Doug Schenkel: I want to come back to the topic of activity. Again, you’ve talked about some permit and activity levels. It totally makes sense how you’re managing screen expectations. It’s really prudent coming off of a tough period for the group over the last several quarters. But in terms of how you’re managing the business and keeping in mind internal metrics like corporate goals, are you managing the business with an assumption that the improvement in activity that you described translates into an increase in the need for product support and ultimately, revenue generation in the back half of the year?
Michael Stubblefield: Yes. I’d say a couple of things about that, Doug, is we’re laser-focused on executing our long-term growth strategy, which means we’re investing in innovation, new product introductions, strategic marketing, a lot of investments in our digital platform to position our business for sustained long-term growth and to build on our leading position in both of our segments. When I think about the cost transformation initiative that we’re driving, it’s a multiyear effort, quite strategic in nature linked to the rollout of our new operating segments, which in a very unique way, do unlock significant efficiencies. So these come with investments in capability, that strengthen the footprint, investments in technology that allow us to do things a bit more efficiently.
So we’ll benefit from the savings associated with that in the near term, which is helpful in an environment of maybe a little bit muted volumes. But there’s nothing that we’re doing here that prevents us from growing the business as it returns. And when I think about our incentive systems, certainly, there’s a bias for delivering upside in both our in-year as well as our equity plans.
Doug Schenkel: Super helpful. Thank you again.
Operator: Our next question comes from Rachel Vatnsdal with JPMorgan. Please go ahead.
Rachel Vatnsdal: Great. Good morning and thanks for taking the questions. So I want to follow up on Vijay’s question around bioprocessing. Great to hear that sequential growth on orders. So can you actually give us what was the number in terms of sequential growth for this quarter and for last quarter since you said it accelerated in terms of the velocity? And can you break out how orders trended by customer type across pharma, biotech and CDMOs? And then specifically on the full year guide, we heard you reiterate the mid-single-digit declines on Bioscience Production, but can you just confirm, are you still expecting the single-digit decline for the full year in bioprocessing as well?
Michael Stubblefield: Yes, a lot to unpack there. You may have to redirect me if I don’t respond to each of your questions there, Rachel. But to your first one about the bioprocessing order book, we haven’t quantified a book-to-bill or you’ve gotten too specific about this. I’m not sure we’re going to be granular enough to satisfy your needs here. But we just reiterate again, two straight quarters of sequential improvement. The rate of that improvement is increasing in terms of comparative to other numbers that you’ve seen out there, consistent with how I answered one of the earlier questions. We do have a best-in-class platform, and that pertains to in-period revenue performance and growth as well as order book.
And I’d characterize our order book as best-in-class based on the data points that we’ve seen that are out there. As I think about the full year, the bioprocessing did perform a bit better in the quarter, as Brent indicated. On the second quarter, we would see bioprocessing moving from kind of a low teens decline in Q1 to something in that mid to high single-digit declines for the second quarter. And as you suggest, on a full year basis, I think the right way to model it at this stage would still be a mid-single-digit decline overall, which implies another sequential improvement in Q3 and ultimately a final improvement there in Q4, primarily driven by just the weaker comparables. We’re – as we’ve said before, our guidance assumes relatively similar absolute levels of revenue in each period.
And so the step-up in growth rate there is really just driven off of the prior year comparables.
Rachel Vatnsdal: Great, thanks. And then I appreciate we’re only a few weeks into the quarter here. But can you talk to us about the trends that you’ve been seeing in April so far across Lab Solutions and then Bioscience Production and bioprocessing specifically as well. So has there been anything specifically to call out that shifted relative to exit rates from 1Q and March as well?
Michael Stubblefield: Yes. I’d say we’re obviously early in the quarter here, not quite through April yet. But certainly do follow the business real time. And the trends that we’re seeing in April, I think are consistent with our commentary today and certainly reflected in our perspective on how we see Q2 trending, which, again, when I look at the first half, based on what we did in Q1 with what we signal [ph] we anticipate doing in Q2. We’re right in line with where we started the year, which is expectation of roughly 49% of our revenues in the first half, 51% of our revenues in the second half. And so I think what we’re seeing here in April certainly is consistent with the guidance that we’ve provided you here today.
Rachel Vatnsdal: Thank you.
Operator: The next question comes from Tejas Savant with Morgan Stanley. Please go ahead.
Tejas Savant: Hey, guys. Good morning. Maybe I’ll start on the CDMO side, Michael. I think you sort of alluded to what you see in that end market in China and the fallout from the BIOSECURE Act and so on. But with the prospect of the degree of consolidation here or M&A rather in the U.S., does that impact your near-term visibility at all in terms of your relationship there with Catalent specifically. Is there a possibility that after a change of ownership there, the terms of that contract might need to be renegotiated?
Michael Stubblefield: Yes. So if you’re speaking specifically to Catalent, they’ve been a great partner to us. We’re certainly encouraged by the momentum we have there. And not may be unsurprising to you, just given how pervasive we are in serving this market across the board. Clearly, we’d have a relationship with their potential acquirer here. And so to the extent that gets done, we look forward to continuing the collaboration with Novo. When we think about our bioprocessing business, one of the things I really like about it, of course, is that our materials, our ingredients, our buffers are chromatography resins, our single-use solutions are specced into the process and are part of the regulatory filing. So that’s one of the things that makes it rather resilient and quite sticky.
