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Edited Transcript of PKI.N earnings conference call or presentation 2-Feb-21 10:00pm GMT

·49 min read

Q4 2020 PerkinElmer Inc Earnings Call WALTHAM Feb 3, 2021 (Thomson StreetEvents) -- Edited Transcript of PerkinElmer Inc earnings conference call or presentation Tuesday, February 2, 2021 at 10:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Bryan Kipp PerkinElmer, Inc. - VP of IR * James M. Mock PerkinElmer, Inc. - Senior VP & CFO * Prahlad R. Singh PerkinElmer, Inc. - CEO, President & Director ================================================================================ Conference Call Participants ================================================================================ * Brandon Couillard Jefferies LLC, Research Division - Equity Analyst * Daniel Anthony Arias Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst * Daniel Gregory Brennan UBS Investment Bank, Research Division - Senior Equity Research Analyst of Healthcare Life Sciences * Daniel Louis Leonard Wells Fargo Securities, LLC, Research Division - Senior Analyst * Derik De Bruin BofA Merrill Lynch, Research Division - MD of Equity Research * Doug Schenkel Cowen and Company, LLC, Research Division - MD & Senior Research Analyst * Jack Meehan Nephron Research LLC - Research Analyst * Matthew Carlisle Sykes Goldman Sachs Group, Inc., Research Division - Research Analyst * Stephen Barr Willoughby Cleveland Research Company - Senior Research Analyst * Stephen Christopher Beuchaw Wolfe Research, LLC - Director of Equity Research * Tycho W. Peterson JPMorgan Chase & Co, Research Division - Senior Analyst * Vijay Muniyappa Kumar Evercore ISI Institutional Equities, Research Division - MD ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to PerkinElmer Fourth Quarter and Full Year 2020 Earnings Conference Call. (Operator Instructions). I will now hand the conference over to your speaker today, Bryan Kipp, Vice President of Investor Relations. -------------------------------------------------------------------------------- Bryan Kipp, PerkinElmer, Inc. - VP of IR [2] -------------------------------------------------------------------------------- Thank you, operator. Good afternoon, and welcome to the PerkinElmer Fourth Quarter and Full Year 2020 Earnings Conference Call. With me on the call today are Prahlad Singh, President and Chief Executive Officer; and Jamey Mock, Senior Vice President and Chief Financial Officer. If you have not received a copy of our earnings press release, you may get one from the Investors section of our website at www.perkinelmer.com. Please note this call is being webcast live and will be archived on our website until February 16, 2021. Before we begin, we need to remind everyone of the safe harbor statements that we have outlined in our earnings press release issued earlier this afternoon and also those in our SEC filings. Statements or comments made on this call may be forward-looking statements, which may include, but not are 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 by any forward-looking statements 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 only today. We disclaim any obligation to update forward-looking statements in the future even if our estimates change, so you should not rely on any of today's forward-looking 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 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. To the extent we use non-GAAP financial measures during this call that are not reconciled to GAAP in that attachment, we will provide reconciliations promptly. I am now pleased to introduce the President and Chief Executive Officer of PerkinElmer, Prahlad Singh. Prahlad? -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [3] -------------------------------------------------------------------------------- Thank you, Bryan, and good afternoon, everyone. A year ago, I started my prepared remarks talking about how 2019 was a seminal year for PerkinElmer, and I had no doubt that the positive changes we had completed would become increasingly apparent to external stakeholders in the quarters and years ahead. Looking back now, it is hard to believe how much has changed in such a short period of time. From where we stand today, looking back on 2020, we are a more collaborative and cohesive organization. We've reduced red tape, promoted cross-functional collaboration and struck a chord with employees that has resulted in our launching of several breakthrough innovations. The energy and purpose that pervaded throughout 2020 was inspirational. Our collective mission to improve lives propelled us as we rallied together to respond to the call to action to help, all while making sure that we did not lose sight of our 4 guiding principles that we highlighted at the onset of the pandemic: keeping our employees and company safe, utilizing our expansive capabilities to join in the fight against COVID-19, serving our customers with excellence during this difficult period and emerging from this crisis a stronger company. I could spend the next hour highlighting the countless examples of employees who went above and beyond in 2020. However, instead, I will take a moment to thank them and their families personally. Many did not receive the spotlight they duly deserved, but their tremendous sacrifices did not go unnoticed by us nor our customers. They each personify our mission, and I could not be prouder to be working alongside them and the rest of our 14,000 colleagues on a daily basis. Their efforts in 2020 embolden PerkinElmer's place in the world. PerkinElmer has been and continues to be a fundamental player in the fight against the global COVID-19 pandemic. However, as I have said before, we do what we do because we are passionate about helping people. It's personal. Our COVID-19 response is just 1 example of the power of our company. We are a multifaceted and multitalented organization. As we look ahead, one thing is for certain, we will emerge as a stronger organization. We are a leading global diagnostics brand. We are an exemplary global citizen, a thought leader, a strategic partner, which does what's right and puts the worthy cause of achieving breakthroughs in health care and science first. Most of all, we have learned a lot over the past year, honed our collective skills and developed capabilities that we, as an organization, didn't have a year ago. That's why even when the pandemic subsides and we are operating in the new normal, things will never be the same. We have earned a seat at the table by clearly demonstrating we are leaders in the fight for making the world better and safer. And I truly hope that, that is what you take away from today's call. In terms of the fourth quarter and full year financials, Jamey will detail our results in a few minutes. But at a high level, I'm very proud of our performance throughout 2020. Fourth quarter results far surpass the guidance we communicated on the third quarter earnings call. We delivered the best quarter of organic growth and profitability since the creation of the modern day PerkinElmer in 1999. And from a cash standpoint, we generated more cash in the quarter than all of 2019. For the full year, the team delivered 29% organic growth including over $1 billion in COVID revenue, adjusted operating margin expansion of over 1,100 basis points, greater than 100% adjusted EPS growth and in excess of $800 million in free cash flow generation. That being said, while the headline financial performance is certainly impressive, it is important to also not lose sight of the fact that we aided more than 1,000 new diagnostics customers in their efforts to combat the pandemic. We shipped more than 25 million COVID-19 PCR tests, expanded our chemagic installed base 3x to over 1,600 instruments worldwide and launched best-in-class solutions, such as our explorer