Good morning. My name is Maria and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to Danaher Corporation’s Second Quarter 2020 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Mr. Matt Gugino, Vice President of Investor Relations. Mr. Gugino, you may begin your conference.

Thanks, Maria. Good morning, everyone and thanks for joining us on the call. With us today are Tom Joyce, 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, the slide presentation supplementing today’s call, our second quarter 2020 Form 10-Q and the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call are all available on the Investors section of our website, www.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 & Presentations and will remain archived until our next quarterly call. A replay of this call will also be available until August 6, 2020. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. The supplemental materials 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 refer to results from continuing operations and relate to the second quarter of 2020 and all references to period-to-period increases or decreases in 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 only available 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 might 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. As a result of the size of the Cytiva acquisition and its impact on Danaher’s overall core revenue growth profile, we are presenting core revenue on a basis that includes Cytiva sales. References to core revenue growth, including Cytiva sales and the calculation of period-to-period sales growth compare to the current period of Cytiva sales to the historical period Cytiva sales prior to the acquisition. With that, I would like to turn the call over to Tom.

Thanks, Matt and good morning, everyone. We are very pleased with our second quarter results, especially in such a challenging environment. Our solid core revenue growth, strong cash flow generation, and more than 30% EPS growth are a testament to our team’s commitment to the Danaher business system and the outstanding portfolio of businesses that comprise Danaher today. We are tackling the challenges and opportunities presented by the COVID-19 pandemic head on and are fortunate to do so from a position of strength. These circumstances have showcased the resilience of our portfolio, a unique collection of market-leading franchises and technologies with a high level of recurring revenue and a foundation of continuous improvement. We believe that this powerful combination differentiates Danaher and will enable us to continue generating sustainable, long-term value for shareholders for many years to come. Before we run through our second quarter results, I would like to provide an update on a few of the ways we are directly contributing to the fight against COVID-19 today and well into the future. Diagnostic testing has been a critical component of the global community’s attempts to better understand and ultimately curb the spread of COVID-19 and Cepheid has been a leader in this effort. In March, Cepheid launched the first rapid molecular tests for COVID-19 that provides highly accurate results within 45 minutes. Multiple independent studies indicate that Cepheid’s test performance is best-in-class versus other point of care platforms on the market today providing superior virus detection with one of the fastest time to results. The team has meaningfully increased production capacity since the test was launched shipping more than 6 million test cartridges in the second quarter. As a testament to Cepheid’s commitment to tackle this global health crisis, the team recently announced the development of a rapid…

Thanks, Tom. That concludes our formal comments. Maria, we are now ready for questions.

Thank you. The floor is now open for questions. [Operator Instructions] Our first question comes from the line of Derik De Bruin of Bank of America.

Hi, good morning. Thanks for taking my question.

Good morning, Derik.

Hey, I got a couple to start with. I think the first one is, can you – we are getting a number of questions on the margin math for the second quarter and the inventory step-ups. Can you talk about the dynamics of that? And the better – the more important questions like, how did the gross and operating margins progress now that Cytiva is fully into the numbers and how should we think about the rest of the year?

Yes, sure, Derek. I will take it. So the gross margin, we saw kind of a decline of 200 basis points sort of year-over-year. Like Tom said in the prepared remarks, that is entirely driven by inventory step-ups related to the Cytiva acquisition in the quarter. So, if you exclude that impact, our gross margins are, I call it, closer to 58%, which would have been up a couple of 100 basis points year-over-year and again, I think largely driven by Cytiva. And that should be sort of one-time here in the quarter, Derek, that we get by as we start to move. That’s a one time thing here in the quarter. So going forward, you shouldn’t see that.

Okay, that’s – yes, I just want to clarify that and how should we sort of – and how should we think about the SG&A and the R&D the OpEx lines?

I don’t know that we had tremendous amount of kind of step-up issues in either of those two lines. I think about the R&D line, I think while I do think we will continue kind of invest in accelerate some spend here in the second half, I think more or less, the R&D line should stay pretty constant, again, outside of the investments that, that we are going to make here in the second half, largely around Cytiva. I think we are probably a little bit heavier investing there. But generally speaking, I think we are biased here in this environment to continue to try and spend to make sure that we position ourselves not only for where we are in the short-term here in ‘20, but to make sure that as we head into 2021 that we are in the best position possible. So might be how I think about it going forward.

