Danaher (DHR) Q1 2026 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Tuesday, April 21, 2026 at 8 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Rainer Blair
• Executive Vice President and Chief Financial Officer — Matt McGrew
• Vice President, Investor Relations — Rachel Vatnsdal

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS

• Total Sales -- $6 billion, reflecting management’s description of underlying momentum improving while lapping a lighter-than-normal respiratory season at Cepheid.
• Core Revenue Growth -- 0.5% year over year, with a 2.5% headwind from respiratory revenue offsetting 3% growth in the rest of the business.
• Biotechnology Core Revenue -- Up 7%, with management highlighting double-digit growth in bioprocessing in China and strong consumables demand globally.
• Bioprocessing Equipment Orders -- Year-over-year orders grew more than 30%, representing the first positive growth in almost two years; actual equipment revenue remained flat as expected.
• Life Sciences Core Revenue -- Up 0.5%, with management noting low single-digit growth in consumables, early improvement in Abcam and Aldevron, and muted instrumentation demand, especially from academic customers.
• Diagnostics Core Revenue -- Down 4%, with mid-single-digit growth in clinical Diagnostics outside China, but a decline in China due to procurement and reimbursement policy changes.
• Cepheid Respiratory Revenue -- Down approximately 25%, tied to a lighter Q1 respiratory season; however, core non-respiratory test menu was up mid-teens, led by 20% growth in sexual health and hospital-acquired infection assays.
• Gross Profit Margin -- 60.3% for the quarter, with adjusted operating profit margin of 30.2%, up 60 basis points, due to cost savings outpacing the decline in respiratory revenue.
• Adjusted Diluted Net EPS -- $2.06, up 9.5% year over year.
• Free Cash Flow -- $1.1 billion, yielding a 105% conversion ratio of free cash flow to net income.
• Pending Masimo Acquisition -- Management expects the transaction to close in 2026, projecting accretion to adjusted diluted net EPS in the first full year and a high-single-digit return on invested capital by year five.
• Guidance Update -- Management maintained core revenue growth guidance at 3%-6% for the year, raised full-year adjusted diluted net EPS to $8.35-$8.55 from a previous high end of $8.50, and projected Q2 core revenue up low single digits with ~26.5% adjusted operating margin.
• China Performance -- Mid-single-digit core revenue growth overall, with Biotechnology and Life Sciences exceeding expectations and Diagnostics down high-single digits due to policy, partially mitigated by higher-than-expected patient volumes.
• Strategic Product Launches -- Cytiva introduced Fibro DT, a next-generation mRNA purification platform, and announced the forthcoming APS tangential flow filtration system; Beckman Coulter Life Sciences formed a partnership with Automata; Beckman Coulter Diagnostics achieved FDA clearance for the HbC IgM assay, filling a key menu gap.
• Order Funnel and Brownfield/Greenfield Trends -- Management noted robust funnel activity in both brownfield (capacity expansion) and emerging greenfield investment discussions, signaling expectations for continued capital investment cycles.

SUMMARY

Danaher(NYSE:DHR) delivered stable top-line performance, with resilience in bioprocessing and Life Sciences offsetting Diagnostics headwinds driven by policy changes and softer respiratory testing demand. The company confirmed steady progress in expanding its strategic portfolio through organic initiatives and underscored the anticipated financial and strategic benefits of the pending Masimo acquisition. Management reinforced full-year guidance, highlighted accelerating order momentum in bioprocessing equipment, and signaled improved funnel activity across key markets.

• Management emphasized clear M&A priorities, stating their "bias for capital deployment is M&A" and that post-Masimo leverage allows readiness for opportunistic transactions in all three business segments.
• Blair stated, "AI is a tailwind in the short and long term, and we are well positioned," highlighting the company’s ongoing investment in AI-enabled process enhancements and product innovation.
• Order book trends in bioprocessing signal a turning point toward a new investment cycle after two years of underinvestment, with both brownfield and greenfield opportunities entering the funnel, notably in China and reshoring projects.
• Non-respiratory Diagnostics growth outside China remained in the mid-single digits, supported by new assay launches and instruments like the DxI 9000 platform, as management described continued market share gains at Cepheid and Beckman Coulter.
• Free cash flow and balance sheet strength position Danaher to pursue both organic investments and further acquisitions, with management reiterating "more than $5 billion of expected 2026 free cash flow" fueling capital deployment.

