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Agilent Reports Third-Quarter Fiscal Year 2024 Financial Results

Business Wire 21-Aug-2024 4:05 PM

Delivers better-than-expected performance; raises midpoint of guidance

Highlights

Revenue of $1.58 billion, down 5.6% reported and 4.4% core⁽¹⁾ from the third quarter of 2023.
GAAP net income of $282 million; earnings per share (EPS) of $0.97, up 155% from the third quarter of 2023.
Non-GAAP⁽²⁾ net income of $385 million; EPS of $1.32, down 8% from the third quarter of 2023.
Full-year revenue outlook revised at $6.450 billion to $6.500 billion. Fiscal year 2024 non-GAAP⁽³⁾ earnings guidance also revised at a range of $5.21 to $5.25 per share.
Fourth-quarter revenue outlook expected at $1.641 billion to $1.691 billion with non-GAAP⁽³⁾EPS of $1.38 to $1.42.

Agilent Technologies Inc. (NYSE:A) today reported revenue of $1.58 billion for the third quarter ended July 31, 2024, a decline of 5.6% reported and 4.4% core⁽¹⁾ compared to the third quarter of 2023.

Third-quarter GAAP net income was $282 million, or $0.97 per share. This compares with $111 million, or $0.38 per share, in the third quarter of fiscal year 2023. Non-GAAP⁽²⁾ net income was $385 million, or $1.32 per share during the quarter, compared with $422 million or $1.43 per share during the third quarter a year ago.

"The Agilent team executed well in Q3, delivering revenue and EPS above the top end of our guidance," said Agilent President and CEO Padraig McDonnell. "While market conditions continued to be challenged during the quarter, we saw steady signs of improvement as anticipated. We continue to make investments in our most promising growth opportunities. And we are mobilizing the organization to accelerate value creation through strategic transformation initiatives, which will drive margin expansion and growth—and increase our execution capabilities."

Financial Highlights

In the first quarter of 2024, Agilent implemented certain changes to its segment reporting structure. Prior period segment information has been recast to reflect these changes. These changes have no impact on Agilent's consolidated financial statements.

Life Sciences and Applied Markets Group

Agilent's Life Sciences and Applied Markets Group (LSAG) reported third-quarter revenue of $782 million, a decline of 8% reported and 7% core⁽¹⁾ year-over-year. LSAG's operating margin for the quarter was 28.4%.

Agilent CrossLab Group

The Agilent CrossLab Group (ACG) reported third-quarter revenue of $411 million, an increase of 4% reported and 5% core⁽¹⁾ year-over-year. ACG's operating margin for the quarter was 34.0%.

Diagnostics and Genomics Group

The Diagnostics and Genomics Group (DGG) reported third-quarter revenue of $385 million, a decrease of 9% reported and 8% core⁽¹⁾ year-over-year. DGG's operating margin for the quarter was 18.3%.

Full Year 2024 and Fourth-Quarter Outlook

Full-year revenue outlook is revised at $6.450 billion to $6.500 billion, representing a range of down 5.6% to 4.9% reported and down 5.0% to 4.3% core⁽¹⁾. Fiscal year 2024 non-GAAP⁽³⁾ earnings guidance is revised at a range of $5.21 to $5.25 per share.

The outlook for fourth-quarter revenue is expected in the range of $1.641 billion to $1.691 billion, a decline of 2.8% to an increase of 0.2% reported and a decline of 1.9% to an increase of 1.1% core⁽¹⁾. Fourth-quarter non-GAAP⁽³⁾ earnings guidance is expected in the range of $1.38 to $1.42 per share.

The outlook is based on forecasted currency exchange rates.

Conference Call

Agilent's management will present additional details regarding the company's third-quarter 2024 financial results on a conference call with investors today at 1:30 p.m. PDT. This event will be broadcast live online in listen-only mode. To listen to the webcast, select the "Q3 2024 Agilent Technologies Inc. Earnings Conference Call" link on the Agilent Investor Relations website. The webcast will remain on the company site for 90 days.