Great.

Yes. I would I would add to that, Derik, just echoing Matt’s comments, we are obviously very fortunate to have a portfolio that now includes businesses like Cytiva, Pall Biotech obviously, Cepheid, driving outside performance and with outstanding operating margins. And I think you know our track record historically is, we like to take advantage of situations like this to continue to invest for the future. And some of that investment shows up in the sales line, some in the marketing line and certainly some in the R&D line. And I think you will see us continue to try to do that, because we feel well-positioned in our markets and we think that there are selective opportunities to continue to invest with growth and that will set us up exceptionally well, not only for rest of this year, but most importantly, I think for next year as we see the environment improve.

Great. If I can squeeze in one diagnostics question, you mentioned the 4-in-1 test coming out, it’s like how are you pricing that multiplex test? And also just talk about Cepheid capacity expansions, I mean, you have obviously picked it up since you – since March, but how should we think about where your cartridge development year can go or your production can go over the next couple of quarters?

Sure. Well, we are not yet at a point where we are in a position to talk about pricing on the 4-in-1 test. But certainly, this is a test that is going to be incredibly important in the market. We are going to continue to produce standalone tests as well, but there is no question our customers have expressed very strong interest in a targeted respiratory panel that brings together COVID, Flu A, Flu B and RSV. So we will be sizing up the opportunities relative to pricing over the next several weeks and be coming back with that. So, we think there is a tremendous opportunity there. Relative to Cepheid capacity, we continue to build on our output capabilities. You will recall, in the first quarter, I think we were at about 2 million tests and we were just ramping. We ramped well throughout the course of the quarter to 6 million tests. And we are going to – we have released a significant amount of capital to continue to build that capacity, some of that capital that we have released is going to take a little bit of time to come online. We will see some modest growth in the third quarter here and even more significant growth as we go into the fourth quarter and then certainly throughout 2021. I think key to this, Derik is our view that there is a tremendous amount of durability and sustainability to the testing benefits that Cepheid delivers to the market. Certainly, there is a lot of variables, there is plenty of competition. But when you look at the speed and the accuracy that we deliver and the value that we deliver associated with the diagnosis, there is no doubt that, that demand is going to be sustained over time. So, we are going to continue to ramp that capacity and sustain our strong positions in the market.

Great. Thank you.

Thanks, Derik.

Our next question comes from the line of Tycho Peterson of JPMorgan.

Good morning, Tycho.

Hey, thanks. Good morning. Tom on the COVID tailwinds, you noted 3Q [Technical Difficulty] comment on Cepheid, how much of the volume do you expect to go to 4-in-1 versus standalone COVID testing going forward?

Tycho, I am assuming you can hear me clearly, we couldn’t hear anything on your question on, unfortunately, just except for the very last part of the question around 4-in-1. So, I am going to try the 4-in-1 answer and then we will see if you come through clearer.

Okay.

So, I think your question was how much volume is going to move to the 4-in-1? We do not know the answer to that at this point. It’s we believe it will be significant and material, but in terms of putting a number on it quite yet, we just don’t have enough voice of customer yet. Obviously, we haven’t developed the pricing model yet and we are building capacity. So, we will have to come back to you probably in the next couple of months with a better sense of how we see that volume ramping. Again, we will continue to produce the standalone test so there will be a balance there. Time will tell on the overall volume. So, let’s try the earlier part of your question again.

Yes. It’s just [Technical Difficulty] vaccine and therapy work, why shouldn’t you see a more material COVID tailwind in 3Q?

Okay. We only caught – we really apologize, we only caught the tail end of that. I am looking at my team on video and they can’t – they couldn’t hear that either. But let me just try to – let me try to hit it a bit, because I think you asked about vaccines…

Why wouldn’t a 3Q tailwind be more material than 2Q for COVID?

Why? Let me see if I got that. You were asking about the Q3 tailwind?

For COVID.

Okay, got it.

Why is that more material given how much you have grown the Cepheid installed base and you have got Cytiva and Pall, why wouldn’t it be more material in 3Q versus 2Q?

