Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2017 First Quarter 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. Thank you. I would like to introduce our moderator for the call, Mr. Kenneth Apicerno, Vice President, Investor Relations. Mr. Apicerno, you may begin the call.

Good morning and thank you for joining us. On the call with me today is Marc Casper, our President and Chief Executive Officer; and Stephen Williamson, Senior Vice President and Chief Financial Officer. Please note that this call is being webcast live and will be archived on the Investors section of our website, thermofisher.com, under the heading Webcasts & Presentations until May 12, 2017. A copy of the press release of our first quarter 2017 earnings and future expectations is available in the Investors section of our website under the heading Financial Results. So before we begin, let me briefly cover our Safe Harbor statement. Various remarks that we may make about the company's future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2016 under the caption Risk Factors, which is on file with the Securities and Exchange Commission and also available in the Investors section of our website under the heading SEC Filings. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. Also, during this call, we'll be referring to certain financial measures not prepared in accordance with Generally Accepted Accounting Principles, or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release of our first quarter 2017 earnings and future expectations and also in the Investors section of our website under the heading Financial Information. So with that, I'll now turn the call over to Marc.

Ken, thank you, and good morning, everyone. Thanks for joining us today for our Q1 call. We accomplished a lot in the quarter, and we had a great start to the year. We delivered strong financial performance on both the top- and bottom-line. We had a very productive quarter for innovation across our businesses. We continued our strong growth momentum in Asia-Pacific, and we enhanced our customer value proposition with two strategic bolt-on acquisitions while continuing to return capital to our shareholders. Our team executed well to deliver a strong Q1, and we're well positioned to deliver another excellent year. I'll cover each of these highlights in my remarks, starting with our financial results. We delivered excellent adjusted EPS growth in Q1, with a 16% increase to $2.08 per share. Our revenue in Q1 grew 11% year-over-year. Our adjusted operating income increased 16%, and we expanded our adjusted operating margin by 90 basis points to 22.6%. So we clearly had a great start to the year. Turning now to our performance by end market, in pharma and biotech, we continued to see good growth and our performance in Q1 was in the high-single-digits. The combination of good market fundamentals and the strength of our unique value proposition continues to drive demand from these customers. We had another strong quarter in our bioproduction business, and we also saw strong demand for our biosciences products. Our performance in academic and government end markets in Q1 was similar to what we saw last year and we grew in the low-single-digits. In health care and diagnostics, conditions really haven't changed since last year, and we grew in the low-single-digits in this end market as well. Last, in industrial and applied, we grew at the company average. Applied markets continued to be strong, and we…

Thanks, Marc, and good morning, everyone. As usual, I'll take you through our first quarter results for the total company. I'll then provide some color on our four business segments, and conclude with our updated 2017 guidance. Before I get into the details, let me start with a high-level view of how the first quarter played out versus our expectations at the time of our last earnings call. We delivered 4% organic growth in Q1 which was approximately one point higher than we had expected at the midpoint of our previous guidance. This was driven by strong operational execution during the quarter. From an earnings standpoint, we finished $0.06 higher in Q1 than we'd assumed in the midpoint of our initial guidance. This was primarily driven by the pull-through on the additional point of organic growth and a stronger-than-expected contribution from the FEI acquisition. So we're clearly off to a great start to the year. Now let me give you more color on the quarter. Starting with our total company financial performance for Q1, as you saw in our press release, we grew adjusted EPS by 16% to $2.08. And GAAP EPS was $1.40, up 39% from Q1 last year. On the top-line, our reported revenue grew 11% year-over-year. The components of our Q1 reported revenue included 4% organic growth, 8% growth from acquisitions, and a 1% headwind from foreign exchange. Looking at growth by geography in Q1, North America grew in the low-single-digits while Europe grew in the mid-single-digits. Asia-Pacific grew in the low-double-digits with continued momentum in China, which grew in the high-teens, and Rest of the World was flat organically for the quarter. Turning to our operational performance, Q1 adjusted operating income increased 16% and adjusted operating margin was 22.6%, up 90 basis points from Q1 of…

Thanks, Stephen. Operator, we're ready to take questions.