INDUSTRY GLOSSARY

• Core Revenue: Sales growth excluding the impact of currency fluctuations, acquisitions, and divestitures, used to assess organic business performance.
• Brownfield Project: Capital investment aimed at expanding, upgrading, or debottlenecking existing facilities rather than constructing new (greenfield) sites.
• Greenfield Investment: Development of new manufacturing or research sites from the ground up, distinct from expanding current facilities.
• Volume-Based Procurement (VBP): Government policy in China designed to drive down medical device and diagnostics pricing by centralizing and standardizing purchasing volume commitments.
• IDN (Integrated Delivery Network): A system of healthcare providers and facilities under a single parent organization, targeted by Diagnostics vendors for coordinated sales efforts.
• RD (Return on Invested Capital): A performance measure indicating the expected after-tax operating income as a percentage of invested capital, referenced in M&A projections.
• APS (Automated Perfusion System): Cytiva’s next-generation tangential flow filtration platform designed for scalable, high-throughput bioprocessing applications.

Full Conference Call Transcript

Rachel Vatnsdal: Good morning, everyone, and thank you for joining us on the call. With us today are Rainer Blair, our President and Chief Executive Officer, and Matt McGrew, our Executive Vice President and Chief Financial Officer. I would like to point out that our earnings release, quarterly report on Form 10-Q, the slide presentation supplementing today's call, the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call, and a note containing details of historical and anticipated future financial performance are all available on the Investors section of our website danaher.com under the heading Quarterly Earnings.

The audio portion of this call will be archived on the Investors section of our website later today under the heading Events and will remain archived until our next quarterly call. A replay of this call will be available until 05/05/2026. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. Our Form 10-Q and the supplemental materials I referenced describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company-specific financial metrics relate to 2026, and all references to period-to-period increases or decreases in these financial metrics are year-over-year.

We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals, or are available only in certain markets. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results may differ materially from any forward-looking statements that we make today.

These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements except as required by law. With that, I would like to turn the call over to Rainer.

Rainer Blair: Thank you, Rachel, and good morning, everyone. We appreciate you joining us on the call today. We are off to a solid start to the year. Our team executed well in a dynamic environment, leveraging the Danaher Corporation Business System to accelerate innovation, drive productivity gains, and deliver better-than-expected adjusted EPS growth. On the top line, continued strength in bioprocessing and better-than-expected performance in Life Sciences largely offset the impact of a lighter-than-normal Q1 respiratory season at Cepheid. Looking across the portfolio, trends in many of our end markets were modestly better than our expectations entering the year. In large pharma and biopharma, commercial monoclonal antibody production remained robust, and we continue to see gradual improvement in R&D spending.

Trends at smaller biotech and academic and government customers were stable sequentially with some pockets of improved order and funnel activity. Meanwhile, clinical and applied end markets performed well, consistent with recent quarters. Geographically, we saw an acceleration in our Life Sciences and Biotechnology businesses in China. The global environment has become more dynamic since the start of the year, including the ongoing conflict in the Middle East, and while we have limited direct revenue or supply chain exposure to the region, we are mindful of potential pressures from a sustained conflict.

That said, we remain focused on controlling what we can control, including leveraging the Danaher Corporation Business System to proactively manage our supply chain and mitigate inflationary pressures while continuing to invest for the long term. At the same time, we are enhancing our portfolio through strategic M&A, including the pending acquisition of Masimo, where we believe there are significant opportunities to improve performance over time through the Danaher Corporation Business System and our global scale. With the strength of our balance sheet and robust free cash flow generation, we are well positioned for further capital deployment going forward. With that, let us take a closer look at our first quarter 2026 results.

Sales were $6 billion in the first quarter and core revenue was up 0.5% year-over-year, with a 2.5% headwind from respiratory revenue partially offsetting 3% core revenue growth in the rest of the business. Despite a lighter-than-typical Q1 respiratory season, underlying momentum across the portfolio improved as many end market headwinds began to moderate. Geographically, core revenue in developed markets was down slightly with a mid-single-digit decline in North America and a mid-single-digit increase in Western Europe. High-growth markets were up low single digits with solid performance across most regions, including mid-single-digit growth in China.

In China, better-than-expected growth in Biotechnology and Life Sciences more than offset the expected high-single-digit decline in Diagnostics, which continued to be impacted by volume-based procurement and reimbursement policy changes. Our gross profit margin for the first quarter was 60.3%, and our adjusted operating profit margin of 30.2% was up 60 basis points, reflecting the benefit of year-over-year cost savings more than offsetting the negative impact from lower respiratory revenue year-over-year. Adjusted diluted net earnings per common share of $2.06 were up 9.5% year-over-year. We generated $1.1 billion of free cash flow in the quarter, resulting in a free cash flow to net income conversion ratio of 105%.