workstation, which boasts unparalleled sample throughput and set up flexibility. We also invested back into the company. We spent an incremental $25 million in people and digital capabilities, and invested more than $200 million in R&D to ensure that we continue to build a robust pipeline of new products across a full suite of technologies. Inorganically, we are deploying approximately $800 million in capital, adding new and exciting assets to the PerkinElmer family, including Horizon Discovery, which uniquely positions us to propel cell and gene research forward through our combined screening and genomics solution and also Oxford Immunotec. And we gave back. As a thank you for their incredible efforts, we gave a year-end organization-wide bonus to our employees, and we ceded our PerkinElmer Foundation to serve as a charitable matching vehicle for future donations that are near and dear to our employees' hearts. While the fourth quarter and full year financial results are certainly impressive, we have many accomplishments beyond the headline financial numbers to be proud of. Most of all, we have always and will continue to do what is right and lead with science. This is what our customers trust us to do, and this is what we expect of ourselves. As we transition to 2021, you can expect that we will continue to lead with science and deliver on our 4 strategic priorities while executing against the value creation framework we outlined during our December virtual life sciences deep dive as well as during our recent presentation at the JPMorgan Healthcare Conference in January. In terms of our strategic priorities, our goals remain the same in 2021 on the customer front. We aim to go above and beyond for them while owning their trust as a true strategic partner. I mentioned earlier that we had made significant headway in enhancing the customer experience last year and we seek to further build on that momentum this year. To that end, we launched our new global commercial function last month, which will support all 3 regions in a strategic and agile way. Miriame Victor was recently appointed Chief Commercial Officer to manage our global commercial organization. She has done a phenomenal job as the General Manager of our EMEA region over the past 2 years. By centralizing our commercial efforts, we hope to further codify our go-to-market strategy across all segments and geographies as well as promote collaboration and democratize best practices across the organization. On talent and culture, we plan to accelerate our employee engagement and brand advocacy efforts in 2021. While we are proud to have one of the lowest voluntary turnover rates in the industry, there is certainly more we can do to improve our most valuable resource, our people. In 2021, we plan to elicit feedback on our recent efforts through employee satisfaction service to ensure that we have the right programs in place to be certain that our employees are happy and fulfilled professionally. On the transformational innovation front, while 2020 was an extremely successful year in terms of new product development, there were a lot of behind the scenes learning as well as we pushed the R&D organization harder than ever to respond to the rapidly evolving needs of our customers. In 2021, our aim is to build on the NPI introduction successes of 2020, while also democratizing prior learnings and institutionalizing process improvements, so that we can continue to optimize our R&D engine for the years ahead. Within operational excellence, as we continue to scale our company, every function increasingly plays a role in making PerkinElmer more efficient and agile. Operational excellence is a muscle that all PerkinElmer employees need to hone. Whether it be R&D, manufacturing, operations or cash collection, we are constantly looking across the organization at ways to improve our operational rigor. And given we're in the early innings of this effort, there's lots we can do. In 2021, expect that we will continue to march ahead, focusing heavily on quality, quote to delivery and cash collection. And from the perspective of leading with science, we will continue in 2021 to listen to our customers, keenly track scientific advancements and challenge our teams to think about ways we can uniquely tackle the scientific challenges of today and tomorrow. For example, think back to a year ago, there wasn't as much focus on the diagnostic nuances between humoral and cell-mediated immune response. In a post-COVID world, we are firm believers that there will be an increased research and clinical focus on developing diagnostics for infectious diseases, autoimmune disorders or cancer that look at the patient's humoral and cell-mediated response to disease. EUROIMMUN recognized the importance early on in 2020 and invested in their own T cell assays. However, as it became more apparent to us that this is where science is likely headed, we, as an organization, proactively quoted Oxford Immunotec to enhance our expertise and accelerate our capabilities on this front. This is just 1 example, but I think it is an informative one and that it touches on both our focus to be at the tip of the spear of science as well as our agility in being able to respond quickly to evolving market dynamics as we see them play out. Before I make some closing comments, I wanted to thank and congratulate Bryan. As you know, one of our strategic priorities is talent and culture. Bryan Kipp is an exceptional talent that joined PerkinElmer 2 years ago, and I'm proud of the work he has done in reshaping our Investor Relations function over this time. He recently accepted a new internal role that will result in him transitioning out of his current Investor Relations responsibilities. I could not be more excited for him, and I have no doubt he will do a phenomenal job in his next chapter at PerkinElmer. In closing, I'll end where I started. It is astounding to think about PerkinElmer's progress over the past year. We truly are a different organization, though our guiding mission remains our North Star, innovating for a healthier world. We have earned the right to lead in key areas with the greatest impact on health and science and have built the internal momentum and esteem with our customers and partners to continue to do so. I'm inspired and humbled by our team, and I couldn't be more excited for the opportunities that lie ahead. I'll now turn the call over to Jamey. -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [4] -------------------------------------------------------------------------------- Thanks, Prahlad, and good evening, everyone. To start, I echo Prahlad's remarks. And as I'd reiterated throughout 2020, I could not be prouder of our team and how they collectively responded to address the needs of our customers and society during these unprecedented times. I have no doubt our shared learnings position the organization well as we aim to tackle the challenges of tomorrow. Before turning to the financial results, I want to remind everyone that our fourth quarter earnings call presentation has been posted on the Investors section of our website under financial information. I will begin my prepared remarks by highlighting the fourth quarter, then I'll provide some additional color on our served end markets and financial metrics, and I will end with a quick look back on our 2020 results and our 2021 guidance. At a high level, we are extremely pleased with our record fourth quarter and full year results. The organization executed remarkably well throughout 2020 despite an extremely difficult macroeconomic backdrop. And as we look ahead, the continued sequential improvement in our customer engagement and business activity during the fourth quarter positions us well as we turn the fiscal calendar to 2021. During the fourth quarter, adjusted revenue grew 68% to $1.36 billion compared to last year and