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00:05 Good afternoon. Thank you for attending today's PerkinElmer First Quarter 2022 Earnings Call. My name is Amber, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end.

00:27 It's now my pleasure to hand the conference over to our host, Steve Willoughby, with PerkinElmer.

01:44 the forward-looking statements made today represent our views as of today. We disclaim any obligation to update these forward-looking statements in the future even if our estimates change, so you should not rely on any of today's forward-looking statements as representing our views as of any date after today.

02:02 During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measures we plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release.

To the extent we use non-GAAP measures during this call that are not reconciled to GAAP, we will provide reconciliations promptly. 02:24 I will now turn it over to our President and Chief Executive Officer, Prahlad Singh.

Prahlad?.

02:30 Thank you, Steve. And good afternoon, everyone. The first quarter of 2022 continued to both challenge and inspire us as we faced varying dynamics across the globe.

I want to start my remarks today by taking a moment to once again acknowledge all of PerkinElmer employees in Poland who have opened their hearts and even their homes to support Ukrainian refugees.

It's been uplifting to see the different ways our teams around the world have been helping during this extremely difficult situation, and we hope for peace to come soon. I also want to highlight and thank my colleagues in China, who have gone to great lengths to continue to deliver for our customers during these extraordinary times.

03:22 Finally, as I reflect on all the events that have shaped this past quarter, I want to also express my gratitude to the team behind the COVID testing lab in Valencia, California, which as we announced a month ago, will be closing later in May as a result of declining COVID cases and the subsequent need for testing.

The team stood up the Valencia lab during the height of the pandemic in a matter of 60-days and ultimately, helped dozens of underserved communities obtain vital COVID testing, processing over 9 million samples from this lab.

I also appreciate the efforts of our colleagues in the UK, who were a part of our COVID testing lab in Wales, which was closed at the end of March.

04:14 While we are thankful that the pandemic is now more under control in parts of the world, it does not seem to be fully going away, as shown by the recent rise in cases in parts of Asia and some parts of Europe, as the new Omicron sub-variant takes hold.

04:34 In the midst of our response to the pandemic, PerkinElmer has also been going through an immense transformation.

As we have entered the new year into what appears to be an evolving and somewhat turbulent operating environment, our teams are continuing to perform at a high level, from the successful integration of our recent portfolio additions to our focus on commercial excellence, to our achievements with new product innovation, all the while against the backdrop of a very dynamic macro environment.

05:11 I think our ability to execute so well under these conditions speaks to what the company has become. Today more than 80% of our revenue comes from life science and diagnostics, up from two-thirds just five years ago, with more than 75% of our revenue now being recurring in nature, compared to only 60% five years ago.

And today more than one-third of our non-COVID revenue is derived from pharma and biotech customers, a figure we expect to continue to grow in the future. This shift to less cyclical, faster growing markets is a proof point of the changes that have already taken place.

06:00 With the transformation of our portfolio has undergone over the last 24-months, the integration and ultimate synergy of these new businesses is paramount. Let me provide you a few examples of how our recent additions are already collaborating with each other and within the broader company overall.

06:20 Our commercial teams are now partnering with each other across our BioLegend, PerkinElmer, and Horizon product portfolios, including unique opportunities at key pharma incubators in North America. Within our lab services organization, we are introducing a new service offering focused on flow cytometry.

In our diagnostics segment over the past few months, our Oxford Immunotec business began selling PerkinElmer JANUS liquid handling instruments, along with cell counting instruments from Nexcelom, as part of its new optimized and automated workflow that is now becoming available to customers.

07:07 Finally, our Oxford business is collaborating with EUROIMMUN by starting to offer its TB test kits in regions where EUROIMMUN has strong existing customer relationships. While our portfolio transformation has been significant, we continue to build on our momentum. And earlier this year, we welcomed SonoVol to the PerkinElmer family.

Although a small overall business today, we've already integrated SonoVol's Vega technology into our in vivo imaging portfolio to offer our customers a first-of-its-kind ultrasound platform.

07:47 The Vega system will enable us to meet growing demand for non-invasive imaging technologies for use in preclinical research and drug development studies of cancer, liver and kidney disease, cardiology and more.

SonoVol's unique ultrasound offering continues to increase the breadth and differentiation of our in vivo imaging offerings and helps ensure we maintain our leading position in this key market.

08:19 From a commercial excellence perspective, life began to show some signs of normalizing during the quarter as we were excited to return in-person to this year's SLAS Conference in Boston, with several of our newly acquired companies co-exhibiting and meeting with customers.

Together, we showcased how our end-to-end life sciences solutions and automated workflows can accelerate scientists' R&D productivity, so customers can get the right therapeutic candidates to market faster.

08:56 Another example is our Power Up 2022 - Battery Summit we held last month in Berlin with key customers and contributors in this fast-evolving market. This two-day summit was in advance of our upcoming Battery Center of Excellence opening in Germany, located in the heart of its electric vehicle manufacturing area outside of Frankfurt.

09:23 From an innovation perspective, we remain very active as all aspects of improving human health didn't start with COVID, especially efforts to get smarter about how we approach research and diagnostics.

For instance, just in the past quarter, EUROIMMUN's test to confirm previous dengue infection has been included in the CDC's recently released pre-vaccination screening algorithm for the Dengvaxia vaccine.

09:55 According to the CDC, about 400 million people are infected with dengue viruses each year, transmitted primarily through the bites of infected mosquitoes. While there is no specific treatment for dengue, in some cases it can be prevented in children and adolescents with Dengvaxia.

