Conference Transcript - A 2026-06-03

Tycho Peterson, Analyst — Life Sciences

We're going to kick it off. I'm Tycho Peterson from the Life Science team. It's my pleasure to introduce Agile this morning. Porig, maybe a great, great quarter. Why don't we start there? You know, a lot of momentum, LDG, AMG, you know, both nicely ahead, strong growth for CAM, diagnostics, forensics, semiconductors, pharma. I mean, you're kind of humming along on all fronts, nice margin expansion too. So, you know, maybe with that in mind, just, you know, talk about some of the messages, you know, coming out of 2Q and what gets you excited about the remainder of the year.

Padraig McDonnell, CEO

Yeah, no problem. Thanks, Tycho. and thanks, great to be here. So, you know, great quarter, 6.3% growth. We had 130 BIPs year over a year margin expansion, which was just great, and that was really fueled by our Ignite transformation. 14% EPS growth, which was well ahead of guidance. So, clean beat across the board. And if you look at the markets, we had high single digits in CAM diagnostics, environmental and food. And pharma was in line, still really strong. and then broad can growth of course we had a semi-con part in there that was really great as well that that helped and when you think about when you put it all together it's really a number of things i think the replacement cycle continues to grow you see low double-digit growth in our lc and lcms business that shows our our replacement cycle is really humming along book the bill is greater than one for a nine consecutive quarter so momentum continuing and innovation this is all you know underpinned by innovation in infinity tree of course driving that replacement cycle pro iq and a number of launches at asms this week 9500 icpms which is right in that semi-con space as well and uh you know we we talk i think every company talks about share gains but we look at our objective share gain data from all you know we had a really struck super strong share share gains across um across our instrument portfolio and and i think you know you look at our Ignite operating system now being able to mitigate tariffs, you know, fully mitigated. Our 200 BIPs of pricing, so our enterprise pricing model is really working. And I think you see digital going extremely well. Actually, digital would have grown 20% ex-China, 9% growth in our digital orders, so that shows the flywheel. And, of course, we're integration playbook with BioVector done and now BioCare coming So you put it all together, I think it was an extremely good quarter.

Tycho Peterson, Analyst — Life Sciences

And you touched on the ASMS news, 9,500 triple quad, first big refresh there, ICP-MS in a decade. Talk a little bit about how you're thinking about the opportunity. Is it new market unlock, share gains, replacement cycle?

Padraig McDonnell, CEO

Yeah, so I would think about it as tech refresh rather than replacement cycle. So if you think about ICP-MS, we have about 80% market share in semi-con and fabs, and actually not only fabs, but also high-purity chemical companies around the fabs. And it really is a technology jump. There's two areas to patent, a dual-cell system that really helps with workflows. And also we have this revolutionary air mode that helps on the analysis side. And with that 80% market share, I think customers with these new capabilities are now going to do a tech refresh with the 9500. So we're really, really excited about it. And you think about, you know, companies like TSMC, where we have a huge install base in Taiwan, we have a huge install base in the U.S. where there's been reshoring in semis. And we've been working with those customers over the last number of years in those reshoring opportunities. So people think it's just pharma, but actually the semi reshoring has been happening quite quietly over time for a long time, and we're right in that space. So we had a great response at ASMS. We're taking a lot of orders now, so we're very excited about it.

Tycho Peterson, Analyst — Life Sciences

I think if we think about ICPMS being a $275 million business or so, how much does this tech refresh kind of impact that installed base, and how do you think about, like, you've talked about GC replacement cycle being a few percentage to the business. Could this be comparable?

Padraig McDonnell, CEO

Yeah, I think, look, if you think about it, SEMI represents about a $400 million market opportunity for us. By the way, it's not just ICP-MS, it's GC-MS products that are in those labs as well. And our total semi-exposure is about 3% to 4% of Agilent's revenue. So I think overall, you know, we grew double digits in that side of it. We expect that to continue. So I think it's going to be, you know, above that in terms of growth rates as we do this tech refresh.

Tycho Peterson, Analyst — Life Sciences

And then, you know, on the column side, just kind of rounding out on ASMS, The, you know, Altaira columns, you know, you launched last year up 50%, you know, sequentially, now 75% penetrated the top 20 pharma. Maybe talk about momentum, how much of this is allowing you to recapture share, and then you're launching new, you know, products into the family of Altaira columns.

