Highlights:
- Revenue of $1.26 billion represents decline of 1% reported
growth year-over-year, down 3.1% on a core(1) basis
- GAAP net income of $199 million, or 64 cents per share
- Non-GAAP(2) net income of $243 million, or 78 cents per
share
Agilent Technologies Inc. (NYSE: A) today reported revenue of
$1.26 billion for the third quarter ended July 31, 2020, a decline
of 1% compared to the third quarter of 2019 and down 3.1% on a
core(1) basis.
Third-quarter GAAP net income was $199 million, or 64 cents per
share. This compares with $191 million, or 60 cents per share, in
the third quarter of fiscal year 2019. Non-GAAP(2) net income was
$243 million, or 78 cents per share, during the quarter compared
with $240 million, or 76 cents per share, during the third quarter
a year ago.
“Agilent’s third quarter results once again highlight the
strength and resilience of the Agilent team and of our business,”
said Mike McMullen, Agilent president and CEO. “Under challenging
conditions created by the global COVID-19 pandemic, Agilent again
delivered strong results. While the world’s economies are expected
to recover at different rates in the fourth quarter, we remain
focused on growth and investing for the future, while effectively
managing expenses.”
Financial Highlights
Life Sciences and Applied Markets Group
Third-quarter revenue of $557 million from Agilent’s Life
Sciences and Applied Markets Group (LSAG) was up 2% year over year
(down 4% on a core(1) basis). LSAG’s operating margin was
22.6%.
Agilent CrossLab Group
Third-quarter revenue of $463 million from the Agilent CrossLab
Group (ACG) declined 1% year over year (up 1% on a core(1) basis).
ACG’s operating margin was 28.4%.
Diagnostics and Genomics Group
Third-quarter revenue of $241 million from Agilent’s Diagnostics
and Genomics Group (DGG) declined 8% year over year (down 8% on a
core(1) basis). DGG’s operating margin was 17.2%.
Conference Call
Agilent’s management will present additional details regarding
the company’s third-quarter 2020 financial results on a conference
call with investors today at 1:30 p.m. PST. This event will be
webcast live in listen-only mode. To listen to the webcast, select
the “Q3 2020 Agilent Technologies Inc. Earnings Conference Call”
link in the “News & Events -- Events” portion of the Investor
Relations section of the Agilent 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 life
sciences, diagnostics and applied chemical markets. Now in its 20th
year as an independent company delivering insight and innovation
toward improving the quality of life, Agilent instruments,
software, services, solutions and people provide trusted answers to
customers' most challenging questions. The company generated
revenue of $5.16 billion in fiscal 2019 and employs 16,300 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, Twitter, 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 model and financial results
and the impact of COVID-19. 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; the adverse impacts of and risks posed
by the COVID-19 pandemic and other risks detailed in Agilent’s
filings with the Securities and Exchange Commission, including its
quarterly report on Form 10-Q for the quarter ended April 30, 2020.
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. A reconciliation between Q3 FY20
GAAP revenue and core revenue is set forth on page 6 of the
attached tables along with additional information regarding the use
of this non-GAAP measure.
(2) Non-GAAP net income and non-GAAP earnings per share
primarily exclude the impacts of non-cash asset impairments,
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. 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.