Turning to capital deployment, in February we announced our intention to acquire Masimo, a leading provider of mission-critical pulse oximetry and patient monitoring solutions in acute care settings. We followed Masimo for over a decade and believe the company is well positioned with its trusted brand, differentiated technology, and attractive financial profile. Looking ahead, we believe there are clear opportunities to run the same playbook that has driven value creation across our portfolio for many years, leveraging the Danaher Corporation Business System to drive growth and expand margins while further strengthening our value proposition with customers.

We expect Masimo to be accretive to adjusted diluted net earnings per common share in the first full year post-acquisition and to deliver a high-single-digit return on invested capital by the fifth full year of our ownership. The transaction remains subject to customary closing conditions, including regulatory approvals, and we look forward to welcoming the talented Masimo team to Danaher Corporation later this year. Alongside M&A, we made significant progress on organic growth initiatives across Danaher Corporation, including new product introductions and strategic partnerships. These efforts are strengthening our competitive positioning while helping customers improve quality and yield, reduce costs, and accelerate the delivery of life-changing therapies and diagnostics.

A few highlights: In Biotechnology, Cytiva launched Fibro DT, a next-generation mRNA purification platform that improves manufacturing speed and efficiency. By eliminating diffusion limitations associated with traditional methods, Fibro DT reduces processing time, increases yield, and lowers material usage, enabling more cost-effective, higher-throughput production of mRNA-based therapies. Additionally, Cytiva will showcase its next-generation automated perfusion system, or APS, at the INTERPHEX trade show this week. APS is a cutting-edge tangential flow filtration platform designed to address key challenges of currently available process intensification systems, including product loss, filter clogging, and scalability. In Life Sciences, Beckman Coulter Life Sciences announced a strategic partnership with Automata, combining its liquid handling, genomics, and cell analysis technologies with Automata’s AI-ready automation platform.

This partnership is positioned to empower scientists with AI-driven tools and automated workflows to improve throughput, workflow reliability, and data integrity in increasingly autonomous research environments. Lastly, Beckman Coulter Diagnostics continued to make progress on menu expansion for the high-resolution DxI 9000 immunoassay analyzer with FDA clearance of the HbC IgM assay for acute hepatitis B. With this clearance, nearly all core blood virus assays for the DxI 9000 are now cleared in both the United States and the European Union. This closes a historical gap in Beckman’s immunoassay test menu and positions Beckman to accelerate new placements, customer wins, and growth as the DxI 9000 rollout continues.

Now let us take a closer look at our results across the portfolio and what we saw in our end markets. Core revenue in our Biotechnology segment increased 7%. Core revenue in Discovery and Medical declined low single digits. Growth in medical filtration and research consumables was more than offset by declines in protein research instrumentation as academic customers continue to face funding constraints. Core revenue in bioprocessing grew single digits in the first quarter. High-single-digit growth in consumables was driven by robust demand for commercialized therapies globally, with notable strength in China.

Equipment declined modestly in Q1, but we were encouraged to see orders growth of more than 30%, marking the first quarter of year-over-year equipment order growth in nearly two years. Stepping back on bioprocessing, monoclonal antibody production remains robust and is expected to continue growing at historical or better rates, driven by new molecules, biosimilars, and increased utilization of existing therapies. We saw a sustained pace of new biologic drug approvals in 2026, building on a robust level of approvals in 2025. At the same time, equipment investment has been relatively muted, which we believe creates a growing need for incremental capacity in the coming years.

We are encouraged by improved trends in bioprocessing equipment and believe we are in the early stages of a multi-year investment cycle. We see activity in brownfield projects today, with larger greenfield investments expected to follow. Given Cytiva’s expansive global footprint, broad portfolio, and depth of technical expertise, we are well positioned to benefit from this capacity expansion across biologic drug production. Turning to our Life Sciences segment, core revenues increased by 0.5%. Core revenue in our Life Sciences instruments businesses declined low single digits, primarily driven by weakness in North American academic research customers, as we expected. While demand at academic research customers remained muted in the quarter, we saw early signs of momentum building in our order book.

We continue to see a gradual improvement in large pharma and biopharma investment. Instrumentation demand at biotech customers remained muted but stable, though we were encouraged to see recovery in the funding environment drive improved funnel activity. Core revenue in our Life Sciences consumables businesses collectively grew low single digits. Aldevron grew in the quarter, driven by solid commercial execution and an improved biotech funding environment. We also saw early pockets of improvement in academic customers in research consumables, contributing to growth at Abcam. We are particularly pleased by Abcam’s recent performance as Danaher Corporation Business System-driven commercial execution has gained traction and cost structure initiatives have driven meaningful margin expansion since acquisition.