Padraig McDonnell, CEO

Maybe just talk about that. Yeah, no, it really is a family. So we launched a GLP-1 column last year. We actually launched a PFAS column long and short chain this year as well. So we're continuing building on this site. So we're early days, but we're in about 15 of the top 20 biopharma companies growing extremely well. And, you know, for context, that column is about 5% of ACG, the cross lab group. And we're seeing a lot of broad new applications around, you know, peptide therapeutics, large oligos and gene and cell therapy. So putting it all together, we're going to continue to launch. and we're seeing a really strong take-up in labs and companies that already have the family and we're going to see that continue over time. And it helps, of course, with our instrument connect rate.

Tycho Peterson, Analyst — Life Sciences

Maybe just focusing on CAM for a minute. Obviously, you know, a lot going on in the macro. Maybe just unpack, you know, what you saw and just talk a little bit about mixed dynamics, how you're thinking about the rest of the year, comps get tougher, but a lot of, you know, positive underlying momentum.

Padraig McDonnell, CEO

Yeah, so CAM's performance was high single digits for Q2. really strong, you know, in low double digits across the advanced materials battery side. So if you think about it, chemical and advanced materials, about two-thirds of that is the chemical and energy side. One-third is the advanced materials side. That's how it breaks out. And, you know, we've really seen strong momentum over a number of quarters. Again, we're going into tough compares. But again, batteries and semis, about 400 million opportunities. And we see in batteries about 250 million opportunity, 400 for semis. And on the chemical side, you know, it is a very topical area with it. But it's an area, if you think about the chemical business and chemical energy, it really is our heartland of our install base. So you have a GC replacement cycle going on there that's going to about 100 bips on top of what we're seeing. And I would say about 15% to 20% is related to exploration and production. And about 50% is related to chemicals. And, of course, people were saying, well, you know, are we seeing just a slowdown on capex actually capex spending was very strong during the year and refinery production side and it's it depends if you're going to see that continue over time you're going to see that um you know you're going to see on the chemical side of course we we get a good downstream effect from semiconductors so it's used in a lot of the semiconductor and workflows so there's a reverse is true where declining prices help refiners while the while deepening demand and on upstream production so it's kind of give and take but overall we feel really good about that business

Tycho Peterson, Analyst — Life Sciences

And just to circle back on batteries and semis, I appreciate the TAM numbers you threw out. Should we continue to assume these are outsized drivers here,

Padraig McDonnell, CEO

those two businesses? Yeah, and it's our market share position, doesn't it? And then when you put a new technology that leapfrogs the competition in that, you're going to see that as an outside driver for sure.

Tycho Peterson, Analyst — Life Sciences

And then anything on chemicals by geography that might be helpful to share?

Padraig McDonnell, CEO

Yeah, no, I think we saw broad strength across it. I think China was a little bit slow for us, and we were expecting that, but we saw broad strength in the Americas, Europe, and Asia outside China.

Tycho Peterson, Analyst — Life Sciences

And then you are talking more about share gains, you know, overall, talked about, you know, having some of the best, you know, market share in 2Q. Was this specific to LC, LCMS, and GC, or, you know, are you starting to see outside

Padraig McDonnell, CEO

share gains? Yeah, the three areas, so it's all our instrument product lines, so just for context, every Every company submits the units and dollars for each of their product lines. We saw outside share gains and LC spectroscopy and GC were the key, were the top drivers, but I would say a broad base across it. And I would say if you look at regions outside share gains in North America and Japan, now Japan we had a relatively low market share historically because we've had a local competitor We put a lot of focus in there and now we're seeing a lot of share gain advantage, but North America was extremely strong for us.

Tycho Peterson, Analyst — Life Sciences

And obviously we touched on innovation. I mean, are there things you're doing differently from a commercial execution standpoint, too, that are driving share gains?

Padraig McDonnell, CEO

Yeah, so before I took over the role of CEO as chief commercial officer, and actually we did a lot of transformation before I took the position, and we spent a lot of time looking at our digital connection with customers. And, you know, sometimes we want to have one central account manager, and we invested heavily in application support, application engineers and product specialization. Why is that important? It's important in an area like semis where actually the application science means everything and the product support of that moving forward. So I think our investments back then are really paying off now and we have one leader that controls our service, sales, marketing and digital. So it means we can move really quick on the deployment of AI and also our connection with customers. and I think when you add the one thing we've centralized Tyco which is kind of unique we have a launch excellence team now that's central for every one of our product lines so each product line isn't launching in a separate way we have the same methodology how we do pre pre-launch how we do launch and then how do we make sure we get our ramps on a ramp to volume and targets so overall you put that flight flywheel together of improved innovation and a commercial engine i think it's a that's one that is a key reason why we're gaining share any way to quantify

Tycho Peterson, Analyst — Life Sciences

share gains like in any of the product categories or yeah if you look at i mean if you look at share

Padraig McDonnell, CEO

gains i'll give you an example in lc you don't see that move huge amounts but i mean one or two percents on the upside is a lot of business on that side so i think we're we we've seen we've seen that um and uh you know if you look at all our product lines except for one which was just stable, we saw outsized gains.