Your first question comes from the line of Derik de Bruin with Bank of America Merrill Lynch. Your line is now open.

Hi. Good morning.

Good morning, Derik. How are you?

Good. So lot of questions, but I'll limit it to one just in the spirit of things. So some of your competitors were talking about some weakness in the U.S. pharma businesses. It doesn't look like that materialized for you. Could you just talk a little bit about that environment? And I guess the commentary on the LPS margin being offset by the mix of biopharma services, is that – could you elaborate a little bit more on that in terms of what you're seeing on that one? Then I've got a follow-up.

Sure. Derik, thanks for the question. At a high-level, when I think about the quarter, obviously a very good start to the year. And the team executed well, serving all of the markets. We came out of the quarter very confident with the 4% organic growth guidance that we outlined back in January. In terms of the color around pharma and biotech, it was a good quarter. It was once again our strongest end market. As I mentioned, it grew in the high single digits. In addition to the strength in bioproduction and biosciences, we also had good strength from chromatography and mass spectrometry. So really a good quarter. As Stephen mentioned in the LPS segment, you saw margin dilution. That was really driven by something we expected in our biopharma services business, which was at the end, in Q4, one of our customers canceled a large Phase III study, a very public one. It had nothing to do with us. The study itself was canceled. And that was a good-sized contract and a profitable piece of business. So it shows up really more in the margin profile within LPS. And we'll sunset that after the third quarter of this year.

So that was the clinical trial logistics business, right? That...

Exactly. Correct.

Okay. All right. And then...

A single study that was canceled, basically.

Great. Thanks for the color on that. And I guess as you – have you noticed any sort of slowdown or hesitation in the academic labs? It doesn't look like it based on your 7% LSS number. But I would love some commentary on that. Then I'll shut up.

Well, you don't have to shut up. But from the quarter, academic and government was low single digits, very similar to what we've been seeing in recent quarters; Asia-Pacific being strongest. In terms of the U.S. academic and government, we grew slightly. And we would have expected by this point to be operating with a budget as opposed to under a continuing resolution. So we didn't see really significant change. If you get into the details of the U.S. academic and government, consumables was stronger than instrumentation. But again in aggregate, a low-level of growth in the U.S.

Great. Thank you very much.

Thanks, Derik.

And your next question comes from the line of Tycho Peterson with JPMorgan. Your line is now open.

Hey. Thanks. Nice quarter, guys.

Thank you, Tycho.

Maybe starting with FEI, obviously the commentary there pretty constructive. Can you talk a little bit on demand trends for cryo-EM adoption and interest you're seeing from pharma? It sounds like you're starting to bundle a little bit with Orbitrap per your commentary. And then separately on the semi-side of that business, can you talk a little bit about how much you're seeing a pickup there? I guess what I'm getting at is, in prior cycles that business can be kind of high single digit or double digit at the right point of the cycle. So just wondering what the inflection point looks like for that business.

Tycho, thanks for the question. Good chance to just talk about FEI broadly. First, from an integration perspective, going very well. Really a fabulous team and very good complement to our company. In terms of the growth performance, we had a very strong quarter within FEI. And we're expecting to have very strong growth. As you know, because we won't anniversary it until the very end of the third quarter, it's not going to be meaningful contributor to our organic growth. But on a pro forma basis, the business is growing very well. When you look at the pieces of the business, the life sciences portion of the business, which is driven by cryo-EM, is going incredibly strongly and there's excellent interest both in the academic community as well as you're seeing the beginning of interest in the pharmaceutical community as well. We've had some orders put in place, we also had, importantly, those customers kind of sharing some of the academic instruments, doing some studies which shows their interest and, ultimately, we think that they'll become purchasers as well. So that's very strong growth. Material science, which incorporates all of the non-life-sciences, semiconductor, academic, material science, oil and gas, every single thing that's not life sciences within the FEI business had very strong bookings growth in the quarter. Revenue growth was more muted in aggregate, but that will pick up as the year goes on, and that's driven by semiconductor being very strong on the bookings side. So a very encouraging first six months of the integration and we feel very good about the FEI business and how we'll add value to it and how it will add value to Thermo Fisher Scientific.