Because eligibility for the vaccine requires proof of prior dengue infection, an assay that can measure virus-specific antibodies for dengue like EUROIMMUN's is needed. 10:34 During the quarter, we were also proud to have PerkinElmer Genomics join other leading genomics companies and laboratories to establish the CardioGenomic Testing Alliance.

The group is aimed at raising awareness and utilization of genomic testing in cardiology, which can be a powerful tool to identify those at risk for specific cardiac conditions. 11:02 From a geographic perspective, we continue to actively collaborate with governments around the world to provide critical solutions to advance their healthcare agendas.

I was honored to meet with the Minister of Health and Prevention of the United Arab Emirates in March to discuss the future of PerkinElmer in the region. During my trip, we inaugurated PerkinElmer's first office in Dubai, which has been evolving into an R&D hub for the Middle East in a growing market for diagnostics.

With our new site, PerkinElmer will be able to better serve our customers with an in-country, for-country approach. Additionally, when I was at the Dubai Airport, I had a chance to view our G3 explorer Workstation, which will be used to screen arriving passengers for COVID.

12:00 As we look to the second quarter, the entire organization remains motivated to keep up the momentum from the first few months of the year.

Despite ongoing global unrest, higher inflation and an evolving supply chain, we continue to have both significant incoming demand from customers and resulting backlogs, which we are executing upon as quickly as possible.

12:32 Overall, I remain quite optimistic as PerkinElmer has proven we can navigate through pandemics, cyclical headwinds and now world crisis, while continuing to execute on our plans, delivering for our customers and emerging as a stronger company.

Our performance during the first quarter was a testament to this, as we grew our non-COVID revenues organically by 11% year-over-year and generated $2.41 in adjusted EPS, both of which are solidly ahead of our expectations.

13:16 As Jamey will touch on in more detail, due to the strong performance here in Q1, our continued optimism over the remainder of the year, despite some incremental challenges and the net impact on our reported results from our COVID contract in California coming to an end, we are now projecting our 2022 adjusted EPS to be in the range of $7.15 to $7.45.

13:48 I will now turn the call over to Jamey to walk through our financial performance in more detail and provide specifics as it relates to our outlook and updated guidance.

Jamey?.

14:04 Thanks, Prahlad, and good evening, everyone. As Prahlad mentioned, the business maneuvered various obstacles well during the first few months of 2022, which is a continuation of our solid execution over the last two years during this pandemic.

Our internal and external transformation remains on track, and I'm pleased to see both our COVID and non-COVID performance again exceeded our expectations this past quarter. This resilient performance is a testament to the progress we've made and the exceptional efforts and sacrifices of our employees.

14:36 During the first quarter, adjusted revenue declined 4%, compared to last year to $1.26 billion, which included a 2% headwind from foreign exchange and a 10% contribution from recent acquisitions. Organic revenue declined 11% year-over-year, driven by a drop in total COVID revenues.

On a non-COVID basis, our revenue increased 11% organically, which was above the 7% to 9% growth we were looking for coming into the quarter. 15:06 Our total COVID revenues came in at $310 million, which was above our $240 million guidance, as the Omicron spike in January and February proved larger than we had anticipated.

The revenue upside in the quarter, along with solid adjusted operating margins of 32.5%, helped drive our adjusted earnings per share to $2.41, which was also ahead of our expectations. Driven by the strong top line and bottom line performance, we again saw a good free cash flow generation totaling $254 million in the quarter.

15:41 As we've previously discussed, our capital deployment this year is focused on deleveraging, which we executed on in the quarter and expect to continue to do so over the remainder of the year. We ended the quarter with a leverage ratio of 2.3 times net debt-to-EBITDA, which is up slightly from the 2.2 times it stood at year end.

16:02 I'd now like to provide some additional color on the performance of the business during the quarter, before wrapping up with some updated thoughts on the environment we are currently operating in and our outlook for the remainder of the year.

Starting with our Discovery & Analytical Solutions segment, which generated $602 million of revenue in the quarter, this was up 33% year-over-year and represented 48% of our total revenue. Organically, the segment grew 12%, with sales to pharma biotech customers leading the way and growing in the upper-teens organically.

16:36 The strong growth we saw in pharma was driven by continued robust demand in our preclinical discovery business and strength in our informatics franchise. Its unique SaaS-based Signals Research Suite is a market-leading scientific data management and workflow platform used by tens of thousands of users worldwide.

16:56 Sales to applied market customers grew in the low-double digits organically, while revenue declined in the high single-digits organically to academic and government customers, who represent approximately 5% of our total revenue. 17:10 Turning to Diagnostics.

The segment generated $657 million of revenue in the quarter, which was down 23% year-over-year and represented 52% of our total revenue. Organically, this segment declined 24%; while on a non-COVID basis, our Diagnostics business grew 10% organically.

As previously mentioned, COVID-related revenues totaled $310 million, down slightly from Q4 levels and down from $550 million a year ago.

17:40 Our Applied Genomics business, which consists of various instruments, kits and other consumables for NGS sample prep, continues to post excellent performance, growing more than 20% organically year-over-year on a non-COVID basis in the quarter.

While we are very pleased with the continued strong performance, we still expect its growth rate to moderate over the remainder of the year. 18:05 In our Immunodiagnostics franchise, we did see some incremental headwinds from lockdowns in various regions throughout the quarter, which became more pronounced in China as the quarter progressed.