Sure, sure. Absolutely. Sorry. I apologize that the transmission was so poor, but I think we got it now. We are going to see that volume continue to track. I think there was an outsized impact, certainly at Cepheid during the course of the second quarter with that instrument volume boosting at the rate that it did. We don’t expect that, that necessarily will continue to grow quite at that rate. So, I think that’s one mitigating factor. And I think as it relates to both Pall Biotech and Cytiva, I think we will see continued traction there. But at the moment, we think that what we are seeing from customers is a demand that is again given the quick ramp that was associated with the 200 or so vaccine and therapeutic-related efforts that are going on that those are likely to be more consistent in the third quarter rather than differentially higher. So, those are just some of the factors that perhaps that’s a little bit conservative. If so, we will take that, but in line, that’s our best estimate at the moment.

And then Tom, can you put in the – go ahead, Matt.

Yes. No, I just wanted to kind of get out. We are expecting – from a tailwind perspective, we are expecting a modestly higher benefit here in the quarter for everything Tom talked about sort of more or less the same volumes at Cepheid, but with a bit of a tailwind or a headwind here on the instrument side. But I mean, I think if you think about what we are going to be doing here in the fourth quarter and into ‘21, particularly around the build-out on Cytiva and if you think about our tailwinds build on the Cytiva – sorry build on the Cepheid capacity that’s coming online. And then probably as importantly, we had 40% growth in orders at both Cytiva and Pall Biotech here in the quarter. And while we don’t expect all of that to show up here in Q3, that does portend well for what we think the second half will sort of look like and as we head into ‘21 and that was not just on vaccines, but that was sort of kind of evenly split between vaccines and the therapeutics, which you know are a big part too. So, while we may have a more modest expectation for the third quarter, I think that there is a ramp as we head through the second half and then particularly into ‘21.

And then lastly, is there any color you can put on the vaccine and therapy work for Pall and Cytiva, I mean, you are not doing fill/finish work. So, there is no kind of per dose calculation, but could you just help us think about the magnitude of that work?

There are. Gosh, I mean, we are certainly working on that and given our exposure across the broad range of human clinical trials that are going on right now. We are starting to get a handle on those opportunities, but there are still so many unknowns to make sizing it tough. I mean, it’s the number and different types of winning vaccines and therapeutics, questions about production volumes, number of steps in each process. So, I mean, there is no question that it’s going to be a large and sustained opportunity, but it’s just – it’s just become – it’s a very hard number for us to wrap our minds around today. But I am sure we will get a handle on it as it becomes clearer who the winners are and how that production volume will ramp within any individual winner. We are not going to have dozens and dozens of winners here. I think we will have several winners and once we have more line of sight to where the winners are then obviously we can get a better sense of their dosage production volumes, our position there and what that means when you translate that into a sales volume.

Alright. Thanks, guys. Sorry about the quality issues before.

Yes, sorry Tycho. Thanks, though.

Our next question comes from the line of Vijay Kumar of Evercore ISI.

Good morning, Vijay.

Good morning, Tom. Thanks for taking my question and congrats on the solid execution through. Maybe I will start with Cytiva, 40% order growth, the implication of that is – I mean, if that business is contributing about 400 basis points of growth right now and the order book is running 2x that of the growth rates right now. The implication is that business should contribute 400 to 500 basis points of growth in fiscal ‘21 if assuming all of the orders that we are seeing flow-through get recognized as revenues in fiscal ‘21? Does it make sense?

Yes, I mean, I think it’s – this is Matt. I mean, I think the issue with that – the math can make sense, but it’s the assumption around the timing, I think that we just are still kind of TBD on, Vijay, whether that starts to flow real hard here in the third or fourth quarter or if it starts in the first half of ‘21. I think that’s the only question that’s really around the timing. But like I said, earlier with my comments, I mean, I think we are pretty encouraged by the start of Cytiva both on top line, the core business outside of COVID and the COVID opportunity that’s starting to emerge that you saw with that level of orders growth.

And just on the margin itself, Matt, I mean, if you look at I think the deal model had Cytiva running at mid-30s. It looks like it came in well above 40%. Is that – is there any timing element on those margins or how sustainable is the Cytiva on the margin side?