And then maybe for a follow-up, just on industrial commentary in general, you talked about research and safety doing pretty well, I think last quarter you've made some comments about metals and mining picking up. Can you maybe just talk a little bit about incrementally relative to last quarter where you've seen some improvement? And we have heard some peers about more of a pickup in Asia industrial as well. So just wondering if you could comment on that, too.

Yeah, of course. Thanks, Tycho. So as I mentioned in the beginning, industrial and applied grew at about the company average for the quarter. Applied markets were good. Industrial clearly is progressing as we had talked about last quarter. So when you look at the pieces, the shorter cycle portions of the business and the channel reflects that as would some of the lower purchase price, lower aggregate priced instrumentation, had a good quarter in terms of growth and what was also encouraging is that bookings were continuing to grow in the longer cycle products, the things that we mentioned last quarter. So that's two quarters in a row of bookings growth there, and that bodes well for the industrial end markets to play out in line with the expectations that we had articulated back in January, which is growth around the company average, and that would be a nice improvement over what we had seen over the last few years. So that's encouraging.

Okay. Thank you.

Thanks, Tycho.

Your next question comes from the line of Doug Schenkel with Cowen. Your line is now open. Doug Schenkel - Cowen & Co. LLC: Good morning. What assumptions are embedded into full year guidance for revenue growth by end market and geography? And how have they have changed, if at all, relative to what you embedded into guidance coming into the year?

Yeah, I'll take that one. So, Doug, nothing much has really changed when we look at it by end market from where we were at the beginning of the year. Some minor puts and takes across it. So biopharma will still be the strongest grower, expecting that to be kind of mid-to high-single-digits. Industrial and applied, as Marc said, would be about company average, and diagnostics and health care, and academic and government would be about kind of low-single-digits for 2017, same as 2016. Doug Schenkel - Cowen & Co. LLC: Okay. Thanks, Stephen. And...

From a geographic... Doug Schenkel - Cowen & Co. LLC: Oh, go ahead, sorry.

From a geographic standpoint, Doug, Asia-Pacific, really no significant changes from the guidance back in January. Asia-Pacific, by far the strongest, and both Europe and North America just below the company average would be our expectations. Doug Schenkel - Cowen & Co. LLC: Okay. So just a couple of quick follow-ups. I mean, it does seem like pharma is holding up at least as well as expected, if not better, NIH uncertainty doesn't seem to be hitting you and you already had low expectations for that end market and industrial seems to be tracking a smidge ahead of plan. You beat your Q1 expectations as you indicated in your prepared remarks. But why not bump up organic revenue guidance a bit based on all of these observations? Is it just a function of being early in the year and wanting to have a little bit more confidence before making any changes?

Yeah, you know Doug, it's a good question. The way that we think about it is twofold. First, it is a bit early in the year, and, well, obviously we're encouraged by the good execution in Q1, so it's a bit early to make changes on that. The second thing is one of the assumptions that's embedded in the guidance both in January, in particular was that we would be operating with a U.S. budget and, obviously, that budget that's been talked about is going to have a nice increase for NIH funding. Obviously we're sitting here at the end of April and we're still under continuing resolution. So that's something that we're just paying attention to and, obviously, three days ago, the news was discouraging, this morning the news is encouraging, and we just look forward to actually going from continuing resolution to budget and that can be a positive as the year unfolds. Doug Schenkel - Cowen & Co. LLC: Okay. And one last follow-up on this topic. Marc, you have better visibility than many if not most of your peers given the size of your business in China and how much time you spend there. Do you have any sense if there's stimulus-like activities or anything else that might be contributing to outsized growth in the near-term? Really what I'm getting at is it doesn't sound like you have any concerns about the sustainability of recent strong trends in China. I just want to make sure you haven't picked up on anything that would change your conviction on the durability of trends.