However, despite these headwinds, the segment was still able to post mid single-digit non-COVID organic growth in the quarter, with EUROIMMUN growing in the high-single digits ex-COVID.

18:27 Our Reproductive Health franchise grew in the high single-digits on a non-COVID basis in the quarter, as the positive inflection in birth rate trends we saw in the US and parts of Europe in the fourth quarter appear to have continued so far this year.

For example, we believe births in the US were up in the 4% range year-over-year in the first quarter. The business also continues to benefit from continued geographic and menu expansions, the contribution from new product introductions and a relatively small, but growing contribution from our Vanadis NIPT offering.

19:00 From a geographic perspective, our 11% non-COVID growth in the quarter was led by the Americas, which grew in the upper-teens, while Europe was up in the high single-digits.

Asia-Pacific and China were both up high single-digits despite lockdown-related pressure on our diagnostics franchise, due to the strong growth from pharma biotech customers. 19:21 Now moving on to the current view of the world and its impact for the remainder of the year.

As you saw with the 11% non-COVID organic growth we posted here in 1Q, the demand environment continues to look very healthy, while supply chain and lockdown pressures persist.

As a result, our overall backlog entering 2Q increased slightly, as compared to where it started at the beginning of the year, so that for the full-year, we are reiterating our full-year non-COVID organic growth outlook of 68% even with the number of various uncertainties that exist in the world today.

19:57 As you saw in the 8-K we filed in April, the State of California provided us notice at the end of March that it decided to end our COVID lab testing contract within the 45 days stipulated by the terms of our agreement. Consequently, as of the middle of this month, the lab will be closed and the contract will be over.

Because of the accounting treatment related to the upfront milestone payments we received when opening the lab, all of the roughly $100 million of deferred revenue we have related to this contract will be recognized in 2Q.

20:27 Along with the associated cost of closing the lab and a 1% higher effective tax rate for the year as a result of greater COVID revenue and income, we estimate the net impact to contribute approximately $0.35 of earnings per share in the second quarter, which will be included in our updated revenue and earnings guidance I will share with you shortly.

For your modeling purposes, our much smaller COVID lab in the UK was also closed at the end of March. 20:54 So as we look ahead, while COVID cases have increased in some markets recently, such as China, testing has dropped significantly over the past few months in most other areas.

After generating $310 million of COVID revenue in 1Q, we are now looking for $570 million of total COVID revenue this year, which includes the non-cash deferred revenue related to the California contract being fully recognized.

With an expected 7% contribution from M&A and a 2% headwind from foreign exchange, we are now forecasting our total reported revenue this year to be in the range of $4.56 billion to $4.63 billion.

21:35 In terms of adjusted earnings per share this year, we are increasing our guidance to a new range of $7.15 to $7.45, which includes the favorable impact from the California-related deferred revenue being fully recognized, as well as our Q1 outperformance.

And for the second quarter, we are projecting total revenue to be in the range of $1.20 billion to $1.22 billion, which consists of non-COVID organic growth of 4% to 6%, an M&A contribution of 10%, a 3% headwind from foreign exchange and approximately $210 million of total COVID revenues inclusive of the deferred revenue being fully recognized.

22:16 In terms of adjusted earnings per share guidance for the quarter, we are forecasting to be in a range of $2 to $2.05. All of this guidance is detailed on the second to last page of today's presentation that is on our investor website.

22:30 In closing, I'm proud to see how our team is responding and continuing to deliver on the very strong demand we are experiencing from our customers.

I know I've made the comment before, but it is really amazing to see the rapid transformation that has occurred at the company over the last two to three years, both internally and externally, which I feel has positioned us extremely well going forward. 22:53 With that, operator, at this time we would like to open up the call to questions..

22:59 Yes, thank you. Our first question comes from Vijay Kumar with Evercore. Vijay, your line is now open..

23:34 Hey, guys. Congrats on Q1, and thanks for taking my question. Jamey or Prahlad, maybe one on the guidance here, a lot of inbounds here on -- with the base guidance change.

I guess the question I'm getting is you guys said 11% on base and the annual of 68% was unchanged, right? So I guess the implied 2Q to 4Q organic is perhaps coming in a little bit lower versus prior guide.

24:05 So the question is, was there any pull-forward of revenues into Q1 in the base of 11%? What is the guidance here I mean for China lockdown impacts in 2Q, and I'm assuming given it's diagnostics, those are lost revenues, right? So maybe talk about the base business and what is perhaps some impact from China..

24:29 Yes. Thanks, Vijay. So we are not changing our overall non-COVID core organic growth guidance of 6% to 8%. Yes, we beat the first quarter, the team is executing extremely well. I think I mentioned in my prepared remarks that the demand looks great, our backlog continues to rise.

So I think it's basically just a little conservatism, the first quarter is always the lightest from a revenue perspective. But the outlook looks strong, and I think we are poised to at least deliver the 6% to 8%, but I thought it was a little too soon this early in the year to raise the overall organic growth guidance.

25:04 As you know, there's a lot of geopolitical and macroeconomic pressures out there. You mentioned China as an example. So I don't think we'll lose the testing. Not a lot of this was due to reproductive health, Vijay. I think most of it is due to EUROIMMUN and the autoimmune testing, which just gets pushed out a little bit.

So it might be pushed out of the year, but not necessarily pushed out because some day they will need testing.

