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Edited Transcript of TMO earnings conference call or presentation 30-Jan-20 1:30pm GMT

·53 min read

Q4 2019 Thermo Fisher Scientific Inc Earnings Call WALTHAM Jun 8, 2020 (Thomson StreetEvents) -- Edited Transcript of Thermo Fisher Scientific Inc earnings conference call or presentation Thursday, January 30, 2020 at 1:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Kenneth J. Apicerno Thermo Fisher Scientific Inc. - VP of IR * Marc N. Casper Thermo Fisher Scientific Inc. - CEO, President & Chairman * Stephen Williamson Thermo Fisher Scientific Inc. - Senior VP & CFO ================================================================================ Conference Call Participants ================================================================================ * Daniel Anthony Arias Stifel, Nicolaus & Company, Incorporated, Research Division - MD & 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 Barclays Bank PLC, Research Division - VP & Senior Research Analyst * Stephen Christopher Beuchaw Wolfe Research, LLC - Director of Equity Research * Tycho W. Peterson JP Morgan Chase & Co, Research Division - Senior Analyst * Vijay Muniyappa Kumar Evercore ISI Institutional Equities, Research Division - MD ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2019 Fourth Quarter Conference call. (Operator Instructions) Please be advised that today's call is being recorded. (Operator Instructions) I would like to introduce our moderator for the call, Mr. Kenneth Apicerno, Vice President, Investor Relations. Mr. Apicerno, please begin the call. -------------------------------------------------------------------------------- Kenneth J. Apicerno, Thermo Fisher Scientific Inc. - VP of IR [2] -------------------------------------------------------------------------------- Good morning and thank you for joining us. On the call with me today is Marc Casper, our President and Chief Executive Officer; and Stephen Williamson, Senior Vice President and Chief Financial Officer. Please note, this call is being webcast live and will be archived on the Investors section of our website, thermofisher.com, under the heading Webcasts and Presentations until February 7, 2020. A copy of the press release of our fourth quarter 2019 earnings and future expectations is available on the Investors section of our website under the heading Financial Results. Before we begin, let me briefly cover our safe harbor statement. Various remarks that we may make about the company's future expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these indicated on these forward-looking statements as a result of various important factors, including those discussed in the company's quarterly report on Form 10-Q for the quarter ended September 28, 2019, under the caption Risk Factors, which is on file with the Securities and Exchange Commission and is also available on the Investors section of our website under the heading SEC Filings. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. Also during this call, we'll be referring to certain financial measures not prepared in accordance with generally accepted accounting principles, or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available on the press release of our fourth quarter 2019 earnings and future expectations and also in the Investors section of our website under the heading Financial Information. So with that, I'll now turn the call over to Marc. -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [3] -------------------------------------------------------------------------------- Thank you, Ken. Good morning, everyone. Thank you for joining us today for our 2019 Q4 and year-end call. I'm pleased to report that we finished the year strong and exceeded our goals for 2019. From a financial perspective, as you saw in our press release, we delivered excellent revenue and earnings growth. From a customer lens, we launched many exciting new products and added new capabilities to strengthen our unique value proposition. And for our shareholders, we continue to be good stewards of capital, making strategic acquisitions and returning capital to create significant value. All in all, it was an excellent year where we've positioned Thermo Fisher very well to begin this new decade as an even stronger company. I'll cover some of the highlights later in my remarks, but first, I'll hit the financials from the quarter and the year at a high level. Starting with the quarter. Our revenue increased 5% in Q4 year-over-year to $6.83 billion. Organic growth was also 5% in the quarter. Adjusted operating income increased 5% to $1.70 billion, and our adjusted operating margin expanded 10 basis points in Q4 to 24.9%. Finally, we achieved strong adjusted EPS growth in the quarter with a 9% increase to $3.55 per share. Turning to our results for the full year. We increased revenue by 5% to $25.54 billion in 2019. Organic revenue growth was 6% for the year. Adjusted operating income increased 6% to $5.97 billion. We expanded our adjusted operating margin by 30 basis points to 23.4%, and we delivered another excellent year of earnings performance in 2019 with an 11% increase in adjusted EPS to $12.35 per share. As you know, our strong performance is fueled by the power of our PPI Business System. Our colleagues use it across the company to improve all aspects of how we work. This is not -- this not only leads to strong earnings growth, but also helps us continuously make our company even better and that creates a great experience for our customers and our 75,000 colleagues around the world. Let me now give you some color on our performance by end market for the quarter and the year. Starting with Pharma & Biotech, we had excellent performance again in this end market, delivering 10% growth during Q4. We saw broad-based strength across our businesses serving these customers. Our unique depth of capabilities gives us a clear competitive advantage, and we continue to strengthen our offering to gain share, which I'll cover later in my remarks. Our leading position in serving Pharma & Biotech customers led to double-digit growth in this end market for the year. In diagnostics and health care, we saw strong growth in our immunodiagnostics, clinical diagnostics and health care market channel businesses in Q4, and we grew in this end market in the mid-single digits for both the quarter and the full year. Turning to industrial and applied. Growth in this end market declined in the mid-single digits in Q4 compared with the double-digit growth we delivered in Q4 last year. This is predominantly driven by our electron microscopy business, a dynamic consistent with what we saw in Q3. For the full year, industrial and applied grew in the low single digits. In academic and government, we grew in the low single digits during the quarter and for the full year. Finally, let me comment briefly on our performance from a geographic lens. In Q4, we grew in China in the low single digits. This was driven by very strong comparisons in the year-ago quarter, coupled with a slower release of funds for capital purchases by some of our customers. Our performance in North America and Europe was very strong, driving excellent revenue growth for the total company. That speaks to the strength of our portfolio and our global competitive position. To sum up our performance, market conditions continue to be good overall, and our teams executed well to achieve another excellent year. We continue to effectively leverage our unique customer value proposition to deliver very strong growth. That's a good transition to our growth strategy, and I'll use it as a framework to recap some of the highlights for the quarter and the year. We continued our strong momentum across all 3 elements of our strategy to put Thermo Fisher in the best position to win with our customers and gain market share. Starting with the first pillar of our strategy, it was an exceptional year for high-impact innovation. We launched exciting products every quarter and across all of our technology-focused businesses. I'll highlight just a few this morning. In