Tycho Peterson, Analyst — Life Sciences

And then biopharma, you know, overall fifth straight quarter of mid-single-digit growth, you know, obviously some nuances there, biotech growing low double digits, large cap, you know, fines, mid-cap still soft, small molecule, you know, up low single digit. Can you just talk on, you know, the exposures to these categories and, you know, talk about the barriers left for some of the lagging segments?

Padraig McDonnell, CEO

Yeah, I mean, look, we've, we're about 50-50 small molecule versus large molecule, you you know, both growing well. Small molecule was low single digits this time, and biotech was low double digits. And again, when you look at the MFN deals that have happened, it's removed a big overhang from our customers. You know, we're reshoring coming in 27. That's progressing very well. You know, we're doing more quotes. We're getting closer on those numbers that we put out. We feel really good about those numbers we put out. So when you think about that, I think overall farmer spending, you know, there's an aged install base in pharma, particularly where we are downstream in QAQC. So that replacement cycle momentum and the reshoring coming is a really great sweet spot for us. And then, you know, in a small mid-cap size, you know, it's been very muted for a number of years. But, you know, through April, you see the number of deals that are being done and the number of dollars that are being deployed, I think over $40 billion being deployed in that area. So we're expecting some benefit for that in 27. We're not expecting it this year. But overall, we really believe that the kind of licensing and the M&A activities going on, as we've seen in previous cycles, is going to prove very, very important for us in terms of our cell analysis equipment, et cetera. We're going to see that.

Tycho Peterson, Analyst — Life Sciences

Why do you think it hasn't converted yet? I mean, biotech funding has been strong here for a little while.

Padraig McDonnell, CEO

Yeah, I mean, it's kind of similar than the last time. I think there's just the funding generally takes probably 12 to 18 months to come through to our site. So I think we're getting through the midsize of that. So I think really we're going to exceed that at the start of 27. I wouldn't say there's anything very different from this at this time, but there's been a large, I would say, air pocket in that market for a long time. So we need to see that work through.

Tycho Peterson, Analyst — Life Sciences

Advanced therapeutics, you know, the old CDMO business, 2Q was up high single digit. You reiterated the guide, you know, for the year of mid-teens. Just talk about what's underpinning that acceleration going forward.

Bob McMahon, CFO

Yeah, so I'll take that. So, first of all, you saw solid first-half growth in our CDMO, which we're calling ATD now, which is Advanced Therapeutics Division. So we had solid growth in the first half. That's low double-digit, as I said. The nice thing is we have visibility into the second-half growth and that acceleration. So we remain confident in our ability to deliver that mid-teens growth for the full year, which we've talked about. The revenue for the year was always weighted to the second half of the year, and that's just based on our production schedules. And the nice part about CDMO is you do have visibility into the production schedules. The challenge with it is sometimes those production schedules are lumpy from a quarter-over-quarter perspective. The nice thing going into the second half of the year and ATV Colorado in general is that that mix, commercial and clinical, last year we finished the year at about 60-40 commercial to clinical, and we're seeing that shift more to a commercial mix over time. And then the last piece I would just highlight is in that second half acceleration, implied underneath that, which you can't see, is a very, very strong Q3 with a flattish Q4. And that's, once again, based on comparison production schedules.

Tycho Peterson, Analyst — Life Sciences

And how about margin lift as utilization improves?

Bob McMahon, CFO

Yeah, so you can expect over time as those ramp, the margin will continue to expand. And we've said the margin of our ATD business is accretive to our overall margin once they're fully up and running.

Tycho Peterson, Analyst — Life Sciences

And then we had the pleasure of going out and seeing the facility. Train C goes live in 27. Just talk a little bit about how much that adds once fully ramped. If you go back to Train B, it added $150 million. Can this be closer to $200 million with the yield improvements?