No, when I was in China at the beginning of April, where we're seeing this excellent, excellent activity is very much aligned with the five-year plan. It's not a stimulus-driven thing. It's really around precision medicine. We had a great interaction with a number of thought leaders there, and they're very aligned with what we're doing and obviously in food safety, environmental and the expansion of healthcare. Those were really core parts of the five-year plan in China. So we're not – we hadn't heard much about, if any, about a short-term stimulus effect but rather really alignment with fundamental government priorities. So we think we're very well positioned and, obviously, have a very strong team there. Doug Schenkel - Cowen & Co. LLC: Okay. Thanks again.

Thanks, Doug.

Your next question comes from the line of Jack Meehan with Barclays. Your line is now open.

Hi. Thanks. Good morning, guys.

Good morning, Jack.

I wanted to start digging on mass spec and chromatography. You talked about the nice growth there. I was just wondering if any of the underlying drivers have changed. And, Marc, do you have any updated views on the clinical opportunity?

Yeah, Jack, good questions. From the chroma, mass spec area, we continue to drive good growth. We saw strong performance in our high-end mass spectrometers, the Orbitrap family in particular was very strong, chromatography was quite strong across the board, so there wasn't anything that particularly jumped out as something special. Obviously, the applied markets in Asia helped drive some of the growth, but we saw a really widespread adoption across the business. So that perspective we feel good about. In terms of our clinical mass spec, a program that something we're targeting for a launch in 2018 and we're looking forward to it. As we get to some of the upcoming conferences, ASMS, in terms of the research market, you'll see some really exciting launches. And in AACC, you'll get some more views on what we're doing in the clinical space. So this late spring and summer will be super-exciting for Thermo Fisher Scientific as well.

Great, looking forward to it. And then just wanted to follow-up on the margins in Analytical Instruments, maybe for Stephen, up 350 bps. I know some of this is mix, but how much leverage do you think you can drive here with better top-line performance through the year?

Yeah. So roughly half of the margin expansion really came from the FEI acquisition. The rest came from the core business. So there is good volume pull-through and using our PPI Business System, we think we can drive significant leverage of additional revenue.

Great. Thank you.

Thanks, Jack.

Your next question comes from the line of Steve Beuchaw with Morgan Stanley. Your line is now open. Steve C. Beuchaw - Morgan Stanley & Co. LLC: Hi. Good morning, guys.

Good morning, Steve. Steve C. Beuchaw - Morgan Stanley & Co. LLC: Just two quick ones, one for Marc and one for Stephen. Marc, during the quarter, there's been some, I suppose, up and down in terms of sentiment and expectations around bioprocess, clearly, a good quarter for you guys. It's an interesting business relative to the business overall, in part because it's a very long-cycle business. I would think you have a good degree of visibility in terms of capital projects and capacity plans for your customer base. It'd just be helpful, given all the questions out there, for you to give us a sense of what you're hearing from the customer base in terms of how they're thinking about capacity needs and what that means for the business. And then one quick one for Stephen. Look, really good quarter on the margin front, right? 90 basis points and guidance is still for 40 to 60 basis points. Can you just help us understand why, over the balance of the year, we might expect to see some moderation in the year-on-year trend? Or is this another case where we're just taking kind of a wait-and-see approach given how early it is in the year? Thanks a bunch.

Thanks, Steve. I'll take the margin one first. So we delivered 90 basis points of expansion in Q1. For the full-year, we're still – I reiterated 40 to 60 basis points with a midpoint of 50 basis points. So if you do the math, we would be delivering just under 40 basis points for the remainder of the year, on average. A couple of key drivers between that and the Q1 expansion: timing of investments, more loaded into Q2 and Q3, a little bit in Q4; and then the other piece is that we had a very profitable stub period in Q3 last year from the FEI acquisition. We had a lot of revenue and very little cost, so that's causing a little bit of pressure on the Q3 margin. But overall, 50 basis points for the year.