Analytical Instruments, you'll recall, it was a big year for us at ASMS with the introduction of our new generation of Thermo Scientific Orbitrap instruments. We strengthened our mass spec leadership with the new Exploris 480 and Eclipse Tribrid systems, which significantly raised the bar in protein analysis. We're pleased to see very strong customer demand for these products. In our electron microscopy business, we launched our new-generation Krios G4 instrument for structural biology during the year. And in Q4, we introduced the Metrios AX for industrial applications. This new system uses machine learning to automate the collection and measurement of critical data, ensuring quality and efficiency for our customers. In our Specialty Diagnostics segment, we added a number of new assets during the year, particularly in our immunodiagnostics business, where we continue to expand our menu of ImmunoCAP allergy tests. In transplant diagnostics, we extended our family of lab screen reagents in Q4. Our new single antigen ExPlex reagents greatly expand the number of HLA antibodies that lab directors can characterize to help identify the risk of organ rejection in transplant patients. Turning to our Life Sciences Solutions segment. We launched a range of new products to strengthen our bioproduction, biosciences and genetic sciences offering, highlighted by the new QuantStudio 6 and 7 Pro Real-Time PCR systems. In Q4, we introduced the Qubit Flex Fluorometer, which is designed to measure up to 8 samples simultaneously and with highly accurate and reproducible results. And to cap off an excellent year, in Q4, we launched the Genexus System to extend our Ion Torrent next-generation sequencing platform. This fully automated system is a real game changer, delivering results in a single day and requiring minimal amounts of sample for analysis. We've continued to make great progress with our oncology-focused NGS strategy, and Genexus is a significant milestone in our goal to ultimately bring NGS to local hospital settings. I'm proud of the passion our teams have for innovation, and that makes a real difference for our customers. This has always been a key element of our culture. So clearly, another fantastic year in that regard, and we look forward to continuing our momentum in 2020. Turning to the second pillar of our growth strategy, leveraging our scale in high-growth and emerging markets. We had strong performance across these key regions in 2019, and that included another great year in China with 13% growth. Looking forward, the government priorities in China are aligned with the technologies we provide to meet customer demands for biologic drugs, a cleaner environment and safer food supplies. And we continue to build on our industry-leading scale to help them solve these challenges. You'll recall that we highlighted many new developments during the year, including the expansion of our clinical trials operations in China to meet growing demand. During the quarter, we opened a new pharma and biotech customer solutions center in Shanghai. The center showcases our expertise in critical analytical processes and specialized workflows to help our customers accelerate their development of novel therapeutics. I came away from my visit to China in Q4 with incredible excitement for how rapidly the biotechnology market is expanding there and how well positioned we are to support that growth. To sum it up, Thermo Fisher has a distinct advantage in China and that we've created by leveraging our unique industry leading scale. And that allows us to deliver an exceptional experience for our customers there. This is a strategy that plays out across our high-growth and emerging markets around the world. As you heard during the year, we also continued to build on our capabilities in South Korea, India and Singapore to help our customers advance their work in life sciences, biopharma and food safety applications. The third pillar of our growth strategy is our customer value proposition, and we continue to enhance it to help our customers meet their goals for innovation and productivity. We've been talking a lot about our offering for pharma and biotech because it's a great example of how we're bringing together our existing capabilities and adding new ones to be the strongest partner for these customers. We have a proven formula for serving these customers and it resonates from large pharma to small and emerging biotech. We can support them from the discovery of a molecule all the way to making it a commercial medicine. And we do this through a combination of continuing to strengthen our product offering by introducing relevant new technologies, leveraging our scale and the extensive customer access we have through our research and safety market channel and continuing to expand our CDMO service capabilities, which also drives revenue synergies across our portfolio. This is a formula that's working very well and in 2019 we once again delivered double-digit growth with our pharma and biotech customers. It's been over 2 years since we acquired Patheon, and we've successfully completed the integration. We were able to turn a business that was growing in the mid-single digits into a high single-digit grower with a bright outlook. We've already covered a lot of our pharma services development during the year, but at a high level, our approach has been a combination of organic investments and strategic bolt-on acquisitions. Organically, we've continued to expand our global network to meet customer demand, including our capacity for biologics production and sterile fill/finish services. We've also acquired new capabilities to strengthen our position. We added the new API manufacturing facility in Ireland that we acquired from GSK. And we significantly increased our capabilities in the high-growth gene therapy market with the acquisition of Brammer Bio. In early December, I attended the grand opening of our new viral vector facility in Lexington, Massachusetts. Our team there is super excited about the opportunities we now have to help our customers bring innovative new therapies to patients with rare diseases. The integration of Brammer Bio has gone extremely well. Business performance is strong, and I'm really excited about its potential. So excellent momentum in serving our pharma and biotech customers. It's clear that our value proposition is a key competitive advantage for us, and we continue to gain share. Turning now to capital deployment. As you know, we have a great track record here in creating value for our shareholders by being good stewards of capital, and we continue to successfully execute our strategy in 2019. First, we deployed $1.8 billion on strategic bolt-on acquisitions. Second, we continue to return capital to our shareholders for a total of $1.8 billion in share buybacks and dividends. Last, you'll recall that we announced in Q3 that we refinanced $5.6 billion of our debt, and that will generate $80 million of savings annually for us. So it was a great year from a capital deployment and balance sheet perspective as well. Let me cover one last highlight from the year before I turn to our guidance, and that relates to our commitment to environmental, social and governance priorities. We've always been a company that's focused on doing business the right way, and that's embodied in our mission, which is to enable our customers to make the world healthier, cleaner and safer. We not only bring our mission to life every day, but we also have robust programs that connect our customers, colleagues and communities, so we can make a direct impact. This happens in a number of ways, including through our STEM education and environmental sustainability initiatives. Still much more to be done here, but I'm proud of the work our teams are doing to raise our ESG profile and continue to make our company even better. Stephen will dwell on the assumptions that factor into our revenue and earnings guidance, but let me quickly cover the highlights. In terms of our revenue guidance, we expect to deliver between $26.61 billion and $27.01 billion in 2020, which would result in