As end markets improve, we expect continued progress on both growth and margins at Abcam. Moving to our Diagnostics segment, core revenue declined 4%. Core revenue in our clinical Diagnostics businesses grew low single digits, with mid-single-digit growth outside of China. In China, pricing headwinds in the quarter from volume-based procurement and reimbursement policies were consistent with our expectations, and the anticipated impact from remaining policy changes remains consistent with our expectations from the start of the year. At the same time, volume growth in China was slightly better than our expectations, an encouraging indicator for future demand and growth as we move past the most significant year-over-year impacts from current policy.

Beckman Coulter Diagnostics delivered another strong quarter with mid-single-digit growth outside of China, led by immunoassay reagents and instrumentation. In Molecular Diagnostics, Cepheid’s revenue declined in the quarter as respiratory revenue was down approximately 25% year-over-year, given lower-than-typical seasonal respiratory infection rates. Cepheid’s core non-respiratory test menu was up mid-teens, led by 20% growth in sexual health and hospital-acquired infection assays. We have seen strong early demand and several notable customer wins for Cepheid’s recently cleared Xpert GI panel, a multiplex PCR test that quickly detects 11 common gastrointestinal pathogens from a single patient sample. This strong momentum supports Cepheid’s broader multiplexing strategy, and we believe it provides a long runway for continued installed base growth and increased utilization.

Now let me briefly frame how we are thinking about the second quarter and the full year 2026. For the full year 2026, there is no change to our expectation of core revenue growth in the 3% to 6% range. This includes an assumption that a slightly lower respiratory revenue outlook of approximately $1.6 billion to $1.7 billion will be offset by modestly better core growth in the rest of the business. Additionally, given our strong Q1 performance, we are raising our full-year adjusted diluted net EPS guidance to a range of $8.35 to $8.55 versus our previous range of $8.35 to $8.50. In the second quarter, we expect core revenue to be up low single digits.

Additionally, we expect the second quarter adjusted operating profit margin of approximately 26.5%. To wrap up, we are encouraged by the first quarter momentum across our portfolio and expect growth to accelerate throughout the year as we continue on the path towards consistent higher core revenue growth. Cost and productivity execution translated into strong Q1 earnings growth, enabling us to raise our 2026 adjusted EPS expectations. During the quarter, we also announced the pending acquisition of Masimo, and with the strength of our balance sheet and more than $5 billion of expected 2026 free cash flow, we are well positioned for further capital deployment going forward. We see a bright future ahead for Danaher Corporation.

Across the portfolio, we are helping customers solve some of the world’s most important healthcare challenges, from enabling faster, more accurate diagnoses to accelerating the discovery, development, and manufacture of therapies. Over time, we also believe the emerging opportunity in AI will further accelerate the pharma development and commercialization flywheel, improving success rates, lowering development costs, and driving increased demand. This in turn is expected to drive incremental demand for our Life Sciences solutions as well as in bioprocessing as commercial drug production expands.

With our differentiated portfolio, our talented team, and balance sheet optionality, all powered by the Danaher Corporation Business System, we are positioned to drive long-term shareholder value while making significant strides in applying science and technology to advance human health. With that, I will turn the call back over to Rachel.

Rachel Vatnsdal: Thanks, Rainer. That concludes our formal comments. We are now ready for questions.

Operator: Thank you. If you would like to ask a question, please press 1 on your keypad. To leave the queue at any time, press 2. Once again, that is 1 to ask a question. Our first question will come from Michael Ryskin with Bank of America. Please go ahead.

Michael Ryskin: Great, thanks for taking the question, and congrats on the results. Rainer, I want to ask about the progression through the year. You did 0.5%. I am backing into something like 2% core growth in the second quarter given the various segments. I think that is what the low single digit implies. So you have a little bit of acceleration in the second half of the year. Can you talk about what is driving that across the segments? You are lapping the respiratory headwinds and some of the VBP in China for Diagnostics, and Abcam dynamics.

But just your confidence in the rest of the business to get that second-half ramp and the progression implied in the guide through the year? Thanks.

Rainer Blair: Sure, Mike. Good morning. There is certainly a lot going on in the world today, but as we have said, we are focusing on controlling what we can control, and there is really no change to how we view the progression throughout the year that we laid out in January. In January, we said three things needed to happen to support the ramp throughout the year, and all three of those things played out as we expected, or even a touch better, in Q1, and we feel good about the balance of the year. Here is why. In Diagnostics, the China diagnostic policy headwinds are playing out as we expected, and patient volumes are higher.