About Agilent Technologies

Agilent Technologies Inc. (NYSE:A) is a global leader in analytical and clinical laboratory technologies, delivering insights and innovation that help our customers bring great science to life. Agilent's full range of solutions includes instruments, software, services, and expertise that provide trusted answers to our customers' most challenging questions. The company generated revenue of $6.83 billion in fiscal 2023 and employs approximately 18,000 people worldwide. Information about Agilent is available at www.agilent.com. To receive the latest Agilent news, subscribe to the Agilent Newsroom. Follow Agilent on LinkedIn and Facebook.

Forward-Looking Statements

This news release contains forward-looking statements as defined in the Securities Exchange Act of 1934 and is subject to the safe harbors created therein. The forward-looking statements contained herein include, but are not limited to, information regarding Agilent's growth prospects, business, financial results, revenue, non-GAAP earnings guidance for Q4 and fiscal year 2024, and future amortization of intangibles. These forward-looking statements involve risks and uncertainties that could cause Agilent's results to differ materially from management's current expectations. Such risks and uncertainties include, but are not limited to, unforeseen changes in the strength of Agilent's customers' businesses; unforeseen changes in the demand for current and new products, technologies, and services; unforeseen changes in the currency markets; customer purchasing decisions and timing; and the risk that Agilent is not able to realize the savings expected from integration and restructuring activities. In addition, other risks that Agilent faces in running its operations include the ability to execute successfully through business cycles; the ability to meet and achieve the benefits of its cost-reduction goals and otherwise successfully adapt its cost structures to continuing changes in business conditions; ongoing competitive, pricing and gross-margin pressures; the risk that its cost-cutting initiatives will impair its ability to develop products and remain competitive and to operate effectively; the impact of geopolitical uncertainties and global economic conditions on its operations, its markets and its ability to conduct business; the ability to improve asset performance to adapt to changes in demand; the ability of its supply chain to adapt to changes in demand; the ability to successfully introduce new products at the right time, price and mix; the ability of Agilent to successfully integrate recent acquisitions; the ability of Agilent to successfully comply with certain complex regulations; and other risks detailed in Agilent's filings with the Securities and Exchange Commission, including its quarterly report on Form 10-Q for the fiscal quarter ended April 30, 2024. Forward-looking statements are based on the beliefs and assumptions of Agilent's management and on currently available information. Agilent undertakes no responsibility to publicly update or revise any forward-looking statement.

(1) Core revenue growth excludes the impact of currency and acquisitions and divestitures within the past 12 months. Core revenue is a non-GAAP measure. Reconciliations between GAAP revenue and core revenue for Q3 fiscal year 2024 are set forth on page 6 of the attached tables along with additional information regarding the use of this non-GAAP measure. Core revenue growth rate as projected for Q4 fiscal year 2024 and full fiscal year 2024 excludes the impact of currency and acquisitions and divestitures within the past 12 months. Most of the excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy and could differ materially. Therefore, no reconciliation to GAAP amounts has been provided for the projection.

(2) Non-GAAP net income and non-GAAP earnings per share primarily exclude the impacts of restructuring and other related costs, asset impairments, intangibles amortization, transformational initiatives, acquisition and integration costs and net (gain) loss on equity securities. Agilent also excludes any tax benefits or expenses that are not directly related to ongoing operations, and which are either isolated or are not expected to occur again with any regularity or predictability. A reconciliation between non-GAAP net income and GAAP net income is set forth on page 4 of the attached tables along with additional information regarding the use of this non-GAAP measure.

(3) Non-GAAP earnings per share as projected for Q4 fiscal year 2024 and full fiscal year 2024 exclude primarily the estimated impacts of non-cash intangibles amortization, transformational initiatives, and acquisition and integration costs. Agilent also excludes any tax benefits or expenses that are not directly related to ongoing operations, and which are either isolated or are not expected to occur again with any regularity or predictability. Most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy and could differ materially. Therefore, no reconciliation to GAAP amounts has been provided. Future amortization of intangibles is expected to be approximately $22 million per quarter.

AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share data)
(Unaudited)
PRELIMINARY


	Three Months Ended						Nine Months Ended
	July 31,						July 31,
	2024			2023			2024			2023

Net revenue	$	1,578		$	1,672		$	4,809		$	5,145

Costs and expenses:
Cost of products and services		723			1,014			2,190			2,595
Research and development		127			118			368			367
Selling, general and administrative		395			407			1,171			1,241
Total costs and expenses		1,245			1,539			3,729			4,203

Income from operations		333			133			1,080			942

Interest income		19			13			56			34
Interest expense		(22	)		(24	)		(64	)		(73	)
Other income (expense), net		13			10			48			16

Income before taxes		343			132			1,120			919

Provision for income taxes		61			21			182			154

Net income	$	282		$	111		$	938		$	765

Net income per share:
Basic	$	0.97		$	0.38		$	3.21		$	2.59
Diluted	$	0.97		$	0.38		$	3.20		$	2.58

Weighted average shares used in computing net income per share:
Basic		290			294			292			295
Diluted		291			295			293			296

The preliminary income statement is estimated based on our current information.

Page 1

AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except par value and share data)
(Unaudited)
PRELIMINARY


	July 31,			October 31,
	2024			2023
ASSETS

Current assets:
Cash and cash equivalents	$	1,779		$	1,590
Accounts receivable, net		1,227			1,291
Inventory		978			1,031
Other current assets		272			274
Total current assets		4,256			4,186

Property, plant and equipment, net		1,446			1,270
Goodwill		3,965			3,960
Other intangible assets, net		392			475
Long-term investments		186			164
Other assets		751			708
Total assets	$	10,996		$	10,763

LIABILITIES AND EQUITY

Current liabilities:
Accounts payable	$	497		$	418
Employee compensation and benefits		309			371
Deferred revenue		524			505
Short-term debt		795			—
Other accrued liabilities		264			309
Total current liabilities		2,389			1,603

Long-term debt		2,137			2,735
Retirement and post-retirement benefits		96			103
Other long-term liabilities		471			477
Total liabilities		5,093			4,918

Total Equity:
Stockholders' equity:
Preferred stock; $0.01 par value; 125,000,000 shares authorized; none issued and outstanding at July 31, 2024 and October 31, 2023		—			—
Common stock; $0.01 par value, 2,000,000,000 shares authorized; 287,529,636 shares at July 31, 2024 and 292,123,241 shares at October 31, 2023, issued and outstanding		3			3
Additional paid-in-capital		5,458			5,387
Retained earnings		773			782
Accumulated other comprehensive loss		(331	)		(327	)
Total stockholders' equity		5,903			5,845
Total liabilities and stockholders' equity	$	10,996		$	10,763


The preliminary balance sheet is estimated based on our current information.


Page 2

AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
PRELIMINARY


	Nine Months Ended
	July 31,			July 31,
	2024			2023
Cash flows from operating activities:
Net income	$	938		$	765

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		188			209
Share-based compensation		103			97
Deferred taxes		(8	)		(69	)
Excess and obsolete inventory related charges		33			27
Net (gain) loss on equity securities		(6	)		13
Asset impairment charges		8			277
Change in fair value of contingent consideration		—			1
Other non-cash (income) expense, net		2			4
Changes in assets and liabilities:
Accounts receivable, net		67			113
Inventory		15			(53	)
Accounts payable		78			(117	)
Employee compensation and benefits		(65	)		(137	)
Other assets and liabilities		(83	)		126
Net cash provided by operating activities ^(a)		1,270			1,256

Cash flows from investing activities:
Payments to acquire property, plant and equipment		(285	)		(214	)
Proceeds from sale of equity securities		—			5
Payments to acquire equity securities		(5	)		(3	)
Proceeds from convertible note		—			4
Payments in exchange for convertible note		(11	)		(11	)
Payments to acquire businesses and intangible assets, net of cash acquired		(3	)		(51	)
Net cash used in investing activities		(304	)		(270	)

Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock plans		76			65
Payment of taxes related to net share settlement of equity awards		(27	)		(53	)
Payments for repurchase of common stock		(815	)		(495	)
Payments of dividends		(206	)		(199	)
Repayments of long-term debt		(180	)		—
Net proceeds from (repayment of) short-term debt		375			20
Payment for contingent consideration		—			(67	)
Net cash used in financing activities		(777	)		(729	)

Effect of exchange rate movements		—			19

Net increase in cash, cash equivalents and restricted cash		189			276

Cash, cash equivalents and restricted cash at beginning of period		1,593			1,056

Cash, cash equivalents and restricted cash at end of period	$	1,782		$	1,332


Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet:

Cash and cash equivalents	$	1,779		$	1,329
Restricted cash, included in other assets		3			3
Total cash, cash equivalents and restricted cash	$	1,782		$	1,332


^(a) Cash payments included in operating activities:

Income tax payments, net of refunds received	$	284		$	143
Interest payments, net of capitalized interest	$	50		$	60

The preliminary cash flow is estimated based on our current information.

