Revvity, Inc. 2026 Q2 Earnings Call

Good morning, everyone, and welcome to Revvity's second quarter 2026 earnings conference call. On the call with me today are Prahlad Singh, our President and Chief Executive Officer, and Max Krakowiak, our Senior Vice President and Chief Financial Officer. Before we begin, I'd like to remind you that today's call may include forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially from our expectations. Please refer to the safe harbor statements in our earnings release and to our SEC filings for a detailed discussion of these risk factors. We assume no obligation to update these forward-looking statements in the future. Additionally, we will refer to certain non-GAAP financial measures during this call. Reconciliations to the most directly comparable GAAP measures are available in our earnings release. I'll now turn it over to our President and Chief Executive Officer, Prahlad Singh.

Prahlad. Thank you, Steve, and good morning, everyone.

I'm pleased to report that Revvity delivered strong results in the second quarter with pro forma organic growth of 3%, resulting in total revenue being above the high end of our expectations. Our pro forma adjusted earnings per share of $1.41 was well above the high end of our guidance due to better than expected underlying operating performance, tax planning timing, and the unanticipated contribution of tariff refunds we received in the quarter, which Max will touch on more in a bit. These results reflect the continued strength and resilience of our diagnostics franchise, the third consecutive quarter of improving conditions across our pharma and biotech end markets, growing customer demand for tools that enable AI-driven science, and the continued momentum of our Signals software business.

Given the stronger performance and our improved optimism for the second half, we are raising our pro forma guidance for organic growth, adjusted operating margin, and adjusted EPS for the full year, which Max and I will provide additional detail on in a bit. Before I provide more detail on the operational progress we are making, I want to share a brief update on the status of the divestiture of our China Immunodiagnostics business, which we first announced last quarter. We have now signed a definitive agreement with the buyer on terms consistent with our initial expectations, and we continue to anticipate the transaction closing by the end of 2027.

This divestiture is a deliberate strategic decision as China has represented a structurally more challenging environment for this part of our business of late, and we are confident this transaction allows us to sharpen our focus on the end markets, where our differentiated capabilities generate the highest and most durable returns for our shareholders. While our reported GAAP results will continue to include the contribution from this business until the transaction is completed next year, all of our non-GAAP and organic performance commentary and guidance are provided on a pro forma basis, which excludes the Immunodiagnostics business in China that we have agreed to divest. Turning to our end markets. I'm increasingly encouraged by what we continue to see.

The gradual improvement in demand from our pharma and biotech customer base that we began to observe in recent quarters continued into the second quarter, we are now seeing tangible signs of a more constructive spending environment. In particular, we are seeing a definitive and progressively larger increase in orders directly related to AI, reflecting demand from both traditional pharma and biotech customers, as well as emerging demand from non-traditional customers that have not historically purchased from us. These organizations are building AI-driven drug discovery platforms and are seeking capabilities that sit squarely within Revvity's portfolio. That is why we are especially well-positioned because AI may accelerate hypothesis generation, but those hypotheses still need to be tested, validated, and advanced through real-world biological data generation, lab-based experimentation, and software-enabled collaboration.

Together, this improving demand from existing customers and new demand from customers outside of our historical base contributed to a higher than normal level of instrument backlog exiting the second quarter, positioning us very well as we enter the second half of the year. While we have touched on this over the past several quarters, demand for our high-content screening instruments, particularly our recently introduced new flagship instrument, the Opera Phenix OptIQ, remains extremely robust, with continued double-digit growth year-over-year, despite more difficult year-ago track comparisons. Demand for high-content screening further accelerated during the second quarter, with order velocity outpacing near-term production capacity, despite dedicating additional resources as the quarter progressed to support customer demand.

As a result, while we may have left some further incremental upside on the table in the quarter, it positions us even better as we move into the third quarter and back half of the year. It is important to note that this build-out by our customers of additional capacity will also result in future improvements in demand for our related high-content screening reagents. Because high-content screening is commonly used by customers to both generate new data and to validate existing hypotheses, it plays an increasingly important role in AI-driven discovery workflows, where lab-generated insights can be fed back into AI models over time. This acceleration in high-content screening demand is a tangible example of the AI adoption cycle I discussed with you last quarter beginning to play out.

At that time, I described how we expect AI to move from solely being in an infrastructure build-out phase to eventually a value creation phase, where the real opportunity comes from generating, validating, and translating new biological data. We are now beginning to see that dynamic show up directly in customer behavior as AI enables customers to identify and design more therapeutic compounds and molecules that still need to be tested, screened, and validated in the lab. That is where Revvity is especially well-positioned, because the need for high-quality biological data, physical validation, and integrated scientific workflows plays directly to our core strengths.

This concept where AI models become part of the experimental cycle itself, continuously learning from results, suggesting next steps, and compressing the time between hypotheses and insight, but importantly, generating more unique data than ever possible in the past, is increasingly being referred to by customers as a lab-in-the-loop workflow. Revvity's instruments and reagents generate the data. Our recently released Signals AI capabilities and our newly introduced Anthropic MCP connector now allow scientists to close that loop in ways that were simply not possible before. These examples highlight how Revvity helps power scientific intelligence as we support customers throughout this new discovery process, reinforcing why we are one of the best-positioned companies in the entire industry to benefit from the AI-driven transformation of preclinical R&D that is only just beginning to take place.

Against this backdrop, our Signals software business remains a critical part of how we enable customers to manage and apply scientific data across their workflows. In the second quarter, Signals performed in line with our expectations against a very difficult year-ago comparison, with organic revenue declining approximately 20% year-over-year. We continue to expect a return to strong double-digit growth in the second half of the year in our software business as its APV continues to grow in the double digits. You have seen from our many new product announcements so far this year, the level of innovation in this business is robust and has only begun accelerating. Our large molecule workflow offering, BioDesign, is now commercially available and beginning to gain traction.

Our AI models as a service platform, Xynthetica, began rolling out to initial beta customers last month. Our novel workflow coordination layer offering, which spans discovery through manufacturing, LabGistics, remains on track to be released later this year. In the meantime, we also recently launched Signals AI, which embeds leading LLM capabilities throughout our Signals platform, allowing users to leverage AI capabilities within the core platform itself, where their proprietary data already exists. In early July, we also announced a new connector with Anthropic, enabling customers to use their data along with other outside programs and datasets directly within Claude and Claude Science itself. These two new capabilities are complementary to each other and both expand the functionality of the core Signals platform while creating greater stickiness, driving increased retention, along with adding new consumption-based revenue streams over time.

Finally, just two weeks ago, we announced a new initiative called Signals for Startups, which is a new commercial program designed to make our Signals platform accessible to even the smallest of biotechs. This allows these customers to adopt and incorporate our Signals platform with its predefined workflows right from the outset of their corporate journey, so they can more easily scale as their businesses take off. I look forward to sharing more with you on all the exciting developments occurring within Signals at our upcoming Investor Day on November 13th in New York City. The strength across our portfolio is also reflected in our diagnostics business, which again delivered exceptional performance. Overall, diagnostics grew 11% organically in the quarter, a further step-up from the high single-digit organic growth we saw from the segment in the first quarter.