We also saw good momentum across the rest of Diagnostics, which showed another quarter of mid-single-digit growth without China and respiratory. While respiratory was a touch softer, we continued to take share, and our core Molecular business grew mid-teens. We expect our broader Danaher Corporation portfolio to compensate for the touch of softness in respiratory. The quarter also demonstrated strong high-single-digit EPS growth even with respiratory a little bit softer. Those are important proof points around the resilience of our portfolio and the work that we are doing. In Bioprocessing, we see strong underlying commercial drug production continue, which drives strength in consumables. Notably, we are encouraged to see improvement in our equipment order book with over 30% year-over-year growth.

Turning to Life Sciences and the progression there, both China and Life Sciences consumables globally performed better than we expected, including growth at Abcam and Aldevron, which is really encouraging. We also saw a broad stabilization in our Life Sciences end markets with pockets of improvement and better funnel activity. All in, we feel really good about how we started the year and believe this momentum continues.

Matt McGrew: Mike, to add some details around the numbers and the progression: we are thinking about core growth as low single digits in the first half of the year, with sequential improvement from Q1 to Q2, which you see reflected in the Q2 guide. The headwinds we have talked about—China Diagnostics, respiratory, and some of the comps in Life Sciences—are collectively about a 300-basis-point, maybe a little higher, impact in the first half of the year. These essentially go away by the end of the year and are why we believe we will exit Q4 in the mid-single-digit range.

For the purpose of the guide, we are not assuming any improvement in our end markets to exit the year at mid single digits, and that is why we feel comfortable about that progression through the year.

Michael Ryskin: That is super helpful, thanks. A quick follow-up on bioprocess specifically. You talked about strength in consumables and the greater than 30% equipment order growth. It does not sound like you are assuming much of that will come through later this year. Could you see some benefit in the fourth quarter? How should that inform how we think about equipment growth next year—taking those data points of consistent high-single-digit consumables and the order book turning—to think about bioprocess later this year and into 2027? Thanks.

Rainer Blair: We continue to see strength in consumables and see that progressing consistently through the year. On equipment, what we are seeing in the order book underwrites and reaffirms the year-over-year improvement we expected. Recall last year we were down double digits; this year, the guide assumes flat on equipment. We like the activity levels in equipment, and that marker of 30% year-over-year orders growth is an important one that is supportive of the out-years. Customer readiness is an important factor in when revenue is recognized, so timing can be a little lumpy. The guide is well underwritten, and we think positively about what this means for the out years.

Michael Ryskin: Thank you.

Rainer Blair: Thanks, Mike.

Operator: Our next question will come from Vijay Kumar with Evercore ISI. Please go ahead.

Rainer Blair: Morning, Vijay.

Vijay Kumar: Very good morning to you, Rainer, and I want to pass along my [inaudible] to Matt [inaudible] and Rachel. Good to have you both on the call. Rainer, my first one is on your comment around the Masimo acquisition. I think initially when people saw the deal, it was a little confusing—people thought this was a MedTech deal. Maybe walk us through the strategic rationale. You mentioned call point synergies between Radiometer and Masimo. My understanding is some of Masimo’s technology and board sales are tied to players like Philips and GE Healthcare. How do you see the call point synergies and the potential for the Danaher Corporation Business System driving high-single-digit ROIC for the business?

Rainer Blair: We see the Masimo transaction as a very typical Danaher Corporation deal. By way of update, the process continues to progress well and we are excited to get the Masimo team on board. We have been following Masimo for over a decade. Based on the learnings we had with Radiometer—our Diagnostics acute care strategy—we believe Masimo is a mission-critical player with differentiated technology, all of the things we like to see in our three-dimensional acquisition framework. This is a great end market with long-term secular growth drivers. Masimo is the premier asset in pulse oximetry and other applications in acute care Diagnostics. It is supportive of what we are doing at Radiometer.

There are synergies: Masimo is a little stronger than Radiometer in the United States, and that reverses in Europe. These solutions sit next to each other in acute care settings, so the call point synergies are significant and direct. From a financial profile, this is a transaction that is accretive at all levels—growth, gross margins, and operating margins. At the same time, we have identified significant value reserves to help us drive ROIC to high single digits in year five.

Matt McGrew: To quantify the synergies we outlined when we announced the deal: we expect both cost and revenue synergies—$125 million of cost synergies realized by year five, roughly $50 million on the gross margin side, $50 million on OpEx, and about $25 million of public company cost elimination. Then about $50 million of revenue synergies. We can help Masimo through our Danaher Corporation Diagnostics platform get stronger in positioning around IDNs—integrated delivery networks—and there is opportunity for Masimo to help Radiometer in the United States. We are really excited to get the team on board later this year.