included a 3% foreign exchange and negligible acquisition tailwind. Organic revenue grew 65%, 2 percentage points better than what we previously communicated. Overall, COVID-related products and services contributed $549 million in the quarter, propelled primarily by our PCR tests and RNA extraction solutions as well as our turnkey Lab-In-A-Lab testing solutions in the state of California and the United Kingdom. In total, excluding the impact of our labs, our PCR and RNA extraction products contributed over $300 million of COVID revenue during the fourth quarter. By business, diagnostics, representing 63% of total sales, increased 172% organically. Strength in our immunodiagnostics and applied genomics businesses more than offset the improving but ongoing modest declines in our reproductive health franchise. Discovery and analytical solutions, representing 37% of total sales, declined 2% organically, as strength in our life science business was offset by more muted demand conditions in food and applied end markets. On a geographic basis, Americas grew strong double digits, Europe grew triple digits, and Asia Pacific grew low single digits. China remained in negative territory, though improved sequentially. Early signs point to a healthy rebound in our China business as we advance into 2021. Operationally, we are extremely pleased with our performance this quarter. Adjusted operating margins expanded approximately 1,800 basis points to 42%, led by volume leverage, business mix and productivity programs. Adjusted earnings per share of $3.96 in the fourth quarter nearly tripled versus the fourth quarter of 2019. Looking further into key drivers within our segments, let's start with our diagnostics business. As mentioned in my earlier remarks, organic revenue increased 172% as robust growth in Europe and the Americas drove the momentum. Our applied genomics business led the way, posting over 420% growth on broad-based momentum across all geographies, with strength in our nucleic acid extraction, liquid handling and sample prep product lines. Nucleic acid extraction and automated liquid handling grew over 12x and 7x, respectively, versus the fourth quarter of 2019. And as Prahlad recently mentioned, we installed over 1,000 chemagic systems and 600 GNS liquid handlers in 2020. Both platforms have gained share and positioned our applied genomics business well as we eventually transition to a post-COVID world. Meanwhile, immunodiagnostics growth increased over 250%, with EUROIMMUN growing over 20%. Demand for our portfolio of RT-PCR assays remain particularly strong across the globe and serology demand was consistent on a sequential basis. Reproductive health declined low single digits organically, driven by lower newborn and prenatal testing in Asia Pacific and Europe. Americas newborn increased mid-single digits, while Europe and Asia Pacific declined high single and double digits, respectively. Birthrate pressures globally remain a headwind. However, early signs point to improved underlying demand trends. Turning to Discovery & Analytical Solutions. Organic revenue declined 2% in the fourth quarter versus the same period last year. By end market, we experienced mid-single-digit organic revenue growth in life science. Pharma/biotech was up mid-single digits, driven by strength in enterprise, up double digits and discovery up high single digits. Academic and government increased double digits, driven by nearly 20% growth in our discovery franchise. Applied markets declined approximately 10%, with Americas down over 20%. Normalizing for the tough cannabis comparison in the quarter, applied declined mid-single digits, which we think is a more useful data point when evaluating the underlying demand trend across our applied franchise. Food declined over 20% in the quarter. However, excluding cannabis, food declined 12% with dynamics consistent across all 3 major geographic regions. Meizheng, Solus and Bioo all improved sequentially, which is an encouraging sign that food safety testing momentum is improving across the globe. Meanwhile, industrial and environmental safety declined mid-single digits, continuing the trend of improved sequential momentum since demand trough during the second quarter. Another positive sign for the applied franchise, as we look ahead, is that our year-end applied backlog increased double digits year-over-year. Shifting to below the line items. Adjusted net interest and other expense for the fourth quarter was approximately $11 million, and our adjusted tax rate was 20%. Turning to the balance sheet. We finished the quarter with approximately $2 billion of debt and $400 million of cash. Adjusted free cash flow was $471 million in the quarter, which resulted in an adjusted free cash flow conversion rate of 105%. Finally, we exited the quarter with a net debt to adjusted EBITDA ratio of approximately 1.2x, down over a turn and a half since the beginning of the year. Closing the books on 2020, we are extremely pleased with our overall performance, including 29% organic growth, 102% adjusted earnings per share growth and 159% adjusted free cash flow growth, all compared to 2019. Adjusted free cash flow conversion was 89%, up from 70% the prior year. The DSO reduction has been a function of process improvements as well as improved monthly linearity in terms due to COVID demand. We remain encouraged by our free cash flow progress and are confident that we are well positioned to deliver consistent adjusted free cash flow conversion of at least 85% for the foreseeable future. Turning to guidance. While the pandemic continues to create uncertainty, we thought it would be helpful to provide a baseline for how we are planning our business in 2021. In total, we anticipate revenue of at least $4.08 billion. Embedded in this guidance, we assume COVID revenues will be at least flat with 2020, and we expect underlying dynamics to improve for our non-COVID portfolio as we progress through the year, translating to full year non-COVID organic growth of approximately 5% to 7%. These assumptions do not account for any incremental lockdowns and/or any COVID-related disruptions as well as any potential catch-ups related to pent-up demand. Additionally, we are anticipating 2% benefit from both foreign exchange and acquisitions for the full year. In total, this baseline implies an organic growth range of 3% to 5%. And on the bottom line, we anticipate adjusted earnings per share of at least $8.50, which assumes approximately $40 million in adjusted interest and other expenses, a tax rate of 20% to 21% and our average diluted share count to be in the range of 112 million to 113 million. For the first quarter, we are forecasting reported revenue of approximately $1.19 billion, representing 77% organic revenue growth and including a 3% benefit from foreign exchange and 3% from acquisitions. Embedded in this guidance is $500 million of COVID-related revenue and organic growth of 1% to 3% for our non-COVID product lines. There are 2 additional factors to keep in mind for top line modeling purposes. First, the extra week during 2020 fell during the first quarter. As a reminder, we estimated that the extra week contributed $11 million of revenue. So that headwind is embedded in our 1% to 3% non-COVID growth guidance. And second, we generated approximately $12 million in COVID revenue in 1Q '20. So one needs to adjust for that amount in the prior year baseline when forecasting the incremental dollar growth for the non-COVID portfolio. In terms of adjusted earnings per share guidance for the quarter, we are forecasting at least $3, which assumes approximately $11 million of interest and other expenses, a 22% tax rate and a diluted share count of 112 million to 113 million. All of this is detailed in the second to last page of our fourth quarter earnings presentation. In closing, 2020 was one of the most important years