Yes, sure. Cytiva margins did come in north of 40 in Q2, which is obviously, like you said better than sort of the recent performance that we had seen out of them. I think there is three things to think about on the reason for that. One, you know, we had higher volume here north of 20% core growth does give you lots of opportunities from the fall-through perspective from a VCM perspective. So, we did have higher volumes. The other thing – the second thing is there is probably a very favorable mix element here. We had sort of the higher margin businesses like process chromatography grew double-digits, while more of the equipment heavy businesses will call it low single-digits, which was kind of a very favorable mix impact in the quarter. And the third thing is and I think you’ve seen it a lot of places, we just have a lot lower OpEx spend given the stay-at-home orders, right, travel, trade shows, etcetera, was sort of much lower. So I think if you add it all up, that’s how we sort of went from where we thought it would be to sort of north of 40, but I would sort of maybe temper some expectations here as we head into margin, think about the margins in Q3. Like I said, Q2 was sort of a perfect storm with everything going the right way, but there is two things that I think to think about as we head forward into Q3 in the second half. One is this is a business that we are going to accelerate the growth investments in, not unlike we have done with our other businesses, we alluded to that earlier in the call. But in particular, this business one, given the plethora of growth opportunities that are out there and across all of their businesses, not just bio-processing and frankly the business we have got to invest as much as it would have liked maybe in the past and we are very eager to make sure that they have every opportunity affording to them. So that’s one. And then two, we are 90 days into this from a kind of standing it up on its own, if you will. And so our standup costs, the number of people we have hired, the cost that we put into the business so far to get it stood up and off of sort of the GE kind of apparatus that is going to ramp as we go through the second half. And that will have an impact here on the margin profile as well. So good, good start for sure, little bit better than we thought on a perfect storm. But I do think there is some moderation coming.

That’s helpful, Matt. And one big picture for Tom. Tom, if you look at the balance sheet, $5 plus billion of cash in hand, free cash looks like we are run-rating well above $5 billion. I am just curious I think at the time of second week, you guys made comments about the ways being opportunistic? I am just curious how your thoughts on cap deployment are evolving in the current environment? Thanks, guys.

Sure, Vijay. Thank you. Yes, we are in a very strong and fortunate position relative to our balance sheet and that position continues to be reinforced by really exceptional free cash flow, a $2 billion cash flow number on a year-to-date basis really continues to put us in a great spot. When I talk about opportunistic, that’s a term that we would typically use associated with a very uncertain sort of disrupted environment like we are coming through in the first quarter and continue to see in the second quarter and that sometimes creates opportunities that for whatever reason, we may not have seen coming, businesses that get into a spot where all of a sudden, they have a change of heart about their future and we are able to take advantage of that. But with the strength of the balance sheet that we have now on the back of the equity offering that we did, the strength of the free cash flow here in the second quarter and what we see is continuing strength net free cash flow in the third and fourth quarters, that positions us to really continue to work hard on the strategic opportunities that we focus on consistently throughout the course of the year and that goes across each one of our platforms, Life Sciences, Diagnostics, water quality and PID, each of them continuing to focus on key market segments, where there are unique opportunities, key product and technology opportunities, where we can complement the strength of our existing portfolio and in some cases bring on a unique and differentiating leg of the portfolio that allows us to add greater value to customers everyday. And so I think we are in a great position. We are starting to see some improvement in the environment in the second quarter. One example of that is a deal that we did for our water quality platform, Aqua Informatics in the second quarter, that was a deal that was essentially put on hold earlier in the first quarter as things tightened up. But as things started to improve, we were able to reengage and we are able to consummate that acquisition in the second quarter. And that’s a tremendous add of a key data management and software capability for our water quality platform. And we are looking forward to do that team playing significant roles. That’s just one example. But I would say we are generally seeing an improving environment one that we can not only be opportunistic, but I think, continue to drive to our strategic objectives at the same time.

Thanks, guys.

Our next question comes from the line of Scott Davis of Melius Research.

Hi, good morning guys.

Is this the author? Is this the author?

Well, no comment. I should have done it under a pseudonym, I guess that are anonymous. I’d get less hate mail.