Vijay Kumar: That is fantastic. Matt, my second one is on margins. Typically there is some seasonality Q1 to Q2 on respiratory, but it feels like in the second quarter the margin step-down is a little bit more than what we saw in the last two years. Can you talk about sequential margins, given Q1 was such a good execution quarter from a margin standpoint?

Matt McGrew: Sure, Vijay. We typically see a several-hundred-basis-point step-down in operating margins from Q1 to Q2 driven by the seasonal step-down in respiratory. There is probably a little more FX impact in Q2 versus Q1 given where the dollar has moved over the last couple of months. Given the Q1 beat, we wanted to take some of that and accelerate growth investments from the second half of the year into Q2. We are expecting mid- to high-single-digit earnings growth in the first half of the year, all in, which puts us on the right path for the rest of the year.

Vijay Kumar: Thanks, guys.

Operator: Our next question will come from Scott Davis with Melius Research. Please go ahead.

Rainer Blair: Morning, Scott.

Scott Davis: Good morning, guys. Congrats. Can you talk about raw materials—resins costs? With the spike in oil prices and associated increases in petrochemical derivatives, what are you seeing and how are you managing that? And same question on the Middle East exposure.

Rainer Blair: With the spike in oil prices and associated increases in petrochemical derivatives, we have our eyes firmly focused on what is going on. While we see some of that pressure, it has not been meaningful yet as it relates to our own cost position. We are vigilant and leveraging the Danaher Corporation Business System as well as our contract positions to mitigate any pressures. As you would expect, every month with every operating company we work through the entire P&L to understand what measures we are taking and how raw material volatility might affect the business. To date, we have not seen any meaningful pressure there.

On the Middle East, that region is driving a good part of the oil price volatility you referenced. In terms of direct supply from the Middle East, that does not affect us; our supply chain is not directly exposed. The indirect effects through commodity volatility are what we address head on.

Scott Davis: Okay. Thank you, guys.

Rainer Blair: Thanks, Scott.

Operator: Our next question will come from Jack Meehan with Nephron Research. Please go ahead.

Rainer Blair: Morning, Jack.

Jack Meehan: Good morning, guys. One of the big topics in the market at the moment is AI. As you look across the business segments, how do you think AI is influencing customer spending behavior? You referenced bioprocessing could be a beneficiary. Do you also see impacts in Life Sciences and Diagnostics—any signs of increased or reduced spending?

Rainer Blair: Let me start with the conclusion: we think AI is going to be a growth accelerator for the pharma and biotech industry in the near and long term. AI will accelerate the drug development and commercialization flywheel and improve pipeline yields. The average yield of the drug development pipeline today is just above 10%. There is an enormous opportunity to improve that yield and accelerate the biopharma flywheel along with the flywheel of Life Sciences tool providers like ourselves. Improved yield drives both growth and profitability and reinvestment in the pharma industry, which in turn drives more investment into discovery—including wet lab validation—development in the clinic, as well as commercial drug manufacturing.

In the short term, we are seeing incremental demand in building biologic models. “Autonomous science” refers to building biologic models, and that requires automation, more analytical instruments, and more reagents. We are well represented in automation and analytical instruments— increasingly AI-enabled—and reagents. This is a multi-year driver, as biologic models require significantly more information coverage than large language models. In the long term, we will see the cycle time of pharma development compressed and the hit rate—yield—increased. That is good for patients, for the pharma industry, and for partners like us that support the industry. More commercialized drugs mean more business for our bioprocess business—we are well positioned there with the broadest and deepest portfolio and ongoing innovation.

Many of these drugs will be more sophisticated and require more accurate diagnostics—if not personalized diagnostics, then near-personalized diagnostics. So AI is a tailwind in the short and long term, and we are well positioned.

Jack Meehan: Maybe for you, Rainer, or for Matt, from a Danaher Corporation Business System perspective: are you seeing tangible productivity benefits from AI in the business—any cost savings or revenue targets you would share?

Rainer Blair: We are getting to the point where the Danaher Corporation Business System and AI are synonymous in terms of accelerating cycle times and driving efficiencies—we bring those together. We talk about AI-enabled DBS and DBS-enabled AI in one sentence, and that will continue to drive efficiencies. As the pharma development pipeline accelerates, think about the Danaher Corporation flywheel also being accelerated by AI-enabled DBS. That will result in more and better products that are AI-enabled, lower costs through efficiencies, and together that will drive growth and earnings expansion going forward.

Jack Meehan: Thank you.

Operator: Our next question will come from Tycho Peterson with Jefferies. Please go ahead.

Rainer Blair: Morning, Tycho.