in PerkinElmer's long and storied history. I have no doubt we are better positioned as an organization exiting 2020. We are excited for what is ahead, how we will better serve our customers and perform for all of our stakeholders. Before I hand it over to the operator, I also want to thank Bryan for all of his work leading and guiding our Investor Relations efforts over the past 2 years. He was instrumental in our strategic evolution and a staunch proponent of increased transparency for all of our stakeholders. I'm excited for him as he transitions to a new role with us in the coming weeks, and I'm glad he remains a part of the PerkinElmer family. Operator, at this time, we would like to open the call to questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Vijay Kumar with Evercore ISI. -------------------------------------------------------------------------------- Vijay Muniyappa Kumar, Evercore ISI Institutional Equities, Research Division - MD [2] -------------------------------------------------------------------------------- Congrats on a nice sprint here. I'll limit myself to 1 question. And Bryan, I want to congratulate you on your internal promotion. All the best to you. I guess, if I could just maybe ask one on the guidance here. The COVID diagnostics, at least flat, given that you guys are doing $500 million in Q1. So I'm curious with the U.K. and California contracts, does it make sense for a pretty steep drop-off from our Q1 levels. And when you look at the base business, I think the 5% to 7% core, but -- correct me if I'm wrong, your core -- the comp in 2020 was minus 7%. So that seems like a pretty easy comp. So maybe talk about the underlying in the COVID assumptions relative to the guide. -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [3] -------------------------------------------------------------------------------- Thanks, Vijay. There's a few questions in there, and we're excited for Bryan as well. So I'll start with COVID as it pertains to the guide. Obviously, we said at least flat year-over-year. And I'd say, predicting the course of COVID has not been easy nor do we anticipate it to be easy over the next 12 months. There are certainly some variables that could make it more than this. But let me talk about it in a couple of ways. One is the sequence through the year, which gets to your question about $500 million in the first quarter, and then the labs versus kind of the rest of the COVID revenue piece. So in terms of the sequence, obviously, we have much better visibility, certainly to the first quarter and the first half. And our assumption in this guidance is that the vaccine kicks in and that the second half revenue and testing comes down substantially. And you can see that by evidence that almost 50% of the revenue is here in the first quarter, so we feel like that's a conservative assumption, but one that we are confident in. As it pertains to the split between core versus labs in 2020, core made up approximately 80% of the revenue, and we're predicting that, that will make up approximately 60% of the revenue. And conversely, the labs, which made up about 20% of the revenue in 2020, will step up and be a greater contributor in 2021 to be about 40%. So I think we're assuming that starting in the first quarter here, we're expecting the testing levels on the core to come back down in the level of instruments that we sell, et cetera, to kind of match what we saw probably in the third quarter. And then as it pertains to the labs, we've got a couple of variables at play. First is in the U.K., our contract only is valid through the end of March. So we're not yet sure whether it will be extended beyond March. We haven't been told yet. We're obviously talking to them about that now. So this guidance assumes that the U.K. finishes at the end of the first quarter, and there is no revenue assumed in the second quarter and beyond. And then California, as you've seen, is a slow and steady ramp. So it's public information. We've ramped from almost no testing at the beginning of November, and now we're probably about 20,000 tests per week. But there's numerous sites throughout the state of California that they're trying to bring into the program and so -- but those are slow and steady. So we expect California to ramp up here, but it's not nearly as fast as we think. And so therefore, we've taken a pretty conservative assumption in the first half here as well and then it tailors back down in the second half as well. So overall, a lot of variables in play, Vijay. We're trying to set a floor here that says we think we can be at least flat. It's very much front-end loaded here, and there's certainly some potential for upside here, and our supply chain can certainly deal with it as we have done in 2020. -------------------------------------------------------------------------------- Bryan Kipp, PerkinElmer, Inc. - VP of IR [4] -------------------------------------------------------------------------------- Non-COVID? -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [5] -------------------------------------------------------------------------------- Well, non-COVID. So on the non-COVID side, the first quarter, I think the comp is at minus 3%, not a minus 7%. The rest of China was the one that was impacted the most. I think China was down over 30% in the first quarter last year. The rest of Europe and Americas was quite strong in the first quarter, which blended to down 3%. So if you look at our 1% to 3% guidance here in the first quarter, that embeds the extra week, which is the equivalent of probably 2 percentage points. So it's more like a 3% to 5% guide. And we've seen a slow and steady uptick here. So second quarter of last year was where we troughed. We had, I think, minus 14% on the core book. Third quarter, we had minus 6%. This past quarter, we had minus 3% with a couple of difficult comps in there. So we continue to see this trend up. As it pertains to the 5% to 7% overall for the year, obviously, we'll probably see the largest growth from an organic growth rate perspective in the second quarter due to the comp, and then it will start to normalize in the back half of the year. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- Our next question comes from Derik De Bruin with Bank of America. -------------------------------------------------------------------------------- Derik De Bruin, BofA Merrill Lynch, Research Division - MD of Equity Research [7] -------------------------------------------------------------------------------- So I want to ask on the margin progression. It's like -- so how should we think about the decremental on the operating margin for 2021? And I know that at Tycho's conference, you put out some targets for the 2023 outlook. So I'm just curious in sort of like can you sort of talk about the margin progression going forward and -- there and what the impact is of the recent acquisitions? And I know Oxford's not -- and what sort of Oxford can sort of like have an impact on the margins? Just I'd love to get to your general thought on near-term and the longer-term margin profile. -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [8] -------------------------------------------------------------------------------- Yes. Sure. So let me answer the last part quickly. So Oxford is not assumed in any of this guidance. We probably should have made that clear. Horizon is the only one that we closed on. So Horizon is embedded in this overall guidance here. So let me talk to the year, and then I'll talk to the sequence throughout the year. Overall, obviously, we're guiding at least $8.50, which is up $0.20. The COVID overall revenue is flat, as we mentioned, and then the core growth kicks in. So we probably get about $0.60 of increase due to the volume and then we're reinvesting that back into OpEx. I'll talk to overall gross margin. So gross