Page 3

AGILENT TECHNOLOGIES, INC.
NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATIONS
(In millions, except per share data)
(Unaudited)
PRELIMINARY

	Three Months Ended											Nine Months Ended
	July 31,											July 31,
	2024					2023						2024						2023
	Net Income			Diluted EPS		Net Income			Diluted EPS			Net Income			Diluted EPS			Net Income			Diluted EPS

GAAP net income	$	282		$	0.97	$	111		$	0.38		$	938		$	3.20		$	765		$	2.58
Non-GAAP adjustments:
Restructuring and other related costs		67			0.23		—			—			71			0.24			—			—
Asset impairments		—			—		277			0.94			8			0.03			277			0.94
Intangible amortization		25			0.09		38			0.13			77			0.26			112			0.38
Transformational initiatives		1			—		19			0.06			5			0.02			31			0.10
Acquisition and integration costs		4			0.01		5			0.02			5			0.02			12			0.04
Net (gain) loss on equity securities		(1	)		—		(1	)		—			(2	)		(0.01	)		15			0.05
Change in fair value of contingent consideration		—			—		—			—			—			—			1			—
Other		3			0.01		20			0.07			4			0.01			31			0.11
Adjustment for taxes ^(a)		4			0.01		(47	)		(0.17	)		15			0.06			(39	)		(0.13	)
Non-GAAP net income	$	385		$	1.32	$	422		$	1.43		$	1,121		$	3.83		$	1,205		$	4.07


^(a) The adjustment for taxes excludes tax expense (benefits) that management believes are not directly related to on-going operations and which are either isolated, temporary or cannot be expected to occur again with any regularity or predictability such as the realized gain/loss due to sale of a business, windfall benefits on stock compensation, and the impact of R&D capitalization under section 174 of the Tax Cuts and Jobs Act of 2017. For the three and nine months ended July 31, 2024, management used a non-GAAP effective tax rate of 13.00%. For the three and nine months ended July 31, 2023, management used a non-GAAP effective tax rate of 13.75%.
We provide non-GAAP net income and non-GAAP net income per share amounts in order to provide meaningful supplemental information regarding our operational performance and our prospects for the future. These supplemental measures exclude, among other things, charges related to restructuring and other related costs, asset impairments, amortization of intangibles, transformational initiatives, acquisition and integration costs, net (gain) loss on equity securities and change in fair value of contingent consideration.
Restructuring and other related costs include incremental expenses incurred in the period associated with restructuring programs, usually aimed at changes in business and/or cost structure. Such costs may include one-time termination benefits, facility-related costs and contract termination fees.
Asset impairments include assets that have been written down to their fair value.
Transformational initiatives include expenses associated with targeted cost reduction activities such as manufacturing transfers including costs to move manufacturing, site consolidations, legal entity and other business reorganizations, insourcing or outsourcing of activities. Such costs may include move and relocation costs, one-time termination benefits and other one-time reorganization costs. Included in this category are also expenses associated with company programs to transform our product lifecycle management (PLM) system and human resources and financial systems.
Acquisition and integration costs include all incremental expenses incurred to effect a business combination. Such acquisition costs may include advisory, legal, tax, accounting, valuation, and other professional or consulting fees. Such integration costs may include expenses directly related to integration of business and facility operations, the transfer of assets and intellectual property, information technology systems and infrastructure and other employee-related costs.
Net (gain) loss on equity securities relates to the realized and unrealized mark-to-market adjustments for our marketable and non-marketable equity securities.
Change in fair value of contingent consideration represents changes in the fair value estimate of acquisition-related contingent consideration.
Other includes certain legal costs and settlements, special compliance costs, acceleration of stock-based compensation expense and other miscellaneous adjustments.

Our management uses non-GAAP measures to evaluate the performance of our core businesses, to estimate future core performance and to compensate employees. Since management finds this measure to be useful, we believe that our investors benefit from seeing our results "through the eyes" of management in addition to seeing our GAAP results. This information facilitates our management's internal comparisons to our historical operating results as well as to the operating results of our competitors.

