued to see pretty solid, pricing up a 0.5% in the period. Can you talk about the sustainability of that and where that's coming from? And then secondly, when do you think pricing might improve somewhat of the dental business given what's been, I guess, about five quarters of weakness on dental pricing?

Matthew R. McGrew -- Executive Vice President and Chief Financial Officer

Yes, that's -- I was going to say dental is kind of in that range for the last four or five quarters. I'm not sure that we've got anything intentional that is driving that in dental. So that seems to kind of be the run rate of where they operate here today. So I'm not sure there's kind of an inflection or a change that's necessarily being planned for dental. As far as EAS goes, yeah, they do a very nice job in pricing. I think it's both of those businesses have been around a little bit longer than some of our other businesses, and we've talked about kind of some of the things that they're able to do in passing through some of the price that they get. So I'm not sure there's anything from a trend perspective there that would change either. I think we've seen price there in that range for the last four or five quarters, I'm sure it's a whole lot that was new here in the quarter from price perspective.

Brandon Couillard -- Jefferies -- Analyst

Very good. Thank you.

Thomas P. Joyce -- President and Chief Executive Officer

Thanks, Brandon.

Operator

We have time for one more question. Your final question will come from the line of Daniel Brennan of UBS.

Daniel Brennan -- UBS -- Analyst

Hi. Thanks for the question. I wanted to ask first starting on GE, if you could share some of maybe some of the early customer feedback that you're receiving. I mentioned it learn if some of the customers look at the combined Danaher GE offering possibly providing some share gains to be possible broader solutions provider.

Thomas P. Joyce -- President and Chief Executive Officer

Sure, Daniel, thanks. Our team has spent extensive time with customers. We obviously share quite a number of customers and we also have the opportunity in situations where we don't share customers to potentially bring a broader portfolio of solutions to that end market. I was actually as I mentioned earlier in my comments, I was actually in China last week or two weeks ago and actually met with one of the key customers in the end market. And I think they represent sort of broadly a view across that market, a real enthusiasm. GE does a tremendous job in the China market as does our Pall business and I think the opportunities that those end customers see today are for really innovative solutions, where we can bring a broader perspective to the overall bioproduction workflow and work collaboratively with them to ensure that we not only their needs of today but the needs that they'll have as their capacity expands over time. And as they evolve their processes more toward single use technologies and more toward continuous bio processing capabilities, they see the combination of the broad set of tools that we bring at Danaher not just associated with Pall but across the broader portfolio and then inclusive of GE as being something really exciting.

Daniel Brennan -- UBS -- Analyst

Great, thanks, Tom. And then maybe just one final follow-up just on China. Obviously the growth has been tremendous there, but with the tariff noise in the economy grinding lower, that's always a question mark, but how sustainable that is? Maybe could you just characterize among your four different businesses and all the different secular initiatives, China has ongoing, like where do you see the biggest runway still for growth dependent upon like where China is with some of their kind of secular kind of buildouts if you will? Thank you.

Thomas P. Joyce -- President and Chief Executive Officer

Sure. Thanks, Daniel. It's almost hard to choose because when we think about the investments that are being made in China in diagnostics in life sciences and in and around the environment, along with the dynamics I've just mentioned a couple of minutes ago around involving middle class and the needs for advanced dentistry, there are important secular drivers in really I would say all four of those markets that I just mentioned. And I think we feel that our leadership position in each one of those markets has served us well in the past, we continued to enhance those leadership positions with innovative products, some of which are designed in China and many of which are made in China for the Chinese market, combined with continued investments in feet on the street. And end market facing associates who are continually looking for new and novel solutions to drive innovation for customers.

Those are just great end markets to be in. So I'm not sure I'd necessarily differentiate a great deal between the diagnostics, life sciences, the environmental and the dental end markets, because I think they all represent important secular drivers that we'll benefit -- we have benefited from in the past and we'll benefit from in the future.

Daniel Brennan -- UBS -- Analyst

Terrific. Thank you.

Thomas P. Joyce -- President and Chief Executive Officer

Thank you.

Operator

Thank you. I'll now return the call to Matt Gugino for any additional or closing remarks.

Matthew E. Gugino -- Vice President, Investor Relations

Thanks Laurie and thanks everyone for joining us. We're around all day for questions.

Operator

Thank you for participating in the Danaher Corporation's First Quarter 2019 Earnings Results Conference Call. You may now disconnect.

Duration: 57 minutes

Call participants:

Matthew E. Gugino -- Vice President, Investor Relations

Thomas P. Joyce -- President and Chief Executive Officer

Tycho Peterson -- JPMorgan -- Analyst

Matthew R. McGrew -- Executive Vice President and Chief Financial Officer

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Ross Muken -- Evercore ISI -- Analyst

Doug Schenkel -- Cowen -- Analyst

Dan Leonard -- Deutsche Bank -- Analyst

Erin Wright -- Credit Suisse -- Analyst

Brandon Couillard -- Jefferies -- Analyst

Daniel Brennan -- UBS -- Analyst

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