margin, we're expecting to be flat year-over-year. That has some assumptions that the COVID pricing and margin starts to dilute a little bit. And then our core book as we work on our productivity programs as well as have more volume leverage kicks in, and that keeps gross margin overall flat. And then we will continue to reinvest into OpEx here. So we started that towards the second half of last year. We're going to continue to do that. I would say we have a very flexible variable cost -- overall cost base. So we can toggle this on and off with the level of growth that we have. We want to continue to do so, and we'll make the investments that we have been, both in our talent, R&D, digital, et cetera. In terms of progression through the year, obviously, with a more material COVID first half, the margin rates will be much more substantial. And then in the second half, it will be -- our assumption is that it comes down and we start to accrete off that 2019 platform. So you mentioned Tycho's conference, and we laid out a 2023 game plan to be 23% or better. We certainly have not lost sight that this business overall can be 25% plus, and we will start to grow margins here in the back half of this year from a productivity programs perspective and extra volumes. So I'd look at 2019 levels towards the back half of that year and add some productivity to it, and that's what we expect there. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Our next question comes from Dan Arias with Stifel. -------------------------------------------------------------------------------- Daniel Anthony Arias, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [10] -------------------------------------------------------------------------------- Jamey, can I just go back to the question on the guide? I mean, I thought the idea was that you guys were kind of trying to convey that this is a business that can do 5% to 6% organic in a normalized environment. So against the minus 6% comp, that seems pretty conservative. Is there something that I'm missing there? Is there an element that maybe I'm not understanding? -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [11] -------------------------------------------------------------------------------- Yes. I mean I'm not sure I would say today is a normal environment. I think people are starting to live in a new normal environment. But I think right now, still, I wouldn't say a completely robust environment. That said, I mean, we feel confident that the long-term prospects are much faster from a growth perspective coming out of 2020 than going into 2020. And so -- but we've seen a steady -- as I mentioned earlier, Dan, we've seen a steady increase quarter-over-quarter. So if you -- as I mentioned, we went up about 6 points each quarter and 3 points in the fourth quarter. But if you normalize some things, probably a little bit more. And so overall, we feel very confident that the 5% to 7% is an achievable number here. And we're -- could there be a scenario that this is better than that? Yes. We -- I mentioned in my prepared remarks that we're not banking on any pent-up demand, but we can go through the end markets, and we feel like 5% to 7% is an appropriate guide at this point in this market environment. -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [12] -------------------------------------------------------------------------------- And given the uncertainty, Dan, I think in the second half, just like on the COVID side, our intent is to ensure that we put a number, given all the assumptions that we've made that we can beat. And then that's what you are -- that's the way we forecasted. -------------------------------------------------------------------------------- Daniel Anthony Arias, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [13] -------------------------------------------------------------------------------- Okay. But just to be clear, it does look like your -- you exited the year with a DAS backlog. That's good. You're seeing some improvement in food safety demand that makes you think that maybe overall, the food business is trending in the right direction. And then on the diagnostics side, it sounds like on the ImmunoDX business, on the non-COVID side of that, you're approaching normalized, right? I mean, so if we're lining up the things that seemingly could take you higher, it feels like there are a couple of elements here that suggest that, that could actually take place. Is that correct? -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [14] -------------------------------------------------------------------------------- Yes. I mean, I think there are certainly -- there's certainly a possibility that the end markets can perform better than what we're planning on right now. And if that happens, we could certainly be north of 5% to 7%. And if COVID comes out faster and the economy returns back to normal, maybe we'd have a little bit more uplift there. But to your point, I think food is an area that has potential upside. I think right now, we're planning on high single digits for immunodiagnostics. I wouldn't say that it's completely normalized. I think EUROIMMUN was slightly positive across the globe in the fourth quarter when you exclude their COVID sales. So it's not yet perfectly normalized here, and I think that's why we're showing kind of a slow and steady uptick here. But certainly, if it returns to normal and if it's faster and we have some pent-up demand, we'll see it, but it should be much -- it should be greater than 5% to 7%. -------------------------------------------------------------------------------- Daniel Anthony Arias, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [15] -------------------------------------------------------------------------------- Okay. Bryan, good luck, don't be a stranger. -------------------------------------------------------------------------------- Bryan Kipp, PerkinElmer, Inc. - VP of IR [16] -------------------------------------------------------------------------------- Thanks, Dan. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- Our next question comes from Tycho Peterson with JPMorgan. -------------------------------------------------------------------------------- Tycho W. Peterson, JPMorgan Chase & Co, Research Division - Senior Analyst [18] -------------------------------------------------------------------------------- I just want to follow up, Jamey, on some of your COVID comments. A couple of cleanups here. Serology, I didn't hear you mention that a lot. And obviously, with vaccine rollout, curious about your views on whether that gets more interesting, especially as you add Oxford to the mix. Also, are you still planning to launch an antigen test? I know you previously talked about doing something with Tulip. And then on the California lab, 20,000 tests a day versus 150,000 capacity, is there any risk at some point if you don't hit a certain threshold that, that doesn't move forward? -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [19] -------------------------------------------------------------------------------- So do you want to answer... -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [20] -------------------------------------------------------------------------------- Yes, do you want me to answer California first and then... -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [21] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [22] -------------------------------------------------------------------------------- So yes, Tycho, right now, we are not at 150,000 capacity. So we have been going at the pace that California Department of Health has asked us to. We got up to 40,000, I think, in January here, and they've asked us to continue to uptick that, so that we are ahead of what they -- how they onboard sites. And I think I've mentioned in maybe at your conference