Steve, in terms of bioprocess, really a very strong fundamental end market. And we have a very, very strong competitive position. So we've had good growth for a number of years in that business. Q1 was a good quarter for us as well, with high growth as well. As a reminder, we have leadership positions in the media used to grow the product. And then obviously in terms of the single-use technologies that the products are made in, we have market leadership positions. We're excited about the Finesse acquisition, because it complements our single-use technologies. We've been expanding our capacity in terms of our manufacturing plants over the last few years. And we've had a number of openings, both in Grand Island and in Inchinnan in Scotland, where the customer feedback has been incredibly positive. So we feel good about the underlying aspects. There's always some lumpiness in the business, so we don't over-read that too much. I mean, yes, you have a lot of visibility. But sometimes shipments happen in one quarter, move to the next quarter. But for us, we've had pretty smooth growth over the last few years. Steve C. Beuchaw - Morgan Stanley & Co. LLC: Thanks a bunch. Have a good morning.

Thanks.

Thanks, Steve.

Your next question comes from the line of Isaac Ro with Goldman Sachs. Your line is now open. Isaac Ro - Goldman Sachs & Co.: Hey. Good morning, guys. I just want to dig a little bit more into the organic growth assumptions by division for the rest of the year. And starting with Diagnostics, I mean you had a pretty tough comp in the first quarter, so that's understandable. But as we think about the rest of the year, is it fair to assume that the organic growth will pick up?

So in terms of what was in our initial guidance and still in our revised current guidance, Life Sciences Solutions will be the fastest-growing segment that we have. Analytical Instruments will be about the company average. Lab Products and Services will be slightly higher than company average. And Diagnostics will be similar to what we saw last year, is the way we're thinking about that. Isaac Ro - Goldman Sachs & Co.: Okay. That's helpful. And then just in terms of LPS, if I think about the overall end market, you guys went through the various customer segments. I'm curious about just market share trends. Where do you feel like you're executing the best in terms of share gains in LPS? Where could you be doing better? Thank you.

Yeah, when I look at the three sub-components of Lab Products and Services, you have the channel business, you have our manufacturing business for lab products, which is basically when you walk through a lab, kind of everything you see, the plastics, the equipment, the refrigeration, all of that. And you have our clinical trials logistics, or what we call biopharma services. I actually think all three teams executed very well in the quarter, right? And when I look at the channel business, we had very strong growth in the channel business. Really both in North America and Europe, the business is doing very well. Lab Products had a very strong start to the year in terms of growth. And when I look at the biopharma services business, the activity excluding sort of the one large trial that a customer discontinued, I feel good about the execution there. And then obviously that's going to take a few quarters to sunset. So I don't think there was areas that we under-executed. But we always try to be better, right? And our goal is to continue to drive additional growth, and our teams are focused on that. Isaac Ro - Goldman Sachs & Co.: Got it. Thanks, guys.

Thanks, Isaac.

Your next question comes from the line of Dan Arias with Citi. Your line is now open.

Good morning, guys. Thank you. Marc, maybe just back on FEIC. Can you just talk a bit about where you are in the new product cycle there? When you guys did the deal, Don [Kania] sounded pretty good on some of the things coming down the pike. So just curious about how much of what you're seeing has to do with new introductions? And then what you think about portfolio additions or refreshes there?

In terms of where the momentum is coming from currently, it's really the existing range of products. We have some exciting products in the pipeline. So that will help sustain a very bright outlook for the business. But the momentum you see right now is not really being driven by new products, per se. So that's something that will unfold as the year progresses.

Got it. Okay. And then maybe just back on industrial, I'm looking at the developed markets. Can you compare U.S. to Europe? And to the extent that the recovery carries through the year, do you see one of those leading the way versus the other? Or should it be pretty balanced? Thanks.

I would say that from the industrial, our channel business performed well in both geographies. So we didn't see a big difference versus our expectations there. I would expect pretty balanced improvements in both the U.S. and Europe and encouraging signs in Asia.

Okay. Thanks a ton.

Thanks.

Your next question comes from the line of Paul Knight with Janney. Your line is now open.