AGILENT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS (In millions, except per share
amounts) (Unaudited) PRELIMINARY
Three Months Ended Nine Months Ended July 31,
July 31,
2020
2019
2020
2019
Net revenue
$
1,261
$
1,274
$
3,856
$
3,796
Costs and expenses: Cost of products and services
592
582
1,807
1,728
Research and development
92
101
393
302
Selling, general and administrative
347
366
1,109
1,075
Total costs and expenses
1,031
1,049
3,309
3,105
Income from operations
230
225
547
691
Interest income
1
10
7
30
Interest expense
(19
)
(18
)
(59
)
(53
)
Other income (expense), net
7
5
64
20
Income before taxes
219
222
559
688
Provision (benefit) for income taxes
20
31
62
(189
)
Net income
$
199
$
191
$
497
$
877
Net income per share: Basic
$
0.64
$
0.61
$
1.61
$
2.78
Diluted
$
0.64
$
0.60
$
1.59
$
2.74
Weighted average shares used in computing net income per
share: Basic
309
312
309
316
Diluted
312
316
312
320
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 amounts)
(Unaudited) PRELIMINARY July 31,
October 31,
2020
2019
ASSETS Current assets: Cash and cash equivalents
$
1,358
$
1,382
Accounts receivable, net
930
930
Inventory
746
679
Other current assets
211
198
Total current assets
3,245
3,189
Property, plant and equipment, net
846
850
Goodwill and other intangible assets, net
4,482
4,700
Long-term investments
148
102
Other assets
825
611
Total assets
$
9,546
$
9,452
LIABILITIES AND EQUITY Current liabilities: Accounts
payable
$
311
$
354
Employee compensation and benefits
306
334
Deferred revenue
397
336
Short-term debt
40
616
Other accrued liabilities
260
440
Total current liabilities
1,314
2,080
Long-term debt
2,283
1,791
Retirement and post-retirement benefits
355
360
Other long-term liabilities
613
473
Total liabilities
4,565
4,704
Total Equity: Stockholders' equity: Preferred stock; $0.01
par value; 125 million shares authorized; none issued and
outstanding
—
—
Common stock; $0.01 par value, 2 billion shares authorized; 309
million shares at July 31, 2020 and 309 million shares at October
31, 2019, issued
3
3
Additional paid-in-capital
5,324
5,277
Retained earnings (accumulated deficit)
130
(18
)
Accumulated other comprehensive loss
(476
)
(514
)
Total stockholders' equity
4,981
4,748
Total liabilities and equity
$
9,546
$
9,452
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,
2020
2019
Cash flows from operating activities: Net income
$
497
$
877
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization
232
162
Share-based compensation
63
57
Excess and obsolete inventory related charges
18
12
Asset impairment charges
99
—
Unrealized gain on equity securities
(26
)
(1
)
Other non-cash (income) expenses, net
6
5
Changes in assets and liabilities: Accounts
receivable, net
1
(58
)
Inventory
(86
)
(31
)
Accounts payable
(35
)
—
Employee compensation and benefits
(32
)
(35
)
Other assets and liabilities
(193
)
(281
)
Net cash provided by operating activities (a)
544
707
Cash flows from investing activities:
Investments in property, plant and equipment
(92
)
(125
)
Proceeds from sale of property, plant and equipment
1
—
Payment to acquire fair value investments
(20
)
(21
)
Payment in exchange for convertible note
(9
)
(2
)
Payment to acquire intangible assets
—
(1
)
Acquisition of businesses and intangible assets, net of cash
acquired
—
(248
)
Net cash used in investing activities
(120
)
(397
)
Cash flows from financing activities:
Issuance of common stock under employee stock plans
56
52
Payment of taxes related to net share settlement of equity
awards
(34
)
(15
)
Payment of dividends
(167
)
(155
)
Issuance of senior notes
499
—
Debt issuance costs
(4
)
—
Proceeds from revolving credit facility
798
—
Repayment of revolving credit facility and short-term loan
(1,413
)
—
Proceeds from commercial paper
240
—
Repayment of commercial paper
(200
)
—
Repayment of finance lease
(4
)
—
Purchase of non-controlling interest
—
(4
)
Treasury stock repurchases
(219
)
(674
)
Net cash used in financing activities
(448
)
(796
)
Effect of exchange rate movements
—
3
Net decrease in cash, cash equivalents and
restricted cash
(24
)
(483
)
Cash, cash equivalents and restricted cash at
beginning of period
1,388
2,254
Cash, cash equivalents and restricted cash at
end of period
$
1,364
$
1,771
Reconciliation of cash,
cash equivalents and restricted cash to the condensed consolidated
balance sheet: Cash and cash
equivalents
$
1,358
$
1,765
Restricted cash, included in other assets
6
6
Total cash, cash equivalents and restricted cash
$
1,364
$
1,771
(a) Cash payments
included in operating activities:
Income tax payments (refunds), net
$
325
$
108
Interest payments
$
53
$
61
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 amounts) (Unaudited)
PRELIMINARY Three
Months Ended Nine Months Ended July
31, July 31,
2020
Diluted EPS
2019
Diluted EPS
2020
Diluted EPS
2019
Diluted EPS
GAAP net income
$
199
$
0.64
$
191
$
0.60
$
497
$
1.59
$
877
$
2.74
Non-GAAP adjustments: Asset impairments
—
—
—
—
99
0.32
—
—
Intangible amortization
45
0.15
25
0.08
139
0.45
79
0.25
Transformational initiatives
13
0.04
11
0.03
41
0.13
25
0.08
Acquisition and integration costs
9
0.03
12
0.04
33
0.11
32
0.10
NASD site costs
—
—
6
0.02
—
—
12
0.04
Special compliance costs
—
—
1
—
—
—
2
0.01
Acceleration of share-based compensation expense
1
—
—
—
1
—
—
—
Other
1
—
11
0.03
(22
)
(0.07
)
17
0.05
Tax benefit on intra-entity asset transfer
—
—
—
—
—
—
(299
)
(0.93
)
Adjustment for taxes (a)
(25
)
(0.08
)
(17
)
(0.04
)
(70
)
(0.23
)
(33
)
(0.11
)
Non-GAAP net income
$
243
$
0.78
$
240
$
0.76
$
718
$
2.30
$
712
$
2.23
(a) The adjustment for
taxes excludes tax benefits that management believes are not
directly related to on-going operations and which are either
isolated or cannot be expected to occur again with any regularity
or predictability. For the three and nine months ended July 31,
2020, management used a non-GAAP effective tax rate of 15.50%. For
the three and nine months ended July 31, 2019, management used a
non-GAAP effective tax rate of 16.67% and 16.75%, respectively.