Tycho Peterson: Rainer, I want to go back to bioprocessing. You touched on order trends and how that may translate to revenues. Can you unpack more of what you are seeing—pharma versus biotech versus CDMOs? Secondly, are you seeing any replacement cycle demand? We have heard about a replacement cycle heating up in some checks. And how are you sizing the China opportunity in biotech? I think it was around $1 billion to $1.3 billion if you go back a couple of years—how are you sizing that today?

Rainer Blair: Starting with China, China continues to be in recovery mode. We were very encouraged with what we saw in the first quarter, with double-digit growth in the bioprocessing business. China biologics, driven by the market you referenced, is accelerating. The monetization of therapies being developed there has improved through license deals with multinationals and with the stock exchange and IPO markets functioning more normally. We expect that to continue to be a growth driver as we get back to normality. As for whether the original $1.3 billion we saw at the peak is in the cards, we are on the way to improved markets and want to get through 2026 to see continued positive progression.

Regarding equipment orders, what we saw is constructive for our hypothesis around 2026 and beyond. Funnel activity is encouraging, and the year-over-year orders growth underwrites how we are thinking about the year. We will see how the next quarters progress to determine any 2026 revenue impact, but it certainly supports growth beyond 2026. On customer segments, we are seeing robust demand linked to commercial production in pharma, continued stabilization in biotech, and improving activity with CDMOs. Replacement cycle discussions are picking up, consistent with your checks.

Tycho Peterson: Shifting to Life Sciences, encouraging to see the turn there. You talked about improved funnel activity. Aldevron, I think, was not assumed to grow in the first half—so that is encouraging. And Abcam consumables a bit better. Where are you feeling better for the remainder of the year in that Life Sciences business?

Rainer Blair: In Life Sciences consumables, we had expected slightly down for the year, albeit with an improved second half. As we go forward, we see positive growth for our Life Sciences consumables for the full year, though results may be a bit lumpy over the next quarter or two as we go from slightly negative to slightly positive. That is encouraging. We also saw China start investing again in Life Sciences instruments, which was nice to see, and funnels there remain constructive. Pharma continued to improve quarter over quarter. Clinical was robust. Applied markets are playing out as we thought. Only academic remains a bit muted, albeit stable.

We are encouraged by what we saw in Life Sciences in the first quarter and expect that to play out positively for the rest of the year.

Tycho Peterson: Thank you.

Operator: Our next question will come from Casey Woodring with JPMorgan. Please go ahead.

Casey Woodring: Morning. Thanks for taking my questions. Nice to see the greater than 30% equipment order growth in the quarter, but I assume that number is coming off a lower base year-on-year. Can you give any sense of what orders grew sequentially in 4Q or what book-to-bill was in the quarter? Any sense of how those came in relative to your expectations? And on the brownfield versus greenfield dynamic—you highlighted brownfield investments are flowing through and said greenfield would be expected to follow. When do you potentially see those greenfield orders start to flow through—is that something you would not be surprised to see in the second half?

Rainer Blair: The first quarter orders growth was the first positive year-over-year orders growth we have seen in nearly two years, so the comp is a little lighter by definition. Sequentially, first quarter orders were down a little versus Q4, which is expected due to normal seasonality, so the year-over-year comparator is the more important signal. Our funnel activity on equipment remains robust. Some orders are getting larger, which dovetails into your brownfield versus greenfield question. We see equipment orders growth and funnel activity driven by two dimensions. First, there has been underinvestment in capacity for the last two years despite robust consumables demand. With biosimilars coming to market, new compounds, and prior underinvestment, capacity expansion is needed.

That explains both brownfield investments—additional lines, debottlenecking—and greenfield interest. Second is reshoring. Here we see increased dialogue, active funnels, and even some orders for brownfield expansions related to reshoring. We are encouraged by what we are seeing on equipment. It underwrites our hypothesis for the year and further supports our view on bioprocessing strength beyond 2026.

Casey Woodring: If I can squeeze one more in: you talked about solid growth across non-respiratory within Diagnostics, and you held the guide for the year in Diagnostics even with the lower respiratory number. What exactly is offsetting that lower respiratory number for the year, and what is getting better in the non-respiratory piece that enables you to hold the guide?

Rainer Blair: A couple of things. First, we continue to take share at Cepheid in the core business, and our hypothesis around Cepheid continues to play out. We are launching new assays—the gastrointestinal GI panel is doing very well, and our MvP panel is doing very well. Even within Cepheid, you see strength playing out. In our non-respiratory business excluding China, we continue to see mid-single-digit growth, with our innovation strategy delivering. At Beckman Coulter we have launched a series of new instruments, none more important than the high-resolution DxI 9000, which opens up new menu items. We closed the blood virus menu gap, and we have a breakthrough designation pathway for Alzheimer’s disease testing. We see positive momentum there.