Hey, guys. This is actually Bill March on for Paul. How are you doing?

Good.

First question, if I could, on microarray. Last summer, you talked about seeing some pricing pressure from a competitor in that business. And with the new product launch, just an update on that end market and your channel strategy there.

Yeah, so in terms – Bill, thanks for the question. In terms of the microarray business, we're expecting modest organic growth for 2017 for that business, as we said shortly after the acquisition. The first year of ownership, which we sunsetted in March, was softer for that business, primarily about pricing that the competitor had dropped during the sale process of that business. And we launched a number of products and commercial initiatives, and we expect to see some momentum build as we move through the course of 2017.

Got it. And then just one question on organic growth in the quarter. Could you give us a sense of what the organic growth was for recurring revenues versus instruments? Just trying to understand the growth dynamics, considering the tough 1Q 2016 comp with the extra week of selling days. Thanks, guys. Have a good one.

Thanks, Bill.

So the growth was actually good across both instruments and consumables for us. Yeah, so good growth across both areas.

And your next question comes from the line of Dan Leonard with Deutsche Bank. Your line is now open.

Thank you. My first question, Marc, has your outlook on the U.S. changed at all given the discussion of cuts in science funding and also environmental?

Yeah. In terms of the outlook for the U.S., not really. Pretty consistent with the original guidance provided we get a budget at some point in time, right? The continuing resolution is probably a month later going on and we had put into our original guidance we would've thought sometime in early April we would move to a budget, something of that standpoint in our original plan. So if that plays out, then the U.S. should be similar to what we thought. In terms of the science funding, Congress continues to be very focused on strong growth and support for NIH in particular. You can see that in the 21st Century Cures, you can see that in the funding for the Cancer Moonshot. I've had the opportunity to be in D.C. and meet with a number of members of leadership and there's strong support there from that perspective. So that's – that we're focused on making sure that that continues and feel like that's – it should be okay.

And I know your environmental business is headquartered in China, but nothing to flag on the environmental front?

No, I thought about that in more detail as we're in the discussion around policy, around the EPA. So obviously the business is primarily driven by activities outside the U.S. in terms of our air monitoring business in particular, primarily in China. In terms of the U.S., the Federal EPA is a tiny customer directly. So truly, hundreds of thousands of dollars, nothing significant. In terms of – bigger customers are really the states' EPAs that do the monitoring of the air quality and those regulators are typically more stringent than the federal level, so that's encouraging. Longer-term, obviously, a less desire for regulation on EPA is going to be a longer-term headwind for the air quality business. And to frame the magnitude domestically, that business is maybe $50 million, roughly in size. So it's a very small business. Short-term, you don't really see any effect. And with these policies, no new regulations go into effect over the next four years, then obviously that has some longer-term headwinds on that business.

Okay. Thank you for all the color.

Thanks.

Thanks, Dan.

Operator, we're going to take one more question.

Your final question comes from the line of Catherine Schulte with Robert W. Baird. Your line is now open. Catherine Ramsey Schulte - Robert W. Baird & Co., Inc.: Hi, guys. Thanks for the question. Going back to China, you talked about being well-positioned to continue to gain share there. Are there particular areas within your portfolio or particular end markets where you're seeing the most share gains in China or is it more broad-based?

We've had broad-based success, Catherine, but clearly precision medicine, the food safety, kind of chromatography and mass spectrometry, genetic sciences, businesses have done very well. There's lots of demand and interest in vaccines and pharmaceutical production. That's been good for both our biosciences business and bioproduction. So it's been pretty broad-based but precision medicine, food safety are probably the two areas that jump out the most to us as big opportunities for continued momentum. Catherine Ramsey Schulte - Robert W. Baird & Co., Inc.: Great. Thank you.

Thanks for the question.

So let me wrap up the call. First, thank you for joining us. We're very pleased to have delivered a strong start to the year. We feel we're very well positioned to deliver another great year in 2017. And of course, thanks for your support of Thermo Fisher Scientific. Thanks, everyone.

And this concludes today's conference call. You may now disconnect.