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 asset impairments, amortization of
intangibles, transformational initiatives, acquisition and
integration costs, NASD site costs, special compliance costs,
acceleration of shared-based compensation expense and tax benefit
on intra-entity asset transfer.
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 due to new tariffs and tariff
remediation actions, small 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, 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, 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.
NASD site costs include all the costs related to the
expansion of our manufacturing of nucleic acid active
pharmaceutical ingredients incurred prior to the commencement of
commercial manufacturing.
Special
compliance costs include costs associated with transforming our
processes to implement new regulations such as data privacy
regulations, revenue recognition, lease accounting and certain tax
reporting requirements.
Acceleration of
share-based compensation expense represents stock-based
compensation expense that was accelerated upon employees’
involuntary termination from the company.
Other includes certain legal costs and settlements in
addition to other miscellaneous adjustments.
Tax benefit on intra-entity asset transfer relates to our
operations in Singapore along with our application of the new
accounting rules for income tax consequences of intra-entity
transfer of assets as adopted on November 1, 2018.
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 Life Sciences and
Applied Markets Group Q3'20 Q3'19 Revenue
$
557
$
544
Gross Margin, %
59.3
%
60.5
%
Income from Operations
$
126
$
118
Operating margin, %
22.6
%
21.7
%
Diagnostics and Genomics Group Q3'20
Q3'19 Revenue
$
241
$
263
Gross Margin, %
49.8
%
55.7
%
Income from Operations
$
41
$
50
Operating margin, %
17.2
%
19.1
%
Agilent CrossLab Group Q3'20
Q3'19 Revenue
$
463
$
467
Gross Margin, %
52.6
%
52.1
%
Income from Operations
$
132
$
122
Operating margin, %
28.4
%
26.2
%
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 amortization of intangibles,
transformational initiatives, acquisition and integration costs,
NASD site costs, special compliance costs and acceleration of
stock-based compensation expense. 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
Q3'20
Q3'19
% Change
Life Sciences and Applied Markets Group
$
557
$
544
2
%
Diagnostics and Genomics Group
241
263
(8
%)
Agilent CrossLab Group
463
467
(1
%)
Agilent
$
1,261
$
1,274
(1
%)
Non-GAAP(excluding Acquisitions
& Divestitures) Year-over-Yearat Constant Currency
(a) Year-over-Year Year-over-Year
PercentagePoint Impactfrom Currency
CurrentQuarterCurrencyImpact (b) Non GAAP Revenue by Segment Q3'20
Q3'19 % Change % Change Life Sciences
and Applied Markets Group
$
513
$
544
(6
%)
(4
%)
-2 ppts
$
(6
)
Diagnostics and Genomics Group
241
263
(8
%)
(8
%)
—
(2
)
Agilent CrossLab Group
463
467
(1
%)
1
%
-2 ppts
(8
)
Agilent (Core)
$
1,217
$
1,274
(4
%)
(3
%)
-1 ppt
$
(16
)
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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INVESTOR CONTACT: Ankur Dhingra +1 408-345-8948
ankur_dhingra@agilent.com
MEDIA CONTACT: Tom Beermann +1 408-553-2914
tom.beermann@agilent.com
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