25:28 So what we've baked into our guidance for the second quarter is that the operating environment that we saw at the end of the first quarter for most of the month of March continues through mostly May and returns to normal at start of June.

So overall, we still feel very confident that 6% to 8% is probably a little conservatism, but it's still early in the year. And things are operating well, the team is doing a great job..

25:51 Yes. And, Vijay, just to add to that also. Just in keep in mind that despite all the lockdowns, our facility in Shanghai, or in Suzhou, has not fully closed. We've been working with authorities to continue to manufacture and ship product out of there. So as Jamey mentioned, the impact has not been on reproductive health.

It has obviously been on immunodiagnostics, but we think that will come back. But I think more importantly, let's keep in mind that for us, the company's portfolio is very different today. Again, going back to as I said in my remarks, 80% is life sciences and diagnostics.

And life sciences there continues to do well, which is now two-thirds of DAS revenue. 26:31 So overall, I think China will come back, assuming -- our assumption is that at the end of May, the lockdowns will open up and I think we should be okay. But it's just being prudent, and this is no different than what we have done in the previous quarters..

26:50 That's helpful perspective, Prahlad and Jamey. Maybe, Prahlad, one for you.

Back at -- earlier in the year at JP, I think you pointed to your fiscal '23 earnings being north of $7, right? If I look at the annual guidance or your current guidance of $7.45 at the high-end and I back out the Q1 and 2Q EPS guide, I think the back half 3Q and 4Q which annualizes to about $6, right? So are we -- maybe can you just talk about fiscal '23 and your confidence in the earnings projection that you laid out earlier in the year?.

27:31 Yes, I think the way, Vijay, I would answer is that our confidence in what we've done and the hard work that -- and the time that we've put over the past several quarters in the transformation of the portfolio has not changed at all.

So while obviously the market environment is changing, but here's what I would say, could not be more bullish on the company's outlook. A ton of work has gone into transforming our portfolio. I mean, just look at what we've done with life sciences. We will have a $700 million-plus of just reagent business which will be growing in the low to mid-teens.

So the way I would answer the question is that I think we are very well positioned to deal with whatever market conditions are thrown our way and have shown our ability to execute over the past couple of years, and nothing changes from that perspective..

28:26 I'm sorry.

And so there is no change from the prior -- the $7-plus earnings outlook for fiscal '23, correct?.

28:35 Yes, as I said, right? Given the market conditions, we are i.e., there is absolutely, as of this point, no change in applied processes towards that number..

28:47 Okay. Thanks, guys..

28:50 Thank you..

28:54 Thank you, Vijay. Our next question comes from Derik De Bruin with Bank of America. Derik, your line is now open..

29:06 Great, thanks. This is Mike Ryskin on for Derik. I want to start on the M&A contribution. Appreciate your color in the beginning of the prepared remarks, Prahlad, on some of the synergies and from the benefits you're seeing from bringing these businesses together.

But you did initially point to, I think, 11% M&A in the quarter and also if you're going to blow wide with that. Can you sort of break down some of the various points there? I know there's a lot of deals that are still in the quarter.

So could you talk specifically how BioLegend did versus some of the other pieces, whether it was Oxford or some of the other acquisitions?.

29:48 Sure, Mike. Let me start by saying that overall for 2022, our forecast for our M&A does not change and in fact, would reiterate that. Yes, as you pointed out, 1Q did come a tad below our expectation and it was primarily because of the lockdown impact at BioLegend when Omicron hit in January. So there were two things.

One, the academic customers had shut down for some time and there was some closures also from employee disruption in January at BioLegend. But that was in January and that's gone. And there was some, I guess, impact also at Oxford. So overall, I think for the year rate hasn't changed. It probably has just pushed out from Q1 to Q2 and beyond..

30:41 Okay, thanks. And on the number you printed in DAS, really strong number despite the comps.

Could you talk us through what you're seeing there, what's really driving that trend, and what are your expectations for the rest of the year if you're going to take up your DAS assumption a little bit?.

31:01 Sure. I think the way to start is let's start from life sciences. I think the innovation that we have put in place there is really leading the strong growth and the share gains that we are seeing there.

If you just take a few examples, right, one is our informatics business, leading research SaaS-based workflow and portfolio on the preclinical side with the products that we have launched and on the reagent side. Now bringing in BioLegend is becoming more of a source for us of antibodies has helped the Cisbio and our traditional reagents business.

And also from a market perspective, pharma overall continues to do very well for us and our backlog continues to grow there. 31:43 So I think in DAS particularly, that's the life sciences has been the main growth driver.

And even within applied, we've had several new product introductions that has been a continuing trend as we have all invested organically in our applied portfolio and the results of that have started to show. There's the solid test program, for example, in China, that's going to -- that's demonstrating good traction.

We talked about the Battery Summit that we had, I think, on the outskirts of Berlin. And that has started to show some impact for us. And in food, especially on the safety side, there continues to be strong demand in China.

32:24 So I would say that of the end markets that we talked about, food, applied and life sciences, all of them continue to do well. And in applied, specifically around the semiconductor side and battery, that market is doing well..

32:40 Okay, thank you..

32:43 Yes..

32:45 Thank you, Derik. Our next question comes from Dan Arias with Stifel. Dan, your line is now open..

33:00 Hey, guys. This is Daniel Macek on for Dan Arias. Thanks for the questions. So just starting with EUROIMMUN for the non-COVID portion of the business, you're expecting to get back to double-digit growth this year. I think it was high single-digits in the quarter. So I just want to clarify if China was probably the main issue there.