reported revenue growth of 4% to 6%. We're initiating adjusted EPS guidance for 2020 in the range of $13.49 to $13.67. This will lead to 9% to 11% growth year-over-year. Before I hand the call over to Stephen, I'll leave you with my key takeaways for the year. We've consistently achieved excellent revenue and earnings growth and extended our track record with another year of strong performance in 2019. We're delivering an exceptional experience for our customers by continuing to enhance our unique value proposition and using our PPI business system to make our company even stronger. And we've continued to create significant value for our customers and our shareholders, which puts us in a very strong position as we begin the decade. With that, I'll now hand the call over to our CFO, Stephen Williamson. Stephen? -------------------------------------------------------------------------------- Stephen Williamson, Thermo Fisher Scientific Inc. - Senior VP & CFO [4] -------------------------------------------------------------------------------- Thanks, Marc, and good morning, everyone. I'll begin with an overview of our fourth quarter and full year results for the total company, then I'll provide some color on our 4 segments and conclude with a detailed review of our initial 2020 guidance. Before I get into the details of our financial performance, I thought it'd be helpful to provide a high-level view of how the fourth quarter played out versus our expectations at the time our last earnings call. As you saw in our press release, we had a strong finish to the year and delivered results ahead of our prior guidance on both the top and bottom line. We delivered 5% organic growth and adjusted EPS that was $0.04 higher than the midpoint of our previous guidance, reflecting good volume pull-through, along with incremental favorable below-the-line FX. Our strong performance in Q4 enabled us to deliver 6% organic growth for the full year 2019 and 11% growth in adjusted earnings per share, so excellent financial results in 2019. Now let me give you some more color on our performance, starting with the earnings results. You saw in our press release, we grew adjusted EPS in Q4 by 9% to $3.55. For the full year, adjusted EPS was $12.35, up 11% versus 2018. GAAP EPS in the quarter was $2.49, up 12% from Q4 last year, and 2019 full year GAAP EPS was $9.17, up 27% versus the prior year. On the top line, our Q4 reported revenue grew 5% year-over-year in Q4. The components of our Q4 reported revenue increase included 5% organic growth, approximately 1% growth from the net of acquisitions and divestitures and a foreign exchange headwind of approximately 1%. For the full year 2019, reported revenue increased 5% year-over-year. This includes a 6% contribution from organic growth, a 1% positive impact from the net of acquisitions and divestitures and a 2% headwind from foreign exchange. Turning to our growth by geography during the quarter. North America grew in the mid-single digits. Europe grew in the high single digits. Asia Pacific grew in the low single digits, including China, which also grew in the low single digits. And rest of the world grew in the mid-single digits. For the full year, North America grew in the mid-single digits. Europe and Asia Pacific both grew in the high single digits, and rest of the world grew in the mid-single digits. Turning to our operational performance. Q4 adjusted operating income increased 5%, and adjusted operating margin was 24.9%, up 10 basis points from Q4 of last year. We saw a strong productivity from our PPI Business System and good volume leverage. This was partially offset by strategic investments, business mix and the impact of acquisitions and the divestiture of our Anatomical Pathology business. Q4 margin expansion was 30 basis points lower than we had assumed in the last guidance. Half of that was driven by FX and the other half by incremental investments to fuel future growth. For the full year, adjusted operating income increased 6%, and adjusted operating margin was 23.4%, which is 30 basis points higher than 2018. We had strong productivity and volume pull-through, which was partially offset by strategic investments, business mix and the impact of acquisitions and divestitures. For the full year, FX was a headwind of 2% on revenue, 10 basis points on adjusted operating margins and 2% on adjusted earnings per share. As a reminder, our divestiture of the Anatomical Pathology business at the end of Q2 was $0.09 dilutive in 2019 and a year-over-year headwind of approximately $120 million on revenue, $50 million on adjusted operating income and 10 basis points on adjusted operating margin. Moving on to the details of the P&L. Total company adjusted gross margin in the quarter came in at 46.3% down 60 basis points from Q4 of the prior year. 50 basis points of this was the impact of acquisitions and the divestiture. For the full year, adjusted gross margin was 46.4%, down 30 basis points from 2018. For both the quarter and full year, strong productivity and volume pull-through were more than offset by business mix, strategic investments and the impact of acquisitions and the divestiture. Adjusted SG&A in the quarter was 17.6% of revenue, an improvement of 70 basis points versus Q4 2018. Total R&D expense came in at 3.8% of revenue, 10 basis points lower than Q4 last year. For the full year, adjusted SG&A was 19.1%, an improvement of 60 basis points compared to the full year 2018. R&D expense was 3.9% of sales, 10 basis points lower than the prior year. R&D as a percent of our manufacturing revenue for the full year was 7.1%. Looking at our results below the line for the quarter. Our net interest expense was $97 million, down $30 million from Q4 last year. Net interest expense for the full year was $450 million, a decrease of $80 million from 2018. The reduction in net interest expense was driven by debt reduction and our refinancing actions. Adjusted other income and expense was a net income in the quarter of $16 million, higher than Q4 2018, primarily due to changes in nonoperating foreign exchange. Our adjusted tax rate in the quarter was 11.7%, down 50 basis points versus Q4 last year. Our full year adjusted tax rate was 11%, in line with previous guidance. This is 90 basis points lower than the full year 2018, primarily reflecting the beneficial impact of U.S. tax reform and our continued tax planning initiatives. As I mentioned on the Q3 call, we repurchased $750 million of our shares in early Q4, bringing the total repurchases for 2019 to $1.5 billion. Average diluted shares were 402 million in Q4 and 403 million for the full year, both in line with our prior guidance. Turning to cash flow and the balance sheet. For the full year, cash flow from continuing operations was $5 billion, and free cash flow was $4.1 billion after deducting net capital expenditures of approximately $900 million. During 2019, we also continued to return significant capital to shareholders with $1.5 billion of share buybacks, $300 million in dividends. And as Marc mentioned, we successfully deployed $1.8 billion of capital through strategic acquisitions. We ended the year with approximately $2.4 billion in cash and $17.8 billion of total debt. Our total debt was up $700 million from the end of Q3, driven by the completion of our debt refinancing activities, which began in the prior quarter. Our leverage ratio at the end of the year was 2.7x gross debt to adjusted EBITDA, in line with our expectations. Wrapping up my comments on our total company performance. Adjusted ROIC was 11.8%, up 20 basis points from last quarter and up 90 basis points from Q4 last year as we continue to generate very strong returns. Now I'll provide you with some color on the performance of our 4 business segments for the quarter and the full year. Starting with Life Science Solutions. In Q4, reported revenue in this segment increased 8% and organic revenue growth was 9%. In the quarter, we continued to see strong growth in this segment led by bioproduction, biosciences and genetic sciences businesses. For the full year, reported revenue increased 9%, and organic