We have not even talked about the implications of Masimo joining the portfolio. Lastly, in China, we feel good about our assumptions around the $75 million to $100 million headwind from VBP and guideline changes. That has been validated by what we saw in Q1, even as patient volumes were a little higher.

Operator: Our next question will come from Dan Brennan with TD Cowen. Please go ahead.

Dan Brennan: Great, thank you. On M&A, the balance sheet is in good shape post-Masimo. How are you prioritizing M&A today across your three business segments? Where do you see the biggest opportunities, and what does the funnel look like? Could you see another sizable deal this year?

Rainer Blair: We are encouraged by what we are seeing in the funnel. Multiples have come in, and our three-vector filter on M&A—right end markets with secular growth drivers, premier assets with defensible positions and value reserves, and a financial model that works—remains our discipline. Our bias for capital deployment is M&A, and we will not compromise on discipline. Financial models are becoming more viable in the current context. The Masimo deal was one we had envisaged for a long time; timing was driven by the process, and we were ready with the balance sheet and point of view to execute. It fits our acute care strategy.

It is not a broader MedTech thesis, and it is not indicative of any reduced focus on Life Sciences, Diagnostics, or Bioprocessing. We see plenty of opportunity to deploy capital in those areas and are prepared to do so as opportunities arise.

Matt McGrew: From a balance sheet perspective, post-close of Masimo we will be around 2.5 times net debt to EBITDA. Given our strong free cash flow—$5 billion plus per year—as well as EBITDA generation, leverage will come down fairly quickly. That gives us the ability to remain active on the M&A front even in the near term. We feel good about how we are positioned.

Dan Brennan: Thanks. Back to growth—your core growth anchored at 3% this year. Consensus is around 5% next year. Assuming that is roughly right, can you walk through key levers to generate 5% growth next year, including what could push down or higher toward the high-single-digit level in your LRP?

Matt McGrew: Dan, it is April 2026, so a little early to talk about 2027, but to go back to what we discussed earlier: we are talking about low-single-digit core growth in the first half with roughly a 300-basis-point impact from headwinds—China Diagnostics, respiratory, and Life Sciences comps. That is why we feel comfortable exiting Q4 in the mid-single-digit range. Getting through those headwinds, without assuming improvement in end markets, gets us comfortably into mid single digits.

Operator: Our last question will come from Doug Schenkel with Wolfe Research. Please go ahead.

Doug Schenkel: Good morning, everybody, and thank you for taking the questions. Matt, a follow-up on your comments at the end in response to Dan’s question. What gets you to the high end of guidance for the year? Is it really just moving past the headwinds and maybe those reversing more robustly than we are seeing right now? Related, would you recommend we stay at the lower end of the guidance range for the year until we see improvement in those headwinds and end markets?

And then on M&A, from a readiness standpoint, could you do something in any segment today, or given the pending Masimo deal would it be less likely you would do something in Diagnostics as you prepare to integrate that business?

Matt McGrew: As we talked about in January, continue to anchor to the low end of the 2026 core growth guide for planning purposes. To get to the higher end of the guide, a couple of things need to happen. First, we need to see further improvement across the Life Sciences end markets. We are encouraged by Q1, but we need some of the policy headwinds—especially in the United States—to further abate. China had a good start to the year, but we need to see further growth acceleration as well. On biotech funding, we are seeing improvement, but we want to see that funding turn more quickly into orders.

Second, in Bioprocessing, we probably need to see a little better than high-single-digit growth—acceleration on consumables and getting equipment growth going. We are encouraged by the order patterns but need to see it move a little quicker. Third, on respiratory, we would likely need a slightly above-normal respiratory season to finish the year in Q4—back to that endemic $1.8 billion rate. All in, we are encouraged by the start to the year; we are already at 3% excluding respiratory today and encouraged to see some underlying trends improve.

Rainer Blair: On M&A readiness, we have both the balance sheet capacity and the leadership bandwidth to execute additional acquisitions in any of the three segments. We feel very good about how we have positioned and developed our talent to be able to do that.

Operator: Thank you. We have now reached our allotted time for questions. I will turn the call back over to Rachel Vatnsdal for any additional or closing remarks.

Rachel Vatnsdal: That is all we have. You can reach us with questions today. Thank you so much for joining.

Rainer Blair: Thanks, everyone.

Operator: Thank you, ladies and gentlemen. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has positions in and recommends Danaher. The Motley Fool has a disclosure policy.