And then so is what's baked into guidance, is that assuming these lockdowns ease up at the end of May or beginning of June? Thanks..

33:33 Yes. Great question, Daniel. So, yes, if you look at EUROIMMUN, they continue to do extremely well. So China did impact their business, it's a relatively large proportion of their revenue. Outside of China, EUROIMMUN grew in the high-teens across the rest of the geographies.

And so China was probably flat to down low-single, I think, or maybe down 5%. And as we look forward into the second quarter here, we continue to believe that will happen. So I think by the third quarter, I would expect EUROIMMUN overall to get back into the normal high-teens, but the performance of the business outside of China is terrific.

And I think when China opens up again, it will snap back as well like we saw in the past..

34:19 That's very helpful, thanks. And then what's the latest on Vanadis? You mentioned a small contribution in the quarter. So just first, how is utilization within your customer base, how is adoption, and then just what's expected for the year in terms of placements and utilization and revenue contribution. Thanks..

34:39 Sure, Daniel. I mean, let me start by just taking it up and talk about the whole reproductive health segment as we've done in the past. Clearly, our new products are seeing strong uptake with SCID, XLA, SMA, preeclampsia, and I think that's shown in the numbers.

Obviously one of the things that has also helped is the improvement in the bot trends, especially in the US, continues to gain traction. We pointed that out in the fourth quarter and I think even in the first quarter, it was roughly about 4% growth in the bought rates.

And Vanadis is another contributor towards that growth, albeit small, but it continues to sequentially grow and we expect this growth to continue in the future quarters. We are seeing a lot of commercial traction, we continue to refine the system and reagents, and keep looking at adding what are the features we need to do.

So overall, we could not be more happier with the way that NPI is progressing and that it's going as per our plan, if not better, I would say..

35:47 Thanks, guys..

35:49 Yes..

35:50 Thank you..

35:54 Thank you, Dan. Our next question comes from Josh Waldman with Cleveland Research. Josh, your line is now open..

36:06 Hey, thanks for taking my questions. One on margins and then one on recent acquisitions.

Jamey, wonder if you could talk through how you think margins in the non-COVID business performed versus maybe internal expectations in the first quarter, and then maybe how you're thinking about margins within that business for the full-year, any change maybe versus initial plan?.

36:31 No, no change versus initial plan. I think we've always been metering our investments to do organic growth, as well as the COVID side of our business. So as COVID winds down, we'll have to wind down some of our increased investments. But that was always the plan, so I would say no change in our overall approach here.

36:48 So I think we've mentioned in the past, Josh, about it and to the earlier question around the $7, 26% operating profit by 2023. I think right now, as Prahlad said, for the most part there's a lot of -- yes, I would say the environment is involving, but -- or evolving and we still think that we will continue to do well.

So we have a lot of productivity programs, we assume that the growth will still be there as the mix of our business has changed. I think something that is underappreciated is the $700 million life sciences reagents business that we have, that has been growing low-teens and comps at a very high profitability.

37:24 So we feel confident exiting the year, to Vijay's question earlier, in terms of the margin rate. And I think at the end of the year by the fourth quarter, we're probably going to be at that adjusted operating margin for next year.

Now that comes on the highest core quarter, but overall I think it speaks to the fact that we can get there for next year..

37:43 Got it. And then a follow-up on acquisitions. Appreciate the timeline you laid out, but wondered if you could provide some context on how you expect acquisitions from 2021 to contribute to the 6% to 8% organic here in 2022.

And then maybe again kind of back to margins, any context on what the margin profile of that revenue has looked like kind of year-to-date?.

38:10 Yes. So for the overall year, Josh, we were originally saying before acquisitions, we've been a 5% to 7% business, and so that the acquisitions and the effect that they would have on 2022 would be an extra point, which is why we guided 6% to 8% overall.

The majority of that revenue or a big portion of that revenue comes in the fourth quarter when BioLegend kicks in and the growth rate that they have. So that's where you'll see the biggest contribution from an organic growth perspective.

38:38 So I think in the first quarter, with Horizon for the whole year, Oxford starts here in the second quarter, Nexcelom starts in the third quarter, and then IDS here and then BioLegend starts in the fourth quarter. So it will be an increasing contributor through the year, but it's relatively small in the first and second quarter here.

As it pertains to margins, margins continue to look very good, I'd say maybe even better than we anticipated at the outset of the year. BioLegend remains strong, Horizon is doing a good job, Oxford is doing a great job. So things are going well on both the growth and the margin rung for all the acquisitions..

39:15 Got it. Appreciate all the detail..

39:22 Thank you, Josh. Our next question comes from Catherine Schulte with Baird. Catherine, your line is now open..

39:35 Hey, guys. Thanks for the questions. Maybe first for the China lockdown, I believe in the fourth quarter, you had quantified that as a point to a point-and-a-half headwind.

So what was that headwind in the first quarter? And can you quantify what's baked into the second quarter in terms of that 4% to 6% non-COVID organic guide for a lockdown headwind?.

39:55 Sure. Thanks, Catherine. Yes, I thinking in the fourth quarter, we might have said it was 200 basis points to 300 basis points at a company level. So for China specifically, that translates to more like high single-digits to a 10% impact on China. So in the first quarter, we continue to experience the same thing.

I mentioned EUROIMMUN already, so EUROIMMUN was down versus up 17% in China, so that's one impact. There was a lot of shipping issues at the end of the quarter, as well as some of the delays in the logistics of our business. 40:28 So to China specifically, we were up high single-digits.