Bob McMahon, CFO

Yeah, so I'm very excited about Train C. Let me start there. We're a leader at NASD, and it's always good when you can invest behind a leadership position. We also hit an important milestone earlier this year with the mechanical completion of Train C. So that happened in Q2. So that positions us then to start generating revenue sort of in the spring of next year. And the way I would think about that is Train C, over time and once it's fully ramped, will double our revenue capacity once fully ramped. And the way I think about that is it's about $350 million in total. But once again, there'll be a variability from time to time based on just the general mix. It should start to skew more commercial than clinical, as we've seen in our other lines. But really excited about it. And so then the last piece I would just highlight on this, as you think about the ramp of train C, it'll start, the revenue will start in the spring. It'll take about six to eight quarters to get to that full revenue that I just talked about, that $350. 50. But what excites me even more is we have visibility to the majority of the capacity we have available in 2027 now. So we're in a really good position. You can see that our customers appreciate the service and the quality that we deliver. And so investing behind that leadership position, you know, before I got here, it was a great move and we're going to reap the benefits

Tycho Peterson, Analyst — Life Sciences

of it. And I got a similar question on the margin trajectory for next year as you're kind of scaling

Bob McMahon, CFO

train c up yeah and so what we've talked about is of course there's a margin implication as you you turn the facility on start depreciating it etc but what we've said is we'll manage that within our broader profile and once again we have the ignite operating system which helps us think about those things prioritize and find incremental efficiencies to offset um maybe we can go back to

Tycho Peterson, Analyst — Life Sciences

replacement cycle we touched on it you know a little bit uh lc lcms both up low double digits in 2q just talk about where we are in the cycle uh you know it's been humming along for a couple quarters here and just you know where where you think about 27 28 uh as we're thinking about the

Padraig McDonnell, CEO

remainder of the cycle yeah look at i think the cycle we're probably i'd say we're one third through the cycle i would say that that's where where we are you know i think um it's you see our instrument numbers versus our peers um in terms of delivery so we're we're doing extremely well and it's not only in our install base but on the competitive deal side it's a very competitive landscape so being able to take competitive deals drives that we expect it's going to add about two to three hundred bips as we go forward on that replacement cycle and it's kind of interesting people think it's just you know one lab or one one site but we have lots of equipment 1100 1260s 1290s that are installed that are replacing at different times so strong momentum and really good uptake with the infinity trees we expect that to keep going and then of course you got reshoring coming along so I think that's very important I think on the you know the GC replacement cycle again and you know you see that in our across all our markets but you see that in our cam markets particularly that that's going out about a hundred bits on top of where we are and the GC replacement cycle is longer I would say we're very early on in that we just launched a new GC platform in the SMS as well so we have the 8850 in the news the new platform so that really helps us as we're moving forward and replacing and even over the all based on the GC side. And again, our market share in GC is extremely high.

Tycho Peterson, Analyst — Life Sciences

Any pockets lagging, whether it's CDMOs or China, like just on the replacement cycle specifically?

Padraig McDonnell, CEO

No, I would say it's pretty broad-based. You know, I think once you see the, you know, I think our CDMO and our CRO segments where we look at that, I think it's pretty broad-based. I think the bolus of our business is QAQC, development QAQC, and that's moving along. So I would say not really any laggards on that side.

Tycho Peterson, Analyst — Life Sciences

And then China, that was one of the areas that was soft in the quarter, down 9%. Just unpack what you're seeing there, how you think about the remainder of the year, obviously some focus on stimulus, and then biopharma being a bright spot. High teens talk about the durability.

Padraig McDonnell, CEO

Yeah, yeah. So look at, I mean, it's the old Lunar New Year effect. And, of course, we had tariffs last year, which pulled in a lot of orders in CSD that created a tough compare on that side. But, you know, we're extremely committed to China, and what we see in the market is that, you know, our biopharma, small-value pharma are doing extremely well. And you see the investment that's happening in there in terms of the deployment of capital. The one area that's really important for us is the speed of innovation in China and our sector. So we'll be announcing more investment in an innovation center in Shanghai, where our manufacturing is to tap into that innovation in China for China and beyond. So overall, I think the market is humming along at $300 million a quarter. We expect that to continue. I do see that improving in 27. You know, all the factors are there for it to improve. And, you know, we think of China as, you know, the China business, and we think of stimulus separate, right, because it's something that, you know, it's got variable timing. It can happen. It can happen at different timings and so on. We were expecting the SAMR stimulus to happen in 26. It's going to happen in 27. We're actually quoting there now. that's a 50 million dollar opportunity we expect about a 30 percent win there like we've seen in the past so um but that's not in our guide currently but we'll we'll see that coming true so overall i think uh we feel um we feel you know china stable we're gonna we're gonna see that improve in in 27 to get up to that mid mid uh high single digit growth rate again in