I have gotten through the – I have gotten through the introduction. I didn’t get directly to the Danaher chapter, but thank you. Welcome, Scott. Good morning.

Well, thanks, Tom. It’s very kind. But hopefully the book helps you sleep at night, couple of pages, and you are out like a light, but anyways, I – lot of good detail already and you just talked a little bit about M&A and what do you envision Tom in the next kind of 12 months, I mean, this is a strange environment. Is it a better environment for bolt-ons? Is it better environment to take bigger bets like you did with Cytiva? Is it – I mean, just a little bit of color around that just given how strange things are right now?

Yes. Well, first of all, Scott, I think over the next 12 months, I think we will see without any question an improving environment from an M&A and capital deployment perspective. I mean, we all know that, March, April, I mean, things were essentially locked down in to great extent people were frozen in place in many different ways. And so there is no doubt that you come off of a situation like that. And I think we will see improvement. We are already seeing a little bit of that already. I would say normally what happens particularly on the back of a very large acquisition, like Cytiva that we have done, you have historically seen us do more, small, mid-size bolt-on acquisitions to our platforms. And I know the teams are working actively on those. Some of those smaller situations can get a little unhinged here in an uncertain environment and that tends to serve us well. But also in terms of just the way we manage our resources internally, on the back of a big deal, we tend to do a few smaller deals. Now, all that being said, when the balance sheet is as reinforced as it is right now, we are in much better shape than we might have been had we not done the equity offering and had the tremendous advantage of the current free cash flow certainly that Cytiva has helped with. So, in general, I think we can be pretty balanced in our approach. I mean, obviously, Cytiva was outsized, but I think we can be pretty balanced in terms of taking advantage of an improving environment.

And Scott, it’s Matt. Maybe put some numbers to the context of what Tom just talked about, we have got pro forma EBITDA, this year, that’s going to be close to $6 billion. And as of right now, we are less than 3x net debt to EBITDA. So to Tom’s point, we have got some flexibility to be aggressive with larger or the smaller stuff.

Yes, for sure. So, natural follow-on just again, in the context of this is kind of a strange environment and you have got amazing growth rates in so many of your businesses, how do you integrate Cytiva for the long-term, I mean, in this environment. And I mean, really specifically, bringing in DBS tools and really culturally, I mean, bringing the best of the Danaher culture kind of into that organization even obviously talk about standing it up as kind of a decentralized business, but how do you do it and is it at all delayed at all? And you don’t want to kind of disrupt the business flow right now given how high the growth rates are or is it already begun and you are really, it’s similar playbook is maybe your past acquisitions?

Yes. Scott, we have had to – we have certainly had to be creative in this environment. And I think we have been able to do that, I will describe what I mean by that here in a minute, but obviously with the restrictions on travel and being and what would normally be very much a face-to-face environment with a newly acquired business, particularly a new one, we have had to come up with new and different approaches to achieve the same objectives in the early going around DBS orientation and getting a business off to a great start. So, I think this all starts with the fact that the Cytiva business brings with it to Danaher really an exceptional team of people. We got to know them unbelievably well during diligence. Certainly, we had a whole year to regulatory approvals to get to know one another. We have gotten a sense of their command of the business, their ability to drive performance, their focus on continuous improvement, the level of humility they bring, all of which sets up for a team and a business that adapts very rapidly to a Danaher environment, because they are so culturally like us right at the outset. Add to that the fact that the team reports indirectly to Rainer. Rainer will continue to have that team report directly into him. And he has maintained that relationship and continued to build those relationships and bring the tools and processes to that team on a virtual basis. So, we have gone through what we call ECO. You have heard of that before executive champion orientation, a lot of that very familiar to that, that team because they are well down field in a number of the tools and processes of DBS. So, yes, we also have some of our teammates going into that, that business and that obviously further accelerates the DBS orientation. So, net-net, the combination of using virtual, our electronic and digital tools to conduct DBS training and orientation and communications along with having an outstanding team already, plus some folks from Danaher going into that business. We can safely say right now, we are very much on track to where we would like to have been if we were in a face to face environment.

Okay, good. Thanks. Congrats, Tom, congrats, Matt and good luck for the rest of the year.

Thanks, Scott.

Thank you, Scott.