revenue growth was 10%. Q4 adjusted operating income in Life Science Solutions increased 11%, and adjusted operating margin was 37.5%, up 70 basis points year-over-year. In the quarter, we drove very strong productivity and volume pull-through, which was partially offset by business mix and strategic investments. For the full year 2019, adjusted operating income increased 13%, and adjusted operating margin was 35.7%, an increase of 130 basis points over 2018. In the Analytical Instruments segment, reported revenue decreased by 3% in Q4 and organic revenue declined 2%. In this segment, all businesses had very strong year-over-year comps given the 12% organic growth that we delivered in Q4 of 2018, particularly in our electron microscopy business. In addition, the slower release of funds for capital purchases in China impacted Q4 growth for the businesses in this segment. For the full year, reported revenue in the segment increased 1%, and organic growth was 3%. Q4 adjusted operating income in Analytical Instruments decreased 5%, and adjusted operating margin was 26%, down 60 basis points year-over-year. In the quarter, we saw very strong productivity, which was more than offset by business mix, strategic investments and volume. For the full year, adjusted operating income was 23.1%, 30 basis points higher than the prior year. Turning to the Specialty Diagnostics segment. As a reminder, this is a segment that previously included the Anatomical Pathology business, which we divested at the end of Q2. In Q4, our total revenue declined 1%. Organic revenue growth was 7%. We saw a strong growth in this segment led by our immunodiagnostics and clinical diagnostics businesses with continued strong growth in our health care market channel. For the full year, reported revenue was flat, and organic growth was 5%. Adjusted operating income decreased 5% in Q4, and adjusted operating margin was 23.7%, down 80 basis points in the prior year due to the impact of the divestiture. In the quarter, we saw a strong productivity and volume leverage. However, this is more than offset by strategic investments and the impact of the divestiture and business mix. For the full year 2019, adjusted operating income declined 2%. Adjusted operating margin was 25%, contracting 60 basis points year-over-year with the divestiture representing 30 basis points. Finally, in the Laboratory Products and Services segment, Q4 reported revenue increased 9%. Organic revenue growth was 7%. In the quarter, we saw a strong growth across all of our businesses within the segment, led by the pharma services business and the research and safety market channel. For the full year, both reported and organic revenue grew 6%. Adjusted operating income in the segment for Q4 increased 15%, and adjusted operating margin was 13.8%, which was higher than the prior year by 70 basis points. In the quarter, we saw very strong productivity, volume leverage, contributions from acquisitions and favorable business mix. This was partially offset by strategic investments. For the full year, adjusted operating margin was 12.5%, flat to 2018. With that, I'd like to review the details of our initial 2020 guidance. And as Marc mentioned earlier, we're initiating a 2020 adjusted EPS guidance range of $13.49 to $13.67, which would result in 9% to 11% growth over 2019. In terms of revenue, our guidance range is $26.61 billion to $27.01 billion, which will result in reported growth of 4% to 6% over 2019. Our initial guidance for 2020 assumes 5% organic revenue growth for the year. With regards to FX, in 2020, we're assuming that it's a year-over-year headwind of approximately $100 million of revenue or 0.4% and $0.06 of adjusted EPS or 0.5%, largely in Q1 and, to a lesser extent, in Q2. We expect $0.06 of dilution from the sale of the Anatomical Pathology business, which reflects revenue and operating income headwinds of $105 million and $30 million, respectively. We're assuming that the acquisitions we completed in 2019 will contribute approximately $160 million to our reported revenue growth in 2020. Turning to adjusted operating margin. We made the decision to reinvest $40 million of last year's debt refinancing back into the business. This reinvestment impacts 2020 adjusted operating margins by 15 basis points. In addition, we expect to have about 10 basis points of margin impact in 2020 from our decision to renew key commercial contracts for our PCT test business, which is part of our Specialty Diagnostics segment. In exchange with some royalty rate concessions, we successfully negotiated long-term contract extensions with most of our PCT commercial partners. For 2020, this creates a headwind of about $30 million of revenue and adjusted operating income, but in return, extensive revenue stream for this highly successful test franchise for many years to come. Factoring in the impact of these 2 decisions and the benefits of strong volume, pull-through and the organic growth and continued strong productivity from our PPI Business System, we expect to expand adjusted operating margins by 30 basis points in 2020, resulting in adjusted operating margins of approximately 23.7%. Moving below the line. We expect net interest expense in 2020 to be approximately $340 million. This is $110 million lower than 2019 and reflects the debt refinancing activity we completed this past year and a lower average debt level. We're assuming adjusted other net income will be about $60 million. We expect the adjusted income tax rate to be 10.5% in 2020. The improvement from our 11% rate in 2019 is primarily driven by the continued realization of benefits associated with U.S. tax reform. We're assuming net capital expenditures in the range of $1 billion to $1.1 billion. This represents an increased investment of approximately $150 million over 2019 driven by capacity and capability expansions in our pharma services and bioproduction businesses. Free cash flow is expected to be approximately $4.5 billion in 2020. The increase over 2019 is primarily driven by our expected strong earnings growth. In terms of capital deployment, our guide -- our guidance includes a total of $1.5 billion of share buybacks in 2020, which we assume will be completed throughout the year. We're also assuming that we'll return approximately $350 million of capital to shareholders this year through dividends. We estimate that the full year average diluted share count will be between 400 million and 401 million shares. Our guidance does not assume any future acquisitions or divestitures. It's also worth noting that our guidance does not include any potential impact from the coronavirus outbreak. It is too early to gauge the impact. We're fully focused on doing everything we can to help our customers and our colleagues address the situation. And finally, I wanted to touch on quarterly phasing for the year as there are several factors to consider. First, note that we have 1 less day in Q1 and 2 extra days in Q4 this year. From an organic growth standpoint, we expect Q1 to be a couple of points lower than the full year due to the days impact and the prior year comps, particularly in the Analytical Instruments segment. And we expect Q4 to be higher than the full year for the same reasons. From an adjusted operating income margin standpoint, we expect Q1 to be 40 basis points lower than Q1 2019. This is driven by the phasing of organic revenue and the timing of investments in our 2019 acquisitions. Acquisitions and divestitures are approximately 60 basis points dilutive in Q1, accretive for the rest of the year and net neutral for the year as a whole. Due to the phasing of revenue and margins, in the year, we expect adjusted EPS in Q1 to be just over 21% for the full year and Q4 to be approximately 30%. Q2 and Q3 are expected to be about equal. So at a high level, to start the year, our guidance assumes 5% organic revenue growth and 9% to 11% adjusted EPS growth, a continuation of excellent financial performance track record. As always, we'll strive to deliver the best possible results, and I look forward to updating you on our progress as we go through the year. With that, I'll give the call back over to Ken. -------------------------------------------------------------------------------- Kenneth J. Apicerno, Thermo Fisher Scientific Inc. - VP of IR [5] -------------------------------------------------------------------------------- Thanks, Stephen. Operator, we're ready to open it up for Q&A. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And our first question today comes from the line of Tycho Peterson from JPMorgan. -------------------------------------------------------------------------------- Tycho W. Peterson, JP Morgan Chase & Co, Research Division - Senior Analyst [2] -------------------------------------------------------------------------------- Marc, I want to start with performance in the Analytical Instruments business. You had a difficult comp last quarter, but there's notable quarter-over-quarter deceleration here. Is there anything you could talk to in terms of pacing? Did anything come up late in the quarter? You talked about the China slower release of funds. How much of it was that versus maybe FDI? It looks like FDI is tracking a couple of hundred million dollars below with semis and life sciences lagging. So can you maybe talk to those 2 dynamics and if there's anything else that weighed down AI in the quarter? -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [3] -------------------------------------------------------------------------------- Yes, Tycho. Thanks for the question. In terms of the analytical instruments, as you said, we had 12% growth in the prior year, so our expectations were that we were going to have that as a headwind. And our performance is a little bit below the expectations that we had. Really happened late in the quarter in China with the slower release of funds from specific customers on high-end capital equipment in that market. When we think about the comparisons, electron microscopy business, as you said, had a very strong second half in '18 and actually very strong going into the first quarter of '19. So we knew we would have challenging comparisons there, and that played out pretty much as we expected. -------------------------------------------------------------------------------- Tycho W. Peterson, JP Morgan Chase & Co, Research Division - Senior Analyst [4] -------------------------------------------------------------------------------- And then, I guess, for the follow-up on China, can you maybe just talk about the gives and takes? Obviously, you're not factoring any coronavirus impact, but are you expecting a catch-up on the release of funds? And maybe just talk about some of the other gives and takes in China for the year. And is there an opportunity on coronavirus for you guys on the positive side as we think about the diagnostics business? -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [5] -------------------------------------------------------------------------------- Yes. So let me cover China. From a China perspective, I always like to keep things in the contract, which is we had a very strong year in China and 13% growth. And when I look back on the year, we really continued to strengthen our strategic position in the country. Feedback from our customers continues to be positive. We were expecting that we would have mid-single-digit growth in Q4 based on comparisons, which is in the Analytical Instruments business that I -- as I just highlighted. And we came in with low single-digit growth in China versus the mid-single-digit expectations for the fourth quarter. And the driver of that was really the slower release of capital for high-end capital equipment. Interestingly enough, when you look at the remainder of the business, which is obviously the majority of the business, the various service businesses and all of our consumable businesses actually played out exactly as we saw in the previous 3 quarters, very strong growth across the rest of the portfolio. So it seems like the government made some decisions to -- on very large capital equipment purchases to hold funds and such is our take there. And coronavirus isn't baked into our forecast one way or the other. Thanks, Tycho. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- Our next question comes from the line of Jack Meehan from Barclays. -------------------------------------------------------------------------------- Jack Meehan, Barclays Bank PLC, Research Division - VP & Senior Research Analyst [7] -------------------------------------------------------------------------------- I wanted to probe a little bit more on the industrial and applied end markets, so down mid-single digits in the quarter. Obviously, electron microscopy weighing on that. Just -- I'm curious if you excluded that, what you're seeing in terms of the macro. Was that also weaker year-over-year? And excluding some of the capital seasonality you're talking about there, what does the guidance assume for that as an end market for 2020? -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [8] -------------------------------------------------------------------------------- So Jack, as I look to -- for the year last year, we grew low single digits in industrial and applied. And our guidance has the same low single-digit assumption for the year. And you'll see the flip in terms of phasing, right? We had a very strong year up in industrial and applied at the first half of 2019. And therefore, we have more challenging comparisons as we start this year. And then the comparisons eased substantially as the year goes on, so it's a little bit softer to begin and then accelerating growth as the year plays out. And really, what's assuming is really exactly the same market conditions happening in industrial and applied. The only thing that's changing is really the -- is just how challenging the comparisons are. When you look at sort of the day-to-day run rate business in industrial and applied, there's always some pockets of strength. We saw some strength in applied markets in QA/QC applications. You saw some strength, but the larger capital equipment purchases had a difficult comparison primarily in semiconductor and material science applications. -------------------------------------------------------------------------------- Jack Meehan, Barclays Bank PLC, Research Division - VP & Senior Research Analyst [9] -------------------------------------------------------------------------------- Great. Okay. And then just as a follow-up. I know Stephen mentioned, I think, all the businesses within AI had a tough comp, but was hoping you could just provide some more color on mass spec and chromatography, how you feel -- did that grow? Or was that negative also in the quarter from the comp? And how do you feel about share gains versus the competitive environment? -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [10] -------------------------------------------------------------------------------- Yes, Jack. So in terms of Analytical Instruments, as a reminder, we have 3 business lines within our Analytical Instruments business: our materials and structural analysis business, which is electron microscopy and spectroscopy; our chroma mass spec business; and our chemical analysis. All 3 businesses declined in the quarter because all 3 had very strong comparisons. Our chromatography and mass spectrometry business performed the strongest of the 3 businesses. And when you look at it for the full year, the electron microscopy or materials and structural analysis was below the segment average and chroma mass spec and chemical analysis was above the segment average for the full year. I feel good about our shared performance in terms of how we performed during the course of the year. Thank you, Jack. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- Our next question comes from the line of Derik De Bruin from Bank of America. -------------------------------------------------------------------------------- Derik De Bruin, BofA Merrill Lynch, Research Division - MD of Equity Research [12] -------------------------------------------------------------------------------- Marc, can you talk a little bit about sort of the margin profile? I mean, you've done some deals recently, like the GSK deal, and the Brammer deal that have been putting some pressure on margins. And I guess, I'm just trying to get a sense on the go-forward basis on what the margin opportunity will be in. And I mean -- and this sort of bonds into a -- of further capital deployment conversation in that when you sort of look at other assets you could potentially add, is there a lot more stuff like GSK and Brammer that you're looking to add that would be dilutive on this? I'm just trying to get some sense on the pacing of the margin because you're trying to balance this new growth opportunity with step of demands, higher capital investment and lower margins at this point in time. -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [13] -------------------------------------------------------------------------------- Yes, Derik. Thanks for the question. So I will try to answer this way. When we -- the first thing is about just M&A generally and how we think about M&A. We actually don't focus on what the starting margin is. Meaning, as you know, over the many years, we've done M&A that was accretive to margins from an operating perspective from day 1. And we've done ones that have been dilutive, right? What we look at is what are the return profiles and what can we do with the business and are we the right owner, right? So you'll have things that sometimes short term are headwinds. Sometimes, they're tailwinds. And when we give our guidance, we always try to carve that out to explain it, not just to say, "Here's the core, everything we have before the acquisition and then whatever the effects are of the acquisitions going forward." When I look at the margin expansion, we laid out at the Analyst Day roughly 50 basis points of margin expansion in the -- on average over the 3-year model is what was assumed in the base view. And along with that, we had assumptions on capital deployment assumptions on tax rate and so forth. And we've made some interesting decisions, right? What we want to do is always deliver excellent adjusted EPS growth and manage the business in the best possible way. When I look at the end market outlook, I feel very good about the growth prospects. And because we had very good opportunity to refinance our balance sheet during the course of Q3, and because our team was able to identify additional tax planning opportunities, we have very strong EPS growth set up for 2020. And we made a conscious decision to actually reinvest some of those savings, still deliver the same EPS growth, but come out with a basically 30 basis points of margin expansion relative to the 55 that we had explained at Analyst Day, a conscious choice, and Stephen laid out the details. Part of it was trading some short-term margins in our PCT franchise for a decade-long extension of the relationships, which is a great economic deal for the company. And the second was we made the decision because of the talent of our hourly workforce in the U.S. to reinvest additional funds in wage increases and to mitigate the increases in health care cost to that part of our population. And so we're taking a slower rate of margin expansion this year. And then I would expect that margins would be right back where the model was in 2021 and beyond. EPS, no factor one way or the other, just based on the other things that I just articulated. -------------------------------------------------------------------------------- Stephen Williamson, Thermo Fisher Scientific Inc. - Senior VP & CFO [14] -------------------------------------------------------------------------------- And Derik, just one thing to clarify the comment about the divestiture -- the acquisition and the divestiture impact our margins and on gross margin. That 60 basis points is much, much smaller impact than Q4 on the bottom line in terms of our adjusted operating income. It's kind of -- the gross margin profile of the acquisitions and the divestitures is really what's caused the dynamic there. -------------------------------------------------------------------------------- Derik De Bruin, BofA Merrill Lynch, Research Division - MD of Equity Research [15] -------------------------------------------------------------------------------- And so how should we think about that gross margin target for 2020 since the 3 seems to be all over the place on a quarterly basis? -------------------------------------------------------------------------------- Stephen Williamson, Thermo Fisher Scientific Inc. - Senior VP & CFO [16] -------------------------------------------------------------------------------- Yes. So obviously, it will depend on the mix of actual revenues that comes in. But I think most of the margin expansion next year will be coming from leverage of SG&A, and roughly flat gross margins is probably a good selling point to think about for the year, those 30 basis points. -------------------------------------------------------------------------------- Derik De Bruin, BofA Merrill Lynch, Research Division - MD of Equity Research [17] -------------------------------------------------------------------------------- Okay. Good. I got another follow-up. So it's been a long time since we've -- I've really thought about thinking about NGS and Thermo. I hadn't really thought about Ion Torrent. You closed the Life deal. And so you've been investing more and doing more of that. I guess, can you sort of talk about where you're going for? And would you be interested in getting more into the research space versus the clinical space? I mean, there are some assets out there that are being kicked to the sidelines. I'm just sort of curious in terms of what your general plan is in that market and sort of like how you see that competitive dynamic shaking out given your very large competitors' footprint there. -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [18] -------------------------------------------------------------------------------- Yes. So Derik, thanks for the question. In terms of NGS, we have been very focused since 2014 on maximizing the impact of our NGS business. And we really have focused it on the oncology market. And you've seen, over the last 5 years or so, a steady stream of product launches that really have a benefit for clinical researchers and ultimately patients. And our technology uses less DNA sample to get a read relative to the alternatives on the market, and the ease of use is outstanding. And the Genexus platform, which we launched at AMP in November is being very well received in the market with incredible customer interest because you can change the way you think about how you treat a patient, which is as opposed to sending out a sample and getting a result 2 to 3 weeks later with an answer, you can come into work the next day and have your sequence completed. And an oncologist then can make a decision based on the information. That's what Genexus is all about. In terms of extending to other markets, our focus right now is really on oncology and some other applications within -- where our NGS platform is outstanding, and that's where we kept our focus. -------------------------------------------------------------------------------- Derik De Bruin, BofA Merrill Lynch, Research Division - MD of Equity Research [19] -------------------------------------------------------------------------------- And you signed an agreement with LabCorp in that market. And I'm just wondering, could -- any idea -- can you give us some idea on sort of what sort of volume LabCorp does in the sort of the NGS space? -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [20] -------------------------------------------------------------------------------- I mean, LabCorp obviously runs a huge number of NGS tests across their network. And I thought it was super exciting that roughly been 6 weeks of launch that they wanted to actually announce to the world their excitement about Genexus and using us to have that within their network. So I think that's a great opportunity. And the specifics, obviously, we're not going to get into, but it's a really nice win for both companies. -------------------------------------------------------------------------------- Derik De Bruin, BofA Merrill Lynch, Research Division - MD of Equity Research [21] -------------------------------------------------------------------------------- And if I can squeeze in one more from a client. One investor wants to know what Thermo's exposure is in the Chinese hospital settings since obviously that's -- people are not going there. Just any idea on which how your business sort of breaks down in China on that regard in diagnostics. -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [22] -------------------------------------------------------------------------------- Yes. If you think about the health care and diagnostics globally, it's 20% of our revenue, but in China, it is actually less penetrated. So it's less than 20% of the Chinese revenue is going to be in the health care and diagnostics setting. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- Our next question comes from the line of Doug Schenkel from Cowen. -------------------------------------------------------------------------------- Doug Schenkel, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [24] -------------------------------------------------------------------------------- I'd like to start by going back to the slower-than-expected release of budget funding for capital equipment investment in China. Could you just provide a little more detail on which end markets? Have you recaptured that revenue in Q1 already? Or do you have visibility on recapturing that revenue soon? And how are you treating this dynamic in guidance? So let me pause there, and then we can go to the second topic. -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [25] -------------------------------------------------------------------------------- Yes. So Doug, thanks. In terms of the release of funds, 100% driven in government controlled-type entities. So we saw it in certain academic and government customers and in certain parts of the industrial market where they're Chinese state-owned enterprises, right? So a semiconductor fab that's owned by the Chinese government would be an example of an industrial and applied tech customer. In terms of the timing or assumption is that, that will work its way through during the course of the year, but we didn't assume that it would be immediately in the first quarter is the way I would think about it. In our guidance, what we've assumed for China is low double-digit growth is what we assumed in our full year guidance for China. -------------------------------------------------------------------------------- Doug Schenkel, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [26] -------------------------------------------------------------------------------- Okay. And it's a good segue to the second thing I wanted to unpack a little bit more, which is indeed guidance. So your first -- your initial organic revenue growth target of 5% for the year is on the lower end of your long-term 5% to 7% target that you outlined at the Analyst Day over the summer. Given seemingly strong end market conditions and a lot of the momentum you've had for a little while now, is this just beginning of the year conservatism? Or is this just kind of what you'd expect in terms of a trend towards normalizing towards the mean after a couple of really strong years? And then I guess, just to layer in one more element to the question, and I apologize if I've missed this in your prepared remarks, but could you just share what your assumptions for growth are in terms of what you built into 2020 revenue growth guidance by end market and geography? -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [27] -------------------------------------------------------------------------------- So first of all, thanks for the question on guidance. I'm super excited about 2020. I mean, that is if you're going to take away the takeaway. So let me put them in context. The last 3 years, '17, '18 and '19, have been very strong in our end markets and very strong performance of Thermo Fisher relative to those end markets as well. 2020, we expect to be exactly the same thing, another year of good end markets and share gain performance for the company. So we're expecting growth to be in line with the long-term model or consistent with that 5% to 7% organic growth. We're initiating with 5% because the way we think about the world is every year, there's some level of risk and every quarter that those risks don't materialize for our industry, they get retired and it gives you the opportunity to raise guidance as you go through the year. As a reminder, we started out with 5% guidance in '19. We always were aspiring to deliver the best possible results. I feel great about the 6% that we delivered, and our posture here is the same. We're starting out with -- in the range that we said we would do with the goal as the year unfolds to be able to continue to move higher and higher in that 5% to 7% range. So hopefully, that gives you a sense. And then a little bit of commentary on some of the details on the growth around that. You're going to have pharma and biotech with high single-digit growth. You're going to see mid-single-digit growth in the health care and diagnostics, low single digit in academic, government and industrial applied end markets would -- will give you the drivers of where our growth is going to come from. -------------------------------------------------------------------------------- Operator [28] -------------------------------------------------------------------------------- Our next question comes from the line of Vijay Kumar from Evercore ISI. -------------------------------------------------------------------------------- Vijay Muniyappa Kumar, Evercore ISI Institutional Equities, Research Division - MD [29] -------------------------------------------------------------------------------- Just on the Q1 commentary on the guidance here. Think I heard you say couple of hundred basis points below the year. I'm just curious on was there any days impact or I'm not sure what drives that Q1 below trend. -------------------------------------------------------------------------------- Stephen Williamson, Thermo Fisher Scientific Inc. - Senior VP & CFO [30] -------------------------------------------------------------------------------- Yes, Vijay. So the one less selling day in Q1, that's just under 1 point of headwind from that. And then it's really the comps from the Analytical Instruments business, particularly electron microscopy. Those will be the driver -- yes, the piece to it. -------------------------------------------------------------------------------- Vijay Muniyappa Kumar, Evercore ISI Institutional Equities, Research Division - MD [31] -------------------------------------------------------------------------------- Got you. Then Marc, one big picture question for you. Looking at the cash flow assumptions here, $4.5 billion free cash. You have $2 billion plus existing, but the share repo is just $1.5 billion. That's a significant amount of cash for Thermo. It's been an unusual year for Thermo from a cap deployment perspective. Any thoughts on sort of how the M&A funnel is looking -- shaping up to be and thoughts on the cash burn on the balance sheet? -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [32] -------------------------------------------------------------------------------- Yes. So Vijay, thanks for the question. So from a capital deployment perspective, looking back and then looking forward, last year played out well from my perspective, which was we set out the very beginning of the year the goal of finishing the strengthening of the balance sheet from the very active period we had before that. So we did some delevering, some refinancing. We returned $1.8 billion of capital to our shareholders through buybacks and dividends. We deployed $1.8 billion in terms of M&A. And as we -- and we generated the cash flow. So as I look to this year, we obviously have a very strong balance sheet. We have a significant amount of capacity. We continue to have a very active