Tycho Peterson, Analyst — Life Sciences

time and last round of stimulus skewed food you know heavy is that kind of similar assumptions

Padraig McDonnell, CEO

this time? Yeah, it's a little bit more broad-based. I think there's four segments in SAMR. There's food, drug, industrial products, and metrology. So it's a bit more broad-based. And again, when you think about those markets, that's a real sweet spot for us at Tyco. So funding and bidding timeline, funding is going to materialize in Q3, bidding timeline in Q4, orders and revenue in Q1. And we've seen that happen in every previous stimulus is in the same type of cadence.

Tycho Peterson, Analyst — Life Sciences

One of the things I think you've focused on, which maybe doesn't get as much attention, is software, and just be curious to talk about some of the AI deployment initiatives that you have underway.

Padraig McDonnell, CEO

Yeah, so we had an announcement today with OpenAI and BCG as one of the deployment areas. But first of all, maybe I can break it down into a few parts. First of all, for our customer segments, we really believe that AI is going to drive a lot of efficiencies in pharma you see the numbers that are coming out um you know from um clinical to uh discovery clinical onto commercial you're seeing 40 to 70 reductions in terms of molecules getting through that pipeline again when you think about that we will be the net beneficiary of that in terms of downstream testing and it's going to be a tailwind over time so that's the customer side we spent a huge amount of time thinking internally about ai and not just, you know, giving flashy headlines but thinking about how it's going to reshape our business going forward on it. And I think when I think about AI, the first book we think about is our product and customer connection and that's with growth involved. So we're really looking about how it's going to help us with our software and acceleration of our software products. With the Cross Lab Group now, we've put software into one place. We've done a lot of movements in the organization So AI coming in at this time is a really important enabler for us as we go forward on it. And second, it's kind of reimagining our internal and end-user workflow. So how do we reshape what we do? I think some companies make a mistake by just layering AI over the top of existing process. You probably get a 5% to 10% incremental benefit. But if you reshape process about how you're connecting with customers and how you connect inside, I think you get an oversized benefit. it. And that's going to be, you know, it's going to be self-funding as we go along and as we move forward. But I think what's going to be different at Agilent, you know, when you see the headlines in different areas and sectors and different companies, first, we're going to have, you know, we create a huge amount of signal that's necessary for AI. You think of our install base, there is no AI without data and signals or our analytical tools. Feeding into that creates a lot of opportunity for us. I think second, building and owns enterprise-wide capability, not just buying disjointed AI tools, but connecting operations, product, and a customer experience in one area creates a really strong dynamic flywheel. And we have really strong partnerships. It's one thing to announce partnership with a frontier model, which we're really excited working with the OpenAI team. But then having BCG help us with the deployment and the execution across the company is super important through the Ignite framework. And this is going to be very tops down. It's going to be all numbers driven. But we're leading with that growth area. So I think it couldn't be better timing for us.

Tycho Peterson, Analyst — Life Sciences

I guess how do we think about the implications of the deal today then? I mean, is this something that's going to result in a definable revenue stream? Is it more touch points with customers?

Padraig McDonnell, CEO

Yeah, you're going to see that over time. We're going to be announcing that. You're going to see revenue both on the product side and software side that we're going to be increasing over time. we expect our market share gains to improve on the customer connection side and we're only beginning on that side so we'll be able to release those numbers over time as we deliver those numbers it's going to be really important and I think one thing we were very very careful not to do was trying to just have a flashy announcement and just do a little thing because tokens are expensive and you can see companies now are running into areas where tokens become prohibitive over time but we want to be very clear with our key use cases that are driving growth so we can self-fund this amazing opportunity we have over time.

Tycho Peterson, Analyst — Life Sciences

And Adam, from your perspective, AI, just on procurement supply chain, just margin levers, how are you thinking about that?

Bob McMahon, CFO

Yeah, so it's obviously a great opportunity, and we're working to deploy it in the right spaces. And so there's some clear use cases and some very straightforward use cases. We're using them on the finance team. You know, procurement is part of, was one of the initial Ignite transformation areas. And so part of coming out of that were some of the AI opportunities as well. And then the other area is pricing and supply chain where we're seeing good opportunity. And you've heard a little bit about our control tower that we're using on supply chain, which has been such a help, not just to the planning and reliability of the supply, but also as we start to think about driving efficiencies going forward. and it really helps us think about our network differently. So in shocks to the network, things like that, when you have that forward-facing outlook, it's much easier to plan and actually think about how you're building out that footprint. So it's been a real boom for us.