Okay.

Our next question comes from the line of Doug Schenkel of Cowen.

Good morning, Doug.

Good morning. Thank you for taking my questions. Starting with another one on Cytiva, your growth, even excluding COVID-19 was definitely a bit above your deal model assumptions of course, the role you are playing in advancing COVID Solutions helps the growth profile as well it is early but I am curious how these trends impact your view on Cytiva accretion and returns longer term, especially given the early and pronounced non COVID strength?

Well, Doug, I will start with the top line and then Matt will jump in with how we see that that flowing through when you are accurate, it they are off to a start that is better than what we anticipated in the growth model. You heard us talk to numbers that were in the in the 10% range. And that core growth in 2019, if you go back to that was about in that range. And yet as we came into this year, they came in with a strong order book, good backlog, and then you had the COVID impact on top of that and so when you then kind of separate that you see there what you might say there non-COVID base business growth being in the mid-teens and the COVID volume obviously taking that volume growth over 20%. So, I think the key message there is this is a business as a base business put COVID aside for a second that is off to a phenomenal start that continues to lead in its market and is continuing to build the order book day in and day out.

That’s helpful. It’s actually a good second question. In your remarks, you have commented on Cytiva and the Pall Biotech order book, your order book looks like for capital equipment. It’s like the recent [Technical Difficulty] of airtime in the Q&A today but it’s clearly better than expected [Technical Difficulty] end market, some momentum building in academic research, but in both categories, it seems like consumable and service were well equipped for them. So the reason I am asking about the broader order book and answer it however you want, of course, but I am just wondering if you think there is pent up capital demand heading into the second half and if there is evidence that this could start to turn into revenue over the course of the year?

So Doug, there was a part of that question. Early on that we did not catch. It broke up, but I think we definitely caught the back end of your question. So I am going to hit that assuming we didn’t miss anything at the front end, which was really around you are talking about consumables and service versus equipment in my prepared remarks, and you were asking about pent up capital demand. And I think the simple answer to that question is, yes, there will absolutely be some pent up capital demand in a number of different areas. I might site one example if I turned to our Environmental applied solutions business segment and I look at a Videojet in PID, while you have our consumables business tracking really well, we have seen much more weakness in our in the equipment side of Videojet. But we know over a long period of time that equipment has a lifecycle and requires replacement, it requires a certain level of maintenance. You certainly had an expanded utilization of much of that equipment, as consumer packaged goods, volumes have grown. And so I would, very much expect to see that fuse one example that Videojet equipment start to track back in short order, I think ditto on as labs reopen in the life science market. We are going to see some improvement there. And in fact, we have dialed some of that improvement in even the third quarter as we start to see labs reopening we are going to see some of those orders that would have normally flowed through in the first and second quarter come through in the third.

Okay.

Yes, Doug, this is again – Doug it’s Matt again. I started just kind of put some maybe some numbers in context to the overview Tom gave. I mean, you saw here in Q2 our order book grew nearly 10% from an order perspective. So, that’s – it’s an encouraging sign to what Tom just talked to and we have got the core business, if you will, without the Cytiva – or sorry without the COVID tailwinds was down kind of 3% here in the quarter. And as Tom just mentioned at the end, we are sort of anticipating because of that nearly 10% order growth, I think you will see an improvement of that, minus 3% sort of going to flat here in the quarter.

Okay, that’s super helpful. I will try to sneak in one last one just a clean up question, hopefully you can hear me okay now. In the second quarter, you delivered adjusted earnings growth that was 70% or so higher than reported revenue growth, is it fair to think that it’s going to be lower than that in Q3 as the mix starts to evolve a bit more towards capital and as you are ramping some of the opportunistic investment you described earlier in this call?

Yes. I mean, maybe the way to think about kind of the third quarter and VCM, etcetera. I mean, it is a little tricky. I think you do need to sort of look at the core business that is, Danaher ex-Cytiva, maybe the way that I think about it is that from a fall through perspective, that Danaher non-Cytiva piece is probably going to have a 30% to 35% variable margin on it fall-through if you will as we do make some of the investments we have talked about in Cytiva and elsewhere. I think if you then include the assumptions around Cytiva, put those in, I think that sort of gets you from an EPS perspective sort of south of where we were here in Q2, but probably closer to what I think we are going to end up with.

