Strong Second Quarter, Raises Full-Year
Guidance
Highlights:
- GAAP net income of $164 million, or
$0.50 per share
- Non-GAAP net income of $187 million, or
$0.58 per share(1), $0.10 above midpoint guidance of $0.48
per share
- Revenue of $1.10 billion, representing
growth of 8 percent (core revenue growth of 9 percent(2)
versus midpoint guidance of 3.5 percent)
- Third-quarter fiscal year revenue
guidance of $1.06 billion to $1.08 billion, and non-GAAP earnings
guidance of $0.49 to $0.51 per share(3)
- Increasing fiscal year 2017 core
revenue growth guidance from a midpoint of 4.5 percent to 5.0
percent(2). Increasing non-GAAP earnings guidance from a
midpoint of $2.13 to $2.18 per share(3).
Agilent Technologies, Inc. (NYSE: A) today reported revenue
of $1.10 billion, up 8 percent year over year (up 9 percent on a
core basis(2)) for the second fiscal quarter ended April 30,
2017.
Second-quarter GAAP net income was $164 million, or $0.50 per
share. Last year’s second-quarter GAAP net income was $91 million,
or $0.28 per share.
During the second quarter, Agilent had intangible amortization
of $31 million, acquisition and integration costs of $7 million,
and $2 million in other costs. Excluding these items and a tax
benefit of $17 million, Agilent reported second-quarter non-GAAP
net income of $187 million, or $0.58 per share(1).
“The Agilent team delivered another excellent quarter,” said
Mike McMullen, Agilent President and CEO. “Both revenue and
earnings per share exceeded the high range of guidance. We saw a
strong pick up in the Chemical and Energy business after modest
gains last quarter, and strong growth in Pharma and Europe also
contributed to the upside.”
“We continue to deliver on our long-term focus of driving above
market growth, expanding operating margins, and deploying capital
in a balanced manner,” he added. “Looking ahead, we are confident
in our company’s prospects, and we are raising our full-year core
revenue growth and earnings expectations.”
Second-quarter revenue of $523 million from Agilent’s Life
Sciences and Applied Markets Group (LSAG) grew 6 percent year over
year (up 6 percent on a core basis(2)), with double-digit
growth in chemical and energy, pharma and environmental markets.
LSAG’s operating margin for the quarter was 21.1 percent.
Second-quarter revenue of $378 million from Agilent CrossLab
Group (ACG) grew 9 percent year over year (up 10 percent on a core
basis(2)). Both services and consumables continued to see
solid growth across all geographies. ACG’s operating margin for the
quarter was 21.6 percent.
Second-quarter revenue of $201 million from Agilent’s
Diagnostics and Genomics Group (DGG) grew 13 percent year over year
(up 13 percent on a core basis(2)) led by pharma and diagnostic and
clinical end-markets. DGG’s operating margin for the quarter was
24.2 percent.
Agilent expects third-quarter 2017 revenue in the range of $1.06
billion to $1.08 billion. Third-quarter non-GAAP earnings are
expected to be in the range of $0.49 to $0.51 per
share(3).
For fiscal year 2017, Agilent expects revenue of $4.36 billion
to $4.38 billion and non-GAAP earnings of $2.15 to $2.21 per
share(3). The guidance is based on April 28, 2017 currency
exchange rates.
About Agilent Technologies
Agilent Technologies, Inc. (NYSE: A), a global leader in life
sciences, diagnostics and applied chemical markets, is the premier
laboratory partner for a better world. Agilent works with customers
in more than 100 countries, providing instruments, software,
services and consumables for the entire laboratory workflow.
Agilent generated revenue of $4.20 billion in fiscal 2016. The
company employs about 13,000 people worldwide. Information about
Agilent is available at www.agilent.com.
Agilent’s management will present more details about its
second-quarter FY2017 financial results on a conference call with
investors today at 1:30 p.m. PT. This event will be webcast live in
listen-only mode. Listeners may log on at www.investor.agilent.com
and select “Q2 2017 Agilent Technologies Inc. Earnings Conference
Call” in the “News & Events Calendar of Events” section. The
webcast will remain available on the company’s website for 90
days.
Additional information regarding financial results can be found
at www.investor.agilent.com by selecting “Financial Results” in the
“Financial Information” section.