And I think we had the same impact in the first quarter that we saw in the fourth quarter. And I think we probably would have been up mid-teens to high-teens with that -- excluding those impacts, specifically in China, and are probably a couple of points to the overall organic growth of our company in the first quarter.

As we fast forward to the second quarter, really we think in China down to mid single-digits. So it's a little bit of a longer operating environment that we're assuming here. So China was really impacted primarily in March. We're assuming that will be impacted in April and May.

And so therefore, we've taken high single-digits down to mid single-digits, on top of the fact that overall it's a tougher comp year-over-year from a China growth perspective.

So hopefully, that gives you a bit of color, but it's basically the same that we've been operating in for the last two quarters and it gets a little bit worse in the second quarter here.

41:22 The other thing I'd say, Catherine, just to emphasize is when we initially guided the year, we obviously said high single-digits and then 6% to 8% for the overall year. And we're still keeping the overall 6% to 8%. And specifically for the second quarter, we're really not changing our overall guidance.

So again, I just think it speaks to the portfolio and how we're able to weather the storm of certain issues across the globe..

41:47 Got it. And then you had mentioned in your lab services organization you're adding a new service offering focused on flow cytometry.

Can you just talk a bit more about that offering and how it's additive to what BioLegend was doing?.

42:02 Yes. So this is as it pertains to our enterprise OneSource business, Catherine. And so the team has been working with BioLegend, our enterprise business obviously maintains assets, but it also does a lot of professional services. It does compliance services, it does IT services.

So they work with the BioLegend team to be able to optimize testing in the lab as it pertains to flow cytometry. And I don't know all the details behind it, but when you combine the BioLegend experts and PhDs with our enterprise team, they're basically able to better operate a flow core cytometry lab..

42:41 Got it, thank you..

42:44 Thank you..

42:47 Thank you, Catherine. Our next question comes from Jack Meehan with Nephron Research. Jack, your line is now open..

43:00 Thank you. Good afternoon. Jamey, I was wondering if you could give a breakdown of the $310 million of COVID sales in the quarter, how much came from the lab service operations.

And just the $25 million per quarter in the back half of the year, just walk us through again what your framework is for kind of endemic COVID for PerkinElmer?.

43:23 Sure. Hey, Jack. Yes, so I would say -- I'm rounding here, probably $175 million excluding the lab, so our core COVID revenue, and maybe $135 million of lab revenue, which was pretty much in line with our guidance on the lab side.

And really the upside is on the core product side, largely due to Omicron and how significant January and February were, so we saw a lot more throughput on the core side of the business. The lab side didn't really change very much.

43:52 If you get to the back half, I mean we've noticed a handful of things to make us even more confident in kind of the $25 million per quarter or overall $100 million for the year. I would say one, our extraction beads and the use of chemagen has been terrific.

I think the yield on those is really well-understood in the marketplace and people are ordering those for quite some time or will continue to order them. We've also seen people start to use the instruments and renew them for non-COVID usage.

And so they have extended warranties and they've bought two-year warranty contracts on that, which just tells us they are using -- in addition to maybe some COVID testing, they're willing to pay for it for other types of testing as well. 44:36 But we feel very confident in terms of PCR testing that was never really in too much of the $25 million.

So I think that's upside, but I think from an endemic perspective, there will be some amount of PCR testing for quite some time.

We just don't parse out how much is PCR versus extraction versus the instruments and the consumables, but I would say the PCR was probably a small fraction that's only $25 million good news, but lot more testing in the second half. I think we would share in that upside.

Otherwise, I think we've get just the use of the chemagen and our liquid handling systems..

45:13 That's helpful. And then just a clarification, sorry if I missed this, on BioLegend.

What was the sales contribution in the quarter, and just still feel good about the $308 million target for the year?.

45:28 Yes, we still feel good about the $308 million target for the year, Jack. I think we want to start talking about the entire life sciences reagents business, because I think it's underappreciated.

It makes up almost 30% of the entire DAS business and so in life sciences in total makes up 66% of the entire DAS business, which to the earlier question is why we are so bullish on the changed organic growth rate of our company.

And so I will quote, the life sciences reagents business, inclusive of BioLegend, grew in the low-teens in the first quarter. 46:00 So I don't think we're going to give out, hey, here's exactly what BioLegend is, here's what Cisbio was, and our historical discovery.

I think we want people focused on the big picture that we now have a substantial life sciences reagents business that is growing low-teens and it has a ton of innovation and opportunity when you combine Alpha technology and everything that Cisbio brought, HTRF technology, and now everything that BioLegend has brought, in addition to Horizon Discovery.

So we're quite excited with Bio and it continues to perform well..

46:32 Thanks, Jamey..

46:34 Thanks, Jack..

46:37 Thank you, Jack. Our next question comes from Brandon Couillard with Jefferies. Brandon, your line is now open..

46:48 Hey, thanks. Good afternoon.

Jamey, just an update on where you're thinking about free cash flow conversion for the year, and I think there's $400 million left on the term loan, correct me if I'm wrong, and do you expect to pay that down ratably over the balance of the year?.

47:02 Hey, Brandon. Yes, so yes, maybe I'll start with the second part. So we are actively and aggressively delevering. The term loan was $500 million at the outset of the year, we paid down $100 million in the first quarter. I think we should be able to get that off the balance sheet by end of July/August timeframe here.

