Stephen Williamson
Senior Vice President & Chief Financial Officer at Thermo Fisher Scientific
Thanks, Mark, and good morning, everyone. As you saw in our press release, we had an excellent Q4. The team executed really well in the quarter and we delivered Q4 financials significantly ahead of what was assumed in the midpoint of our prior guide. We beat Q4 organic growth by just under 2 points, adjusted EPS by $0.14, and we ended the year with very strong free-cash flow, delivering $7.3 billion for the year. Looking back on '24, we had a very successful year. The markets played out as we outlined at the beginning of the year with growth steadily improving each quarter. Our proven growth strategy drove consistent share gain and the PPI business system enabled great execution. All of this enabled us to consistently deliver differentiated financial performance throughout the year, all while further strengthening our industry leadership. This puts us in a great position to deliver an excellent 2025.
Let me now provide you with some additional details on our Q4 and full-year 2024 performance. Starting with earnings per share. In the quarter, adjusted EPS grew 8% to $6.10. For the full-year, we delivered adjusted EPS of $21.86. GAAP EPS in the quarter was $4.78 and for the full-year, it was $16.53. On the top-line, Q4 reported revenue grew 5% year-over-year. The components of our reported revenue change included 4% organic growth, a 1% contribution from acquisitions and a slight headwind from foreign-exchange. In Q4, core organic revenue increased 5%. For the full-year 2024, reported organic and core organic revenue were all flat year-over-year. In 2024, we delivered $520 million of pandemic-related revenue comprised of approximately $100 million of testing and $420 million from vaccines and therapies.
Turning to our organic revenue performance by geography. In Q4, North-America grew mid-single digits, Europe grew low-single digits and Asia-Pacific grew high-single-digits with China growing mid-single digits. For the full-year, North-America declined low-single digits, Europe was flat year-over-year and Asia-Pacific and China within Asia-Pacific grew low-single digits. With respect to our operational performance, we delivered $2.72 billion of adjusted operating income in the quarter, an increase of 7% year-over-year and adjusted operating margin was 23.9%, 50 basis-points higher than Q4 last year. In the quarter, we delivered strong productivity, reflecting the continued execution of our cost management initiatives and we drove good volume pull-through. This enabled us to fund strategic investments to further advance our industry leadership and offset the expected impact of unfavorable mix this quarter.
For the full-year, we delivered $9.71 billion of adjusted operating income and adjusted operating margin was 22.6%. Total company adjusted gross margin in the quarter was 43.2%, 170 basis-points higher than Q4 last year. For the full-year, adjusted gross margin was 42.2%, an increase of 100 basis-points versus 2023. Moving on to the details of the P&L, adjusted SG&A in the quarter was 16.1% of revenue. For the full-year, adjusted SG&A was 16.3% of revenue. Total R&D expense was $374 million in Q4. For the full-year, R&D expense was $1.39 billion, up 4% year-over-year, reflecting our ongoing investments in high-impact innovation.
R&D as a percent of our manufacturing revenue for the full-year was 7.2%. Looking at our results below-the-line, our Q4 net interest expense was $89 million, slightly higher than Q4 2023. Net interest expense for the full-year was $312 million, a decrease of $183 million year-over-year, driven by effective management of our debt portfolio and our strong cash-flow. The adjusted tax-rate was 10.9% in Q4 and 10.5% for the full-year, in-line with our expectations. Average diluted shares were $383 million in Q4, $5 million lower year-over-year, driven by share repurchases net of option dilution. In Q4, we repurchased $1 billion of shares, bringing our total repurchases for 2024 to $4 billion.
Turning to free-cash flow and the balance sheet, full-year cash-flow from operations was $8.7 billion and free-cash flow was $7.3 billion after investing $1.3 billion of net capital expenditures. During 2024, we deployed $7.7 billion of capital, $3.1 billion through M&A with the acquisition of OLINK and $4.6 billion through the return of capital to shareholders in the form of $4 billion of buybacks and approximately $600 million of dividends. We ended the quarter with $5.6 billion in cash and short-term investments and $31.3 billion of total debt. Our leverage ratio at the end-of-the quarter was 2.9 times, gross debt-to-adjusted EBITDA and 2.4 times on a net-debt basis. In concluding my comments on our total company performance, adjusted ROIC was 11.6%, reflecting the strong returns on investment that we're generating across the company.
Now provide some color on the performance of our four business segments, starting with Life Sciences Solutions. Q4 reported revenue in this segment grew 5% and organic revenue growth was 3%. Growth in this segment was driven by our Bioproduction and Biosciences businesses. For the full-year, reported revenue declined 3% and organic revenue was 4% lower versus 2023. Q4 adjusted operating income for Life Science Solutions increased 6% and adjusted operating margin was 36.6%, up 40 basis-points versus the prior year quarter. During Q4, we delivered strong productivity and good volume pull-through, which was partially offset by unfavorable mix and strategic investments. For the full-year, adjusted operating income increased 2% and adjusted operating margin was 36.4%, an increase of 210 basis-points versus 2023.