Padraig McDonnell, CEO

The one thing I would just add, I forgot to mention, Tycho, is that when we did an assessment of where companies fail or companies really are successful in this, we've created an AI center of excellence at the center. We have the chief AI officer, and he's come in from Verley, Suki Singh. But the businesses are required to deliver it and deliver on the numbers. But having that central operating system of how it's deployed when and the sequencing of things and making sure what we said we're going to do that is going to happen is really important, and that's going to be a very important central capability for us.

Tycho Peterson, Analyst — Life Sciences

I want to make sure we spend a minute on diagnostics. You know, it's a billion-dollar business. You've done M&A there recently. Just talk a little bit about how you're thinking about market growth and some of the dynamics that's allowing you to put up healthy numbers there.

Bob McMahon, CFO

So, number one, I think you saw the strong diagnostics and clinical in Q2, so 11%. And we believe that that's been a great business for us over the last number of years. Unfortunately, demographics are in our favor of that business, aging population, greater incidence of cancer, things like that. So that really helps us. The other piece is we're seeing strong traction with our technology, so the DACO Omnis family is really gaining traction. You see that in the numbers, and you'll see that continue to evolve. The other piece I would layer in here, which is important, is this BioCare acquisition. Number one, it's a great template for the types of deals that we want to do, and then you see how it layers into that business. you know complementary instruments so we're daco is in the medium throughput uh the biocare instrument is in the low throughput so complementary instruments complementary geographies so we're gonna they're gonna leverage our footprint in europe perfect and then expanding our menu which you know that's the name of the game here is menu expansion but it'll also give us access to more tenders globally things like that and then the last piece which you know hasn't gotten as much attention but i'm personally very excited about is the innovation engine that we're getting out of biocare they've been very efficient in creating new antibody tests and doing it efficiently so big opportunity there so really excited about biocare how that's going to roll through it's just going to continue our long legacy of being a you know kind of a diagnostics

Tycho Peterson, Analyst — Life Sciences

leader maybe just in the last minute we could hit on you know margins uh if you go back pre-covid The framework was 30%, 40% core incrementals. As we look ahead, any reason that you couldn't be at the high end of that range or above, given tariff headwinds abating, some of the AI initiatives you talked about?

Bob McMahon, CFO

Yeah, so I think it's fair to think of our incremental margins in that way. The one piece I would say is that we will be balancing that with investments and growth and innovation, and that's something we've been clear about all along. I would also say, if you want to think about how the ramp will happen over time, And think about the LRP guide that we've given, which is 50 BIPs to 100 plus BIPs on a year-on-year basis, margin expansion. And I feel very confident in our ability to deliver that, and the confidence comes from three areas, really. So if you look at number one is the execution excellence. You've seen our ability to perform under a variety of different conditions over the last several years, several quarters, and it's only getting better so that we can execute. The second is the Ignite operating system. So what started as a transformation is really now an operating system. So when we have a challenge or an opportunity, we can run it through and run it through the company very quickly in a cross-functional way. So it's very, very powerful. And you see that in our performance in the second quarter, top line, margin, and EPS. And then the last piece, which is what gets me up in the morning, is the customer-driven innovation. And so with those three elements, I feel very confident we're going to be able to expand our margins, as we've said. you see the innovation that we just launched at ASMS and I think we're in a good position to deliver really excited about the future

Tycho Peterson, Analyst — Life Sciences

last one, tariff refunds not embedded in the guide, how do we think about the impact, I think it was a $60 million gross impact when they went in, how do we think about it

Bob McMahon, CFO

yeah so as you know, people who pay tariffs, we have the right to file for a refund, we filed where appropriate and we'll continue to file so it doesn't happen all at once we didn't include it in the guide, one, because we don't have any information about the approval and when it's coming, so we don't want to skew that. We'll be transparent about when we get those numbers. The second piece is when we get the refund, we will include it in our adjusted non-gap earnings. We'll be transparent about it once again. If you think about what we paid in 25, it's about $70 million. And when we get that back, the last piece I would just highlight is that you know there will be some impact potentially on our variable pay so it may not all drop to the bottom line but when you look back in 2025 there was the same effect and so we want to make sure that we're treating our employees fairly great i think we'll leave it at

Tycho Peterson, Analyst — Life Sciences

that thank you