We certainly have the cash across the globe, you're very familiar with our balance sheet, so you can see that we have a substantial amount of cash. Making it -- dividending it back to the U.S. in a tax-efficient way is what we are focused on. So it takes a little bit of time to repatriating it.

But just the general free cash flow that we're also kicking off, we kicked off $250 million in the quarter. So therefore, we can use $100 million to paydown the term loan. So anyways, I think it will be done relatively soon.

47:44 In terms of free cash flow, you know this better than most people, 83% free cash flow conversion in the first quarter is one of the best quarters we've had in a long history. So if you go back to the pre-COVID days, we were sometimes in the negative range. And so we've focused a lot on free cash flow conversion.

We've always said -- we said we'd be above 85% or 85% to 90% in the past. BioLegend only helps that, and I would say there is nothing really to come off that. The only thing that will impact free cash flow is this deferred revenue and the fact that it won't -- it is mostly -- it's all non-cash.

So instead of 85% to 90%, I would think 80% to 85% for the year and we still feel very confident in achieving that..

48:29 Okay.

And then any more color you can help us with as far as gross margins in the back half of the year once COVID testing sort of normalizes at the endemic steady state?.

48:39 Yes. So as COVID rolls off, and we always knew this day was coming, I would expect gross margins to settle in the mid '50s, so call it 55%. And as I mentioned in my prior response, I think operating profit will be low 24% for the second half and we might even exit in the 25% to 26% range.

So I think we're really going to be monitoring the investments as COVID rolls off. But again if COVID is better than we anticipated, we might choose to continue to invest. But overall, we're still laser-focused on the 26% for 2023..

49:17 Got it, thank you..

49:21 Thank you, Brandon. Our next question comes from Rachel Vatnsdal with JPMorgan. Rachel, your line is now open..

49:35 Great, thanks for taking the question.

So could you just spend a minute talking about pricing? I know that you've started taking up prices in the back half of last year in light of all the inflation that we've been seeing, so can you walk us through how much pricing is expected to contribute this year? And then have you faced any pushback from your customers on any of these pricing increases at all so far?.

49:54 Yes. Thanks, Rachel. So yes, we in the past have historically said -- what we've said is we've seen about 50 basis points to 100 basis points in the year, and we've said that we think that might be able to double.

And as you might remember in the first quarter, we saw kind of the average rate, maybe a little bit above that, because we knew we were working off a substantial backlog from the fourth quarter.

As we look at the order book that will -- that transpired and what was taken in the first quarter, which will start flowing through in the second quarter, there is a substantial amount -- a significant amount more of price in the second quarter. And we think that will continue to increase throughout the year.

50:31 So it takes a little time to get through to customers to understand, then get it through the entire salesforce. But I think what might have been 50 to 75 increase is probably 50 basis points every single quarter.

So that by the end of the year, we might be in the kind of 100 to 200 range, or 150 to 200 range, and feel very good about how the team is responding..

50:53 Great, thanks. And then my last question is about the supply chain. So last quarter, you highlighted about 300 to 400 basis points headwinds between supply chain and lockdown pressures.

So specifically, how meaningful is that supply chain headwind in 1Q, and then what's baked into the guidance for supply chain and logistics constraints for the rest of the year?.

51:12 Yes, I think it's -- Rachel, similar to my response on China, it's just kind of the new norm. It hasn't gotten better, it hasn't gotten worse. So the 300 to 400 basis points to the fourth quarter probably is a similar number than we experienced in the first quarter, so it didn't get any better, it didn't get any worse.

As we head into the second quarter, I don't think supply chain gets better -- or gets worse. We did say China is down a little bit. But overall, I think we're kind of living in the new norm and I think the team is navigating it well.

And so therefore, it's not really worth calling out because it's kind of been there for at least two quarters now, and we believe will continue to remain for the rest of the year..

52:02 Thank you, Rachel. Our next question comes from Paul Knight with KeyBanc. Paul, your line is now open..

52:16 Thanks. Jamey, I didn't quite catch the color on California.

That was $125 million or $100 million?.

$100 million to the second quarter -- sorry, yes, maybe try to clarify that because we tossed out a couple numbers in Jack's question there. So Jack had asked how much of it was the labs as it pertains to the first quarter? Well, how much was the labs portion in through the $310 million.

Total labs, including the UK lab, was about $135 million, which is not too far from our original guidance. In the second quarter, the extra deferred revenue that we will be amortizing is $100 million above our previous guidance.

52:58 So California to the second quarter will be more like $150 million overall, which is $100 million more, and that's purely a result of the amortizing that deferred revenue. We already had $50 million in our guidance, thereabouts, so hopefully that tries to clarify. Essentially, we're not coming off the original guidance.

The original guidance was $110 million for the second quarter, we're just adding the extra $100 million of deferred revenue..

53:23 Got it, okay.

And that's how you get to that $0.35 of contribution in Q2?.

53:31 That's right. There are other costs associated with decommissioning the overall lab and taking out the equipment and that kind of thing, but including the extra COVID revenue that we have that increases our overall tax rate for the year, when you put that all together, that's $0.35 to the second quarter and the overall year..

53:51 Great, and then overall tax for the year?.

53:54 21 -- 21, 7 yes..

53:57 Okay, thank you..

54:04 Operator, maybe just one more question..

54:08 Of course. Our next question comes from Patrick Donnelly with Citi. Patrick, your line is now open..