Okay. Thank you again.

Thanks, Doug.

Our next question comes from the line of Steve Beuchaw of Wolfe Research.

Hey, good morning. Thanks for the time here.

Good morning.

Okay. Hoping you could just put a little bit of perspective on in terms of the recovery trajectory and then I had one less exciting model question. There are two things that we have focused on the call here where we have good reason to be at least directionally optimistic about how things evolve. One is vaccines, in the vaccine space, while it’s certainly tough to know exactly how it’s going to look and how big it’s going to be. It would be really helpful if you could just give us a little perspective on what the slope of the curve looks like. If we are at ex today which is a sort of preliminary investment in scaling up in anticipation of vaccines, when we get out to ‘21, is it still X or is it X x2 or X x3? What does that look like? And then the other ramp related question I was going to ask actually relates to healthcare utilization. So, Tom, you gave some really helpful commentary on how people are getting back to getting healthcare to some extent in doc office settings to some extent in hospitals, that’s encouraging, should we take this to mean you feel good about this sort of dovetails off of Doug’s question, but the ramp for hardware spend on some of the Beck DX and Leica products that might have been under a little bit of pressure in 2Q, do we get that back starting in 3Q or given everything that’s going on the hospitals to take a little bit longer? Thanks so much.

Yes, you bet. So, your broader question started out with recovery trajectory and I want to just hit one quick theme and then I am going to get your question about vaccines. One of the key things we haven’t really touched on this call, even though I mentioned it in my prepared remarks on the recovery trajectory was China. We saw a significant improvement in our China business over the course of the second quarter. And if you looked at that, the breadth of that improvement that span not just across Life Sciences and Diagnostics and not just across, Cytiva and Pall, but – or Cepheid, but our other businesses like Beck LS and LMS, our EAS businesses like Hach and Videojet, all performed extremely well in China benefited from the kind of trajectory of recovery that we are seeing broadly there and across the board, delivered positive low single-digit growth in China in the second quarter. So that’s – I think that’s an important dynamic of this recovery trajectory that we haven’t really touched on today, but let me get to the core of your questions. In terms of the vaccine multiples, again, yes, you are right. It is, as I said earlier, very hard to gauge. But at this point, I mean, you are talking about a really high multiple of volume versus today. Let me give you an example. I mean, today, all of these – all of our revenues associated with this are in the early stages of Phase 1, Phase 2, early stage human trials, small volumes etcetera. I mean, we are nowhere near the stage of talking about tens, let alone hundreds of millions of doses of either a vaccine or a therapy. And so, again, hard to put a number on it, but I can only say it’s certainly a high multiple of where we are today, but with a lot of variables attached to how high that number is. Relative to your question about healthcare utilization, I think the simple answer is yes, we will be seeing an improvement in the hardware equipment side of the house and yes, it is associated with Beckman Diagnostics and Leica Biosystems…

Brief musical interlude.

Brief musical interlude maybe that was associated with the recovery in healthcare utilization, but the issue has been not just around healthcare utilization relative to equipment, but it’s really been about the fact that in a COVID-19 environment, access to hospitals in any area whether it’s the reference lab area, anatomical pathology, microbiology, access to those labs for hardware installations has been limited, if not in certain cases, zero. And so just as we are seeing academic and research labs opening up on the life science side, as we have started to see hospitals opening up a bit relative to elective procedures and overall utilization, we are now starting to see our ability to get in and install equipment that’s in the order book come along. So we will see some improvement there. It will take some time for that to happen, because hospitals are still highly restricted in their access. But as we go into late this year and early next year, we will start to see that return to a more normal growth rate.

Okay, that’s incredibly helpful. I know we are top of the hour here. So I will take my financial question offline. Really appreciate all that.

Okay. Thanks so much.

Thanks, Steve.

And ladies and gentlemen, we have reached the allotted time for questions. I would now like to turn the floor back over to Matt Gugino for any additional or closing remarks.

Thanks everyone for joining us today on our call. We are around all day for questions.

Thank you ladies and gentlemen. This does conclude today’s conference call. You may now disconnect and have a wonderful day.