In the Analytical Instruments segment, reported revenue grew 7% and organic revenue growth was 8%. The strong growth in the quarter was led by electron microscopy and chromatography and mass spectrometry businesses. For the full-year, both reported revenue and organic revenue grew 3%. In this segment, Q4 adjusted operating income increased 13% and adjusted operating margin was 30.5%, up 170 basis-points year-over-year. In the quarter, we delivered strong productivity and good volume pull-through and had favorable FX. This was partially offset by unfavorable mix and strategic investments. For the full-year, adjusted operating income increased 2% and adjusted operating margin was 26.2%, 10 basis-points lower than 2023.
Turning to Specialty Diagnostics. In Q4, both reported revenue and organic revenue grew 5%. In Q4, growth in this segment was led by our transplant diagnostics and immunodiagnostics businesses as well as our healthcare market channel. For the full-year, reported revenue increased 2% and organic revenue growth was 3%. Q4 adjusted operating income for Specialty Diagnostics increased 3% and adjusted operating margin was 23.6%, 30 basis-points lower than Q4 2023. During the quarter, we delivered good productivity, which is more than offset by strategic investments. For the full-year, adjusted operating income was 3% higher than 2023 and adjusted operating margin was 25.7%, an increase of 20 basis-points versus the prior year.
And finally, in the Products and Biopharma Services segment, both reported revenue and organic revenue grew 4% versus the prior year quarter. The runoff of vaccines and therapies revenue had a mid-single-digit impact on the growth in this segment in Q4. This was offset by very good growth in our Pharma Services business and research and safety market channel. For the full-year, reported revenue grew 1% and organic revenue was flat. In this segment, Q4 adjusted operating income increased 3% and adjusted operating margin was 14%, which is flat to Q4 2023. In the quarter, we delivered strong productivity, which was offset by strategic investments and unfavorable mix. For the full-year, adjusted operating income declined 8% and adjusted operating margin was 13.3%, which is 130 basis-points lower versus 2023.
Turning now to guidance. As Mark outlined, we're initiating a 2025 revenue guidance range of $43.5 billion to $44 billion and an adjusted EPS guidance range of $23.10 to $23.50. This guidance assumes 3% to 4% organic revenue growth, a 1% headwind from the remaining runoff of the pandemic-related revenue and a 1.5% revenue headwind from foreign-exchange and approximately 90 basis-points of adjusted operating margin expansion. All of this will enable a really strong 6% to 8% growth in adjusted EPS. The strength of the guidance reflects our industry-leading position, our proven growth strategy and the power of our PPI business system.
Let me now provide some more detailed context behind the guide, starting with the market growth framing. In 2024, we estimate the industry market growth was down low-single digits. In 2025, we expect the market growth will be better than 2024. We expect market growth will be slightly positive for the year, improving as the year progresses. With this market context and a very strong share gain, we expect organic growth for 2025 to be in the range of 3% to 4%. And as I commented earlier, this includes a 1% headwind from the remainder of the pandemic run-off, largely in our clinical research business. So the underlying total company growth is strong.
Turning to FX, given recent changes in rates, we're assuming there will be a headwind from revenue from FX in 2025 of approximately $650 billion or 1.5 points. Putting all this together, our top-line guidance assumes a 1.5% to 2.5% increase in reported revenue dollars and a 3% to 4% increase in organic revenue. This is a strong step-up from 2024. Moving on to the bottom-line, we expect to deliver a very strong year of adjusted EPS growth in 2025. The cost actions we took over the past couple of years are enabling very accretive pull-through on the incremental dollars of revenue growth and we will continue to use the PPI business system to drive productivity and actively manage our cost base. This will enable very strong adjusted operating margin expansion of approximately 90 basis-points.
Below-the-line, we're effectively managing our debt and cash positions and taking advantage of great interest rates on cash deposits and all of this will enable us to deliver adjusted EPS in the range of $23.10 and $23.50, which is a very strong 6% to 8% growth for the year. In terms of potential changes in the macro-environment, our guidance is assumed to cover the impact of modest policy changes. And then to help you with your modeling, here are a few additional assumptions behind the guide. We expect approximately $350 million of net interest expense in 2025. We assume that the adjusted income tax-rate will be 11.5% in 2025, largely driven by the increased earnings. We're expecting between $1.4 billion and $1.7 billion of net capital expenditures in 2025, and we're assuming free-cash flow is in the range of $7 billion to $7.4 billion for the year.
In terms of capital deployment, we're assuming $2 billion of share buybacks, which were already completed in January and we estimate that full-year average diluted share count will be between 378 million and 379 million shares. And we're assuming we'll return approximately $600 million of capital to shareholders this year through dividends. And then finally, I wanted to touch on phasing for Q1. Embedded in the guidance for the year is an assumption that organic growth is flat in Q1 as-is adjusted EPS growth in Q1. This is largely driven by Q1 having two less selling days than the prior year quarter and also the phasing of our services revenue within the year. So in conclusion, Q4 capped off a very successful 2024. We expect to continue to manage the company and the opportunities really well in '25 and a focus on delivering very strong share gains and adjusted EPS growth, enabling excellent financial performance. I look-forward to updating -- updating you on our progress as we go through the year.
With that, I'll turn the call-back over to Ralph. Operator, we're ready for the Q&A portion of the call.