54:20 Hey, guys. Appreciate you squeezing me in there. Jamey, just maybe one on the EPS guide. I was hoping for a bridge. I mean, you guys, I think you raised by about $0.40, beat 1Q by $0.30, the California contracts and other $0.35. So by math, 2Q through 4Q guidance came down by $0.25.

I'm sure part of that is FX, but was hoping just for a bridge, if you had it, in terms of the EPS guide from last quarter to this..

54:47 Yes. You're in the ballpark there, Patrick. So again, we believe the team did an outstanding job executing in the first quarter and continues to execute well in a turbulent environment. To give you the bridge, yes, we beat the first quarter -- I'll take the high end. We took -- the high end, we beat by $0.31.

You've got the extra $0.35 for California, which I just described. So we're basically not flowing through $0.20. That's primarily three things. For the most part, it's foreign exchange, I think you've heard that with all of our peers as well.

And then the inflation and freight environment is a little bit tricky right now, so we put in a little of extra costs. I think as I mentioned, pricing is going well, the team continues to execute. We're doing a lot to offset increased freight cost in terms of different routes, different providers, different packaging, frankly.

55:38 But I think right now, it's early. There is a lot of macroeconomic uncertainty out there, Patrick. So we felt like we wanted to flow through $0.10 on the high end because we wanted to increase the guidance by something that we are very confident as always in at least meeting if not beating..

55:55 Yes, that's helpful. And then maybe one on China, you obviously talked a lot about it with 1Q and 2Q.

Can you just remind us, first of all, how much of the China revenue is in the diagnostics world, and then how do you think about the recovery? A lot of the companies, a lot of your peers have said instruments will probably snap back fast, consumables service, maybe that's a little more lost than recovered.

How are you guys thinking about that? And then again would love to just talk through your split there in China..

56:21 Yes. So I'll just talk non-COVID, Patrick, COVID just sort of So non-COVID, I think that's what we're trying to portray that it is different. I mean, if you go back two or three years ago, we used to say China diagnostics was 60% of the business and DAS was more like 40%, which was the inverse of the total makeup of the company.

If you fast forward to this past quarter, DAS is now 55% of overall China and diagnostics is 45%. And life sciences is about 30% of overall China. 56:58 And I think that's where all these investments in terms of BioLegend, Nexcelom, Horizon, et cetera, have really change the game for us in China.

So even though life sciences has always grown very well there for us, and this past quarter it grew over 20%, it's now a much bigger piece of the pie, which I think then changes the trajectory of the growth rate for us in China.

57:19 Applied continued to do well in a kind of tricky environment, I mentioned all the supply chain issues at the end of the quarter, and everybody knows about the chip issues that all of us are experiencing. They still grew mid single-digits. So DAS is probably 50-50 life sciences and applied markets, and then the rest is diagnostics, call it 45%.

You know diagnostics is two-thirds of that and it's mostly EUROIMMUN, and I've already hit that. But overall, China diagnostics at a company level, or immunodiagnostics at a company level is less than 5% of the revenue of the company. So while it has been impacted, overall it grew low single-digits in the first quarter.

And I think we're weathering the storm pretty well and quite excited about the future of China for us, particularly with the greater life sciences business..

58:03 I mean, even within diagnostics, the applied genomics business continues to do very well there. So I think once the lockdowns open up and we get back to normal double-digit growth, that's on the upside..

58:17 Great. Thanks, Prahlad and --.

58:18 Operator, we have a few extra minutes. So if there are any other questions, we'd be happy to take them..

58:26 Of course. Our next question comes from Matt Sykes with Goldman Sachs. Matt, your line is now open..

58:37 Thank you. Good afternoon, Jamey and Prahlad and Steve. Appreciate you squeezing me, and I just have one quick one. Prahlad, you talked a lot about life sciences becoming such a large portion of DAS and it's a great story.

And I'm just also looking at the growth rate you guys put up in your industrial environmental and food within that, which is still strong and there seems to be some secular tailwinds driving some of that.

As you allocate internal resources within the company and you think about DAS, how are you thinking about sort of that life sciences split between the other divisions within DAS in terms of allocating capital and growth initiatives?.

59:16 Yes. I think the way we've talked about, Matt, and especially as we look at our overall allocation both organically and inorganically, over the past several quarters, we've continued to make organic investments disproportionately on the applied side of the business.

And if you look at the inorganic trend over the last 18-months, I would say a dominant if not a majority of our acquisitions has been on the life sciences side of the business.

But consequently, the thing is also in this case for applied, the end markets where we have a strong position, whether it's or inorganic and especially with semiconductors on batteries with our ICP-MS portfolio or IR portfolio, those end markets are doing very well and we are seeing the benefits of that.

60:01 But I think again going back to what I've been mention -- Jamey has been saying, the DAS business now is two-thirds life sciences. For us what becomes important is what might be a $700 million business this year and end up being an $800 million business life sciences reagents business that's growing in the low-to-mid teens.

And I think that is going to be the growth drivers for not just DAS, but for the company. And I think that's what we feel very good and confident about the assets that we've put in place for that..

60:37 Great. Appreciate you squeezing me, thank you..

60:40 Yes..

60:44 Thank you, Matt. There are no further questions, so I'll turn the conference back over to our management team for any closing remarks..

60:52 Thank you, Amber. And thank you, everyone, for your time and questions this evening, and we look forward to speaking with you all again next quarter. Have a good night..

61:07 That concludes today's PerkinElmer first quarter 2022 earnings conference call. Thank you for your participation. You may now disconnect your line..