M&A pipeline. And as you know, we operate in a very fragmented industry. So plenty of things that we look at. And we'll only pursue things that we feel are aligned with our strategy and create shareholder value. Our return assumption is basically $1.5 billion in buybacks, about $350 million in dividends, which means that what's not on our EPS numbers is just additional deployment of capital, whether it's return or buybacks -- return or M&A or a combination of the 2 beyond that. And that's the convention that we've always used, which is as the year unfolds, we'll see what the best opportunity is for our shareholders. And we'll deploy most likely in some way and then we'll update you on the impacts to our EPS guidance based on whatever decisions we make as the year unfolds. -------------------------------------------------------------------------------- Operator [33] -------------------------------------------------------------------------------- Our next question comes from the line of Steve Beuchaw from Wolfe Research. -------------------------------------------------------------------------------- Stephen Christopher Beuchaw, Wolfe Research, LLC - Director of Equity Research [34] -------------------------------------------------------------------------------- First, I wanted to drill in just a bit on broader biopharma, and maybe a 2-parter. I wonder if you could give us a sense for around the 4Q and year-end, how you saw hardware purchasing dynamics in pharma, specifically relative to the last 2, 3 years. And then prospectively, for pharma in '20, how do you imagine the hardware component of the pharma growth outlook looks like, whether it's in research settings or in bioprocess? And then I have one much simpler follow-up. -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [35] -------------------------------------------------------------------------------- So Steve, thanks for the question. When I think about the pharma and biotech performance, really a fantastic year for the company, continuing the trend of many fantastic years. For the year, we had double-digit growth. And when I look at the performance, it was really across the entire portfolio. We saw strength in bioproduction, biosciences, pharma services, analytical instruments in the research and safety market channel. If I left something out, it's not deliberately, and it's due to the sense of broad-based strength across the portfolio. We had a good quarter and a good year in capital equipment to the biotech and pharmaceutical spending. So no change in trajectory there. And we're starting out with a high single-digit growth guidance for pharma and biotech as the initial starting point. So we're expecting strong performance. And if you go back over the last few years, we had historically started out with mid-single to high single-digit growth, and we feel comfortable starting out with high single-digit growth based on the momentum we have in the portfolio. So that's how I would think about it. Nothing particular on capital. We -- I don't really track year-end spend by subsegment so much. I think about year-end spends that are more across the portfolio. And we saw last year playing out in line with our guidance that we had all year, which was a normal year-end spend with some customers having very strong year-end money but others, kind of business as usual, and that kind of averages out in the long run. As a reminder, the previous 2 years were very strong year-end spends. And from recollection, I think '16 was a below-average year in spend. And so it varies, but it took -- it played out last year in line with our guidance. -------------------------------------------------------------------------------- Stephen Christopher Beuchaw, Wolfe Research, LLC - Director of Equity Research [36] -------------------------------------------------------------------------------- Okay. Much appreciated. And then just a couple of fine points. Within the broader pharma outlook, it's safe to say we can hold up double-digit growth in bioprocess, just as a follow-up to that prior. And then I wonder if you could speak to how things played out over the course of 2019 and how you're thinking about 2020 as it relates to, at the corporate level, price increases year-on-year. And then going into the year, given some of the broader trade dynamics, there was an initiative to look at accelerated pricing. How did that play out? And are we back to normal in 2020? -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [37] -------------------------------------------------------------------------------- Yes. So I'll take biologics and then Stephen will cover the pricing. On bioprocess, we had very strong growth. A couple of companies have reported prior to us, and we continue to perform a little north of the levels that others have performed there. -------------------------------------------------------------------------------- Stephen Williamson, Thermo Fisher Scientific Inc. - Senior VP & CFO [38] -------------------------------------------------------------------------------- Yes. And pricing played out as we had expected in the year, so a good year for pricing, over 1% of price overall offsetting, in fact, the tariffs. So that was really the goal there. And going forward, I generally project kind of just -- like between 0.5% and 1% price as we think about the company's performance in 2020. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- Okay. Our final question will come from the line of Dan Arias from Stifel. -------------------------------------------------------------------------------- Daniel Anthony Arias, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [40] -------------------------------------------------------------------------------- Stephen, on Brammer, just to follow up on the margins there. Can you just touch on the impact of that business on overall margins over time? I think that goes from dilutive to accretive at some point, but I was just hoping you could confirm that. But then also just clarify the timing around that if that is true. -------------------------------------------------------------------------------- Stephen Williamson, Thermo Fisher Scientific Inc. - Senior VP & CFO [41] -------------------------------------------------------------------------------- Yes. Just on the Brammer margins, we expect it to be just under the company average for the full year 2020. So we'd be getting it up to the decent level at the end of the year. So think about going into 2021, that's right at that pace. -------------------------------------------------------------------------------- Daniel Anthony Arias, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [42] -------------------------------------------------------------------------------- Okay. And then maybe, Marc, it's -- I'm sure, a little hard to do, but just given how meaningful it seems like it's been for you guys, are you able to quantify what you think share gains have meant for growth over the last year or so? -------------------------------------------------------------------------------- Marc N. Casper, Thermo Fisher Scientific Inc. - CEO, President & Chairman [43] -------------------------------------------------------------------------------- Yes. We had -- if -- we had 6% organic growth for the year. We obviously don't have the benefit of everybody reporting, but that's a very solid performance. And when we compare the pieces relative to others, we expect that our share gain will be better than the 1% in terms of growth. And we'll have good clarity on that in the next week or 2. So another strong year. So Dan, thanks for the question. Let me wrap it up here. So first, thank you. We're pleased to deliver really another excellent year. But we're much more excited about what the opportunities that sit ahead of us. And we look forward to updating you on the course -- over the course of 2020. So thanks for your support of Thermo Fisher Scientific, and look forward to seeing you soon. -------------------------------------------------------------------------------- Operator [44] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.