Our management recognizes that items such as amortization of intangibles can have a material impact on our cash flows and/or our net income. Our GAAP financial statements including our statement of cash flows portray those effects. Although we believe it is useful for investors to see core performance free of special items, investors should understand that the excluded items are actual expenses that may impact the cash available to us for other uses. To gain a complete picture of all effects on the company's profit and loss from any and all events, management does (and investors should) rely upon the GAAP income statement. The non-GAAP numbers focus instead upon the core business of the company, which is only a subset, albeit a critical one, of the company's performance.

Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.

The preliminary non-GAAP net income and diluted EPS reconciliation is estimated based on our current information.


Page 4

AGILENT TECHNOLOGIES, INC.
SEGMENT INFORMATION
(In millions, except where noted)
(Unaudited)
PRELIMINARY


Quarter-over-Quarter

Life Sciences and Applied Markets Group
	Q3'24			Q3'23
Revenue	$	782		$	854
Gross Margin, %		60.2	%		60.1	%
Income from Operations	$	222		$	265
Operating margin, %		28.4	%		31.0	%


Diagnostics and Genomics Group
	Q3'24			Q3'23
Revenue	$	385		$	422
Gross Margin, %		51.8	%		53.5	%
Income from Operations	$	70		$	96
Operating margin, %		18.3	%		22.7	%


Agilent CrossLab Group
	Q3'24			Q3'23
Revenue	$	411		$	396
Gross Margin, %		52.1	%		50.9	%
Income from Operations	$	140		$	129
Operating margin, %		34.0	%		32.7	%

Income from operations reflect the results of our reportable segments under Agilent's management reporting system which are not necessarily in conformity with GAAP financial measures. Income from operations of our reporting segments exclude, among other things, charges related to restructuring and other related costs, asset impairments, amortization of intangibles, transformational initiatives and acquisition and integration costs.

Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.

The preliminary segment information is estimated based on our current information.

Page 5

AGILENT TECHNOLOGIES, INC.
RECONCILIATIONS OF REVENUE BY SEGMENT
EXCLUDING ACQUISITIONS, DIVESTITURES AND THE IMPACT OF CURRENCY ADJUSTMENTS (CORE)
(in millions)
(Unaudited)
PRELIMINARY

	Year-over-Year

	GAAP
					Year-over-Year
GAAP Revenue by Segment	Q3'24		Q3'23		% Change

Life Sciences and Applied Markets Group	$	782	$	854	(8%)
Diagnostics and Genomics Group		385		422	(9%)
Agilent CrossLab Group		411		396	4%
Agilent	$	1,578	$	1,672	(6%)


	Non-GAAP(excluding Acquisitions & Divestitures)					Year-over-Yearat Constant Currency ^(a)
					Year-over-Year	Year-over-Year	Percentage Point Impact from Currency	Current Quarter Currency Impact^(b)
Non GAAP Revenue by Segment	Q3'24		Q3'23		% Change	% Change	Percentage Point Impact from Currency	Current Quarter Currency Impact^(b)

Life Sciences and Applied Markets Group	$	782	$	854	(8%)	(7%)	-1 ppt	$	(9	)
Diagnostics and Genomics Group		385		420	(8%)	(8%)	—		(3	)
Agilent CrossLab Group		411		396	4%	5%	-1 ppt		(6	)
Agilent (Core)	$	1,578	$	1,670	(5%)	(4%)	-1 ppt	$	(18	)



We compare the year-over-year change in revenue excluding the effect of recent acquisitions and divestitures and foreign currency rate fluctuations to assess the performance of our underlying business.

^(a) The constant currency year-over-year growth percentage is calculated by recalculating all periods in the comparison period at the foreign currency exchange rates used for accounting during the last month of the current quarter and then using those revised values to calculate the year-over-year percentage change.

^(b) The dollar impact from the current quarter currency impact is equal to the total year-over-year dollar change less the constant currency year-over-year change.

The preliminary reconciliation of GAAP revenue adjusted for recent acquisitions and divestitures and impact of currency is estimated based on our current information.

Page 6

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Agilent Reports Third-Quarter Fiscal Year 2024 Financial Results