And there’s certainly nothing from a contractual perspective that has us concerned there. To expand a little bit and take it beyond just Catalent, though, we don’t have much customer concentration in this business. And in fact, it’s quite a diversified platform. So we’re going to be well exposed across, of course, the OEMs, but also the playing field there for all the CMOs around the world. And so we’re well positioned to support the strategies of our – the OEMs and the innovation cycles that are in play here. And as it relates to BIOSECURE and China, it’s a little bit of a balloon any impact that some of those partners may see negatively, presumably will show up somewhere else in the network that we’ll be able to help our customers through.
So I really like our positioning and setup here.
Tejas Savant: Got it. That’s great to hear. And then a quick follow-up on the geopolitical side of things outside of China. And it’s more of a medium-term question really. What are you hearing in terms of governments in Europe starting to push for a greater degree of self-reliance when it comes to their own defense expenditures? They want to have a layer of insulation in place relative to the U.S. election outcomes, et cetera. Is there a risk here in your mind, if that research budgets there could get crowded out? Not so much in 2024, like I said, but more in 2025 and beyond?
Michael Stubblefield: Undoubtedly, there’s a higher degree of geopolitical tensions around the world, and we follow that closely to see how it impacts the business. But I think specific to your question, at the end of the day it’s our strong conviction that good science gets funded. And we’re quite encouraged by the pipelines and the new modalities and the research that’s underway. These pipelines are as full as they’ve ever been. Things are accelerating through, particularly on cell and gene therapy, again, I mentioned, I think there’s been three approvals year-to-date. I think there was a fourth one that came through even this morning. And so you see the rate of those things starting to pick up. So I think history has shown – and I don’t think we’ve seen anything here in the near-term environment that would cause us to waver on that – this promising good science that’s in flight here is going to get the funding it needs to progress.
Tejas Savant: Thanks, Michael. Appreciate the time.
Operator: The next question comes from Josh Waldman with Cleveland Research. Please go ahead.
Josh Waldman: Good morning. Thanks for taking my questions. We’ve got a couple for you. First, Brent or Michael, wondering if you could comment on how you think visibility in the business has evolved over the last 90 days? Are you seeing any improvement in regards to the team’s ability to forecast sales here in the near or medium term? And then along those lines, can you talk about how or if you’re seeing bulk orders come back into the business? And how that impacts your ability to forecast?
Michael Stubblefield: Yes. Thanks, Josh. Good to hear from you. A couple of things I would say about visibility. I think one of the remarks I may have made in my prepared remarks was just some of the early returns we’re getting from our new operating model. And one of those certainly is the operational rigor and improved forecasting that comes from a more simplified and more logical, in my opinion, structure to the business. It’s easier to think about these businesses from a customer needs, research or production, environment, and it certainly aligns better with how our customers think about it as opposed to our historical approach from a geographic standpoint. So our operating reviews have become a lot more streamlined and a lot more straightforward, which, from our perspective is certainly a helpful improvement.
A relatively short order cycle business, as I commented earlier, and so I wouldn’t say we’ve seen really any meaningful change in that regard over the last 90 days or so. Our supply chains have largely normalized in both segments. So we’re back to pretty healthy levels of service in our Lab segment, which means we can satisfy most orders in a day or two. On the production side, we’re two to three months out, which is kind of pre-COVID levels of performance there. So I’d say the visibility is similar. Now of course, with the accelerating order book and an improved – in building order book here, that gives us a little bit more forward visibility on the production side of the business and certainly more confidence in underwriting the outlooks that we have here, which I think is encouraging.
Your second question there around how we’ve seen a return for bulk orders. In our business model, if I think about the ingredients or buffers, excipients, our customers don’t typically have the ability to store just elevated levels of product. And so they tend to sync their orders with their production campaigns. And consistent with kind of the destocking trends that we’ve seen, that was more prevalent on single-use than it was on the process ingredients for those reasons. And so I would say the size of the orders has been pretty consistent on the process ingredient side. And then on the single-use side, I don’t know I’d say that we’ve seen a change in order size. We’re certainly starting to see with the orders return, the positive indications of destocking, presumably coming to an end here in the near term and good underlying levels of activity.
Josh Waldman: Got it. Thanks Michael. And then wondering if you could talk a bit more about the pricing and share environment? You commented on contract wins. Any more context you could provide there? And then do you think you’re seeing more account churn than normal this year? So does that pose any risk to pricing as the year plays out? Or would you see it more as a potential opportunity for share and maybe top line outperformance?
Michael Stubblefield: Let me take those in reverse, maybe talking first about your questions on pricing, and I’ll talk about share. On the pricing side, I would say the team has delivered another solid year of execution on this and executing on that playbook. We expect kind of 1 to 2 points of contribution coming from price that’s primarily offsetting the COGS inflation that we are seeing. So pretty close to historical levels of contribution, I would say, coming from price, and I think the teams did a nice job putting that through and not a lot of noise around that at this stage. We’ll see a little bit of a step-up in revenue in the second quarter as those price increases, we get the full phasing of those in the quarter.