actually that there's over 500 sites that they want to bring on. Right now, they've only brought on 100 sites or a little over 100 sites across the state of California. So we're not at 150,000. We're going at the pace they asked us to be, and they will uptick their onboard their sites over time here, and we'll stay ahead of them. -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [23] -------------------------------------------------------------------------------- And Tycho, on the serology and on the antigen test, on serology, our assumption right now is we've got QuantiVac CE mark, and we are going to submit it for an EUA from EUROIMMUN. And we've got a couple of T cell options that we are looking. Obviously, one is from EUROIMMUN, and they'll probably be -- assuming Oxford closes, we have that option too. So I think in the post-vaccine world, we see a role for it. We've not made a big assumption around that in the numbers that we forecasted as of now. On the second one, on the rapid antigen test, if you recall, in the fall, in fact, during the CEO series that you had done, we had talked about the fact that we would come out with one when we feel that it's probably of the same quality comparison as we have on the RT-PCR. And at this point, we feel pretty comfortable that we have something that we might come out with, which is probably at par or if not best of best in standard in terms of what's out there. So few weeks more to go, and that should be something we'll be able to share. -------------------------------------------------------------------------------- Tycho W. Peterson, JPMorgan Chase & Co, Research Division - Senior Analyst [24] -------------------------------------------------------------------------------- And Prahlad, are there plans for explore, 10,000 samples a day, obviously, a high throughput system in terms of future menu build-out? Or do you envision customers decoupling that as the pandemic subsides? -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [25] -------------------------------------------------------------------------------- No. I think there's both organically future menu build-out on those ourselves and also adding other components to it from a detection capability perspective for our customers, NGS and things to that effect and adding kits on that side. So there's a lot of work going on, on that from an R&D perspective, Tycho. -------------------------------------------------------------------------------- Tycho W. Peterson, JPMorgan Chase & Co, Research Division - Senior Analyst [26] -------------------------------------------------------------------------------- Okay. And then lastly, China, just curious whether you think that gets back to growth here in the first quarter? Or what are the kind of leading indicators here? -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [27] -------------------------------------------------------------------------------- I think it will get back to growth in the first quarter. But I think -- I don't know... -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [28] -------------------------------------------------------------------------------- It's actually coming off a pretty easy comp here, Tycho. So embedded in the 1% to 3% has a pretty high China growth rate. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- (Operator Instructions) Our next question comes from Steve Beuchaw with Wolfe Research. -------------------------------------------------------------------------------- Stephen Christopher Beuchaw, Wolfe Research, LLC - Director of Equity Research [30] -------------------------------------------------------------------------------- And before asking anything, I would echo the congrats to Bryan. Well deserved. -------------------------------------------------------------------------------- Bryan Kipp, PerkinElmer, Inc. - VP of IR [31] -------------------------------------------------------------------------------- Thanks, Steve. -------------------------------------------------------------------------------- Stephen Christopher Beuchaw, Wolfe Research, LLC - Director of Equity Research [32] -------------------------------------------------------------------------------- I'll ask a 2-parter, and it's for Prahlad. It has to do with how you want people to think about news flow in 2021 on your diagnostics lineup outside of COVID. One is, you've talked a little bit about publications and validation work on Vanadis. I wonder if you could give us any sort of details as to what you're thinking about there. And then part 2 is, you've commented before that to leverage your expanded molecular diagnostic presence in part with the pretty large numbers that you have out there in terms of instrumentation, you might look at more partnerships or assay development efforts. I wonder if you could share anything incremental on that front. And then I'll drop back in queue. -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [33] -------------------------------------------------------------------------------- Sure, Steve. So on Vanadis, I think we've got 2 to 3 publications that are coming out in the first half of this year. I think there was one that came out at the -- close to the end of last year. So we've got a good pipeline of publications coming out. And again, I'll reiterate what I have said earlier, Steve, we continue to be very confident on Vanadis. We've got a very strong pipeline. Our challenge really right now is being able to ship, install and train. So maybe it's probably in the next couple of quarters, we'll start seeing that coming into play. On the second question around how do we -- on adding more menu to our installed base or incremental installed base we have put in. I think, again, there, we are going with a 3-pronged approach: one, organically what we develop through EUROIMMUN or through our Turku and Taichung labs; second, partnering with other companies that have got approved molecular assays that are out there; and third, obviously, is the M&A and acquisition targets. So the number 2 and number 3 are in place, Steve, and hopefully, we'll have something more to announce in the second half of the year. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- Our next question comes from Dan Leonard with Wells Fargo. -------------------------------------------------------------------------------- Daniel Louis Leonard, Wells Fargo Securities, LLC, Research Division - Senior Analyst [35] -------------------------------------------------------------------------------- So 2-parter. On the COVID assumptions, I think it might be helpful to understand is the component of your PCR RNA extraction business. How much of that is equipment versus consumables as we make assumptions around durability? And then just to cleanup, can you offer up the China growth rate in the quarter and what you expect, broad brush strokes, to look like in '21? -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [36] -------------------------------------------------------------------------------- So yes, I mean from an instrument perspective, Dan, it's probably less than 10% of the revenue overall from -- and I missed the second part. What was it? -------------------------------------------------------------------------------- Bryan Kipp, PerkinElmer, Inc. - VP of IR [37] -------------------------------------------------------------------------------- China. What was the actual growth rate in 4Q and then our expectation in 2021? -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [38] -------------------------------------------------------------------------------- China was down mid-teens in the fourth quarter. So if you go through the progression of the year, down 32% in the first quarter, and it got a little bit better throughout the entire year. But then -- and then as we go into the next year, our assumption is that it is high single, double digits for China throughout the year here starting in the first quarter. -------------------------------------------------------------------------------- Bryan Kipp, PerkinElmer, Inc. - VP of IR [39] -------------------------------------------------------------------------------- And Dan, when you look at that, it's split. Diagnostics is worse than what we saw in aggregate for China in 4Q and DAS is better. So the underlying analytical is stronger than the aggregate performance. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- Our next question comes from Steve Willoughby with Cleveland Research. -------------------------------------------------------------------------------- Stephen Barr Willoughby, Cleveland Research Company - Senior Research Analyst [41] -------------------------------------------------------------------------------- Good luck, Bryan. Jamey, I was wondering if we could just circle back 1 more time on the -- some of the assumptions as it relates to COVID. I guess, first, you talked about how the state of California has asked you to increase capacity in that lab there. So I presume that, that would also mean that your -- basically, the minimum amount of revenue you should expect to receive from that contract should increase in the first quarter versus what you saw in the fourth quarter. And then in the U.K., I believe your -- larger of your 2 labs didn't open until the beginning of December, and that has continued to ramp up, we believe. So should both California and the U.K. contribute meaningfully more in revenue -- COVID revenue in the first quarter versus what you saw in the fourth quarter? -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [42] -------------------------------------------------------------------------------- No, actually. So it's about flat to the fourth quarter, Dan -- Steve. So as you -- you're right on California that overall in the fourth quarter was a minimal amount of capacity and volume. So that will substantially uptick in the first quarter here. But as it pertains to the U.K., as I mentioned earlier, first of all, in the fourth quarter, they -- we had a lot of instrument sales as well as an implementation fee and some stocking, both due to Brexit and the risk of Brexit as well as getting ready for the first quarter ramp. And right now, our assumption in the first quarter is that there are much less reagents because we're not sure whether we will continue on with the contract after the first quarter here. So right now, it's basically (inaudible) comes down and California comes up and overall flat. -------------------------------------------------------------------------------- Stephen Barr Willoughby, Cleveland Research Company - Senior Research Analyst [43] -------------------------------------------------------------------------------- Can I ask a follow-up on that? Jamey, just how are you guys thinking about that U.K. contract going beyond March? I mean, if there's any way to ballpark, if you think that continues or not? -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [44] -------------------------------------------------------------------------------- We don't have any... -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [45] -------------------------------------------------------------------------------- We don't have it in our guidance at all. -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [46] -------------------------------------------------------------------------------- So if that comes through, that will be upside. -------------------------------------------------------------------------------- Operator [47] -------------------------------------------------------------------------------- Our next question comes from Doug Schenkel with Cowen. -------------------------------------------------------------------------------- Doug Schenkel, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [48] -------------------------------------------------------------------------------- Jamey, I know you provided some commentary on margins in response to, I think it was Derik's question earlier on the call. But could you just maybe provide a bit more detail on why there isn't a bit more earnings leverage in 2021? You're expecting to grow the top line, I think, around 8%. And I think with the flow-through, you're talking about -- only about 3% earnings growth. What were some of the key factors we should be considering as we think about 8% versus 3%? -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [49] -------------------------------------------------------------------------------- Yes. So 2 things. One is that Horizon is basically, we said, nominally accretive here. So you have a lot more OpEx costs as a result of that. I said overall gross margin we're assuming is flat. And then we're going to uptick our R&D and selling and marketing and some of our digital investments here, Doug. So I think we're using some of that profitability this year to invest in the OpEx line and continue to improve the outlook from a growth rate standpoint. -------------------------------------------------------------------------------- Doug Schenkel, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [50] -------------------------------------------------------------------------------- Okay. That makes sense. And then 1 for Prahlad. One of the clear goals that you've articulated since taking the helm as CEO has been to better integrate acquisitions, the sales force and R&D organizations across the company. We've seen some clear progress on that front. I was curious if you could just provide a bit more detail on how you see Oxford and Horizon filling into the strategy -- or I should say, fitting into the strategy? And what are some examples of areas where you can leverage capabilities to accelerate growth for both of these deals? -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [51] -------------------------------------------------------------------------------- Sure, Doug. I think the way what we've done and the reason it has worked for us so far is we have always integrated our acquisitions right rather than heavy or light or appropriately. And I think maybe I can talk a lot more around Horizon than on Oxford because we haven't closed on Oxford. But as you think through it, right, the -- give you 1 example. Horizon has a group of strategic account managers with pharma that are very well penetrated and a lot of the business flow through comes from them. So in this case, for us, it's more of a reverse integration, just to give you an example, where we can build on that core competency that Horizon has around strategic account managers, specifically in pharma and biotech, and use them and add our assays and imaging and detection portfolio and discovery portfolio to that bag. So for us, what is more critical is to look at the opportunity that -- look at the target that we are integrating and see where there are opportunities. And most of our focus right now has gone around commercial synergies and technology synergies. And obviously, Jamey and I both have talked earlier about the whole aspect around how we bring in our automation expertise, for example, with Oxford. So that will play a role. That doesn't mean that we don't have the cost synergies or the corporate opportunity of -- the cost opportunities around corporate costs. But for us, the focus is primarily around commercial and technology synergies. -------------------------------------------------------------------------------- Operator [52] -------------------------------------------------------------------------------- Our next question comes from Matt Sykes with Goldman Sachs. -------------------------------------------------------------------------------- Matthew Carlisle Sykes, Goldman Sachs Group, Inc., Research Division - Research Analyst [53] -------------------------------------------------------------------------------- Congrats, again, Bryan. Well deserved. I just wanted to -- just 1 question for me, just on the DAS division. Obviously, life sciences had a good fourth quarter. I just wanted to get at the sustainability of enterprise and discovery within that. And if that is sustainable, how should we think about food and applied kind of coming up the curve as they recover? And how does that kind of fit into your guide for the year? -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [54] -------------------------------------------------------------------------------- Sure. Yes, Matt. So I would say -- overall, as we laid out in December, we're encouraged by the life sciences franchise as a whole. And we've said that long term, we believe it can grow 6% plus. Discovery has certainly gotten a lot better. Enterprise is coming off a little bit of a tough comp as we head into this year, so we're a little less bullish there. Informatics has been consistent overall at kind of 10% plus. So life sciences look strong. Food has been a more challenging market to understand here and see what will happen. We're assuming some kind of rebound here in 2021, but not gangbusters. So I would say it's up mid-single digits as well. And so that could be an area that provides additional growth versus our current guide. -------------------------------------------------------------------------------- Operator [55] -------------------------------------------------------------------------------- Our next question comes from Brandon Couillard with Jefferies. -------------------------------------------------------------------------------- Brandon Couillard, Jefferies LLC, Research Division - Equity Analyst [56] -------------------------------------------------------------------------------- Just a high-level question, Prahlad. If you think about just capital deployment priorities, obviously, you've thrown off a lot of free cash flow. You've already done 2 deals. Just talk about your bandwidth to absorb another acquisition right now. Do you expect to sort of take a pause as you absorb Oxford and Horizon and then just your appetite for share repurchases this year. -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [57] -------------------------------------------------------------------------------- Brandon, our priority will remain on M&A. And I think our appetite is pretty good, and I think we will be acquisitive in 2021. -------------------------------------------------------------------------------- James M. Mock, PerkinElmer, Inc. - Senior VP & CFO [58] -------------------------------------------------------------------------------- And on share repurchases, Brandon, we assume in our outlook here that we're going to keep it flat year-over-year. -------------------------------------------------------------------------------- Operator [59] -------------------------------------------------------------------------------- Our next question comes from Jack Meehan with Nephron Research. -------------------------------------------------------------------------------- Jack Meehan, Nephron Research LLC - Research Analyst [60] -------------------------------------------------------------------------------- Just a couple on reproductive health segment. I was wondering if you could give us an update on genetic testing, how that business performed in 2020? I'm guessing a little bit of pressure from the pandemic, but what the outlook looks like for 2021? And then what are the expectations for newborn screening? You have some easy comps, but just talk about how that's going to trend throughout 2021. -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [61] -------------------------------------------------------------------------------- Sure. I think from 2020 perspective, obviously, the pandemic did have an impact on generic testing, not for us, for the industry as a whole. But it has started coming back. And also, keep in mind that most of the team there was focused on ensuring that the California and the U.K. labs get up and running. So our focus had shifted because they sort of were the nucleus of ensuring that these labs take off and we execute flawlessly. From a reproductive health perspective, our assumption I think going into it is low single digits for the year. We continue to see -- we've seen continued pressure on birth rates for the past few years. But again, as I've said earlier, that's not sustainable. So our assumption on that is probably flat to low single-digit decline on birth rates, but compensating that with menu expansion and some of the new NPIs that we've talked about, Ion is being one of them, I think, SMA and DMD, right? So that's sort of our thinking around reproductive health. -------------------------------------------------------------------------------- Operator [62] -------------------------------------------------------------------------------- And our last question comes from Dan Brennan with UBS. -------------------------------------------------------------------------------- Daniel Gregory Brennan, UBS Investment Bank, Research Division - Senior Equity Research Analyst of Healthcare Life Sciences [63] -------------------------------------------------------------------------------- Bryan, best of luck with the new role. So really it's is a 2-part question on testing, if you don't mind. Just how are you thinking about the impact of rapid antigens just on PCR and your franchise as you look out? And then, b, while I know there is a very wide range of outcomes with the vaccine and kind of what happened to testing. But any way to think about like kind of guidepost as we cycle past even '21 into '22, just given how big of a part of the business it is? Obviously, symptomatic testing may come down, but you could have a lot of screening that takes up the slack. Just kind of wondering -- just some early thoughts about just kind of a range of outcomes we might contemplate. -------------------------------------------------------------------------------- Prahlad R. Singh, PerkinElmer, Inc. - CEO, President & Director [64] -------------------------------------------------------------------------------- Sure. I think 1 thing to keep in mind is even around RT-PCR, the benefit that we have is we have a full array of assays around RT-PCR that are FDA -- EUA-approved. As you look at it, we've got pooling, we've got asymptomatic. So as this moves forward and as pooling starts to play a role around RT-PCR, we already have an EUA-approved assay for symptomatic and asymptomatic. Outside of that, Dan, as you look at rapid antigen testing, our intent is to bring out a test there, which has a high level of sense and spec. Because the idea really is that you don't want to be in your low 80s or late 70s in terms of sense and spec when you want to release that test. And that's why we have not been the first one to the game, but I feel very confident that when we come out with one, the sensitivity and specificity of the test will be compelling enough for it to gain rapid traction. So thank you. Thank you, operator, and thank you all for your questions. As we've shared, both of us shared, 2020 has -- was a seminal year in our long and storied history. Our team is energized and focused on building off our recent successes, and we want to challenge -- tackle the challenges of tomorrow. I want to again take the opportunity to thank the 14,000 employees across the globe. Thank you for your interest and support of PerkinElmer, and then look forward to providing further updates on our first quarterly earnings call. Thank you. -------------------------------------------------------------------------------- Operator [65] -------------------------------------------------------------------------------- And ladies and gentlemen, thank you for participating in today's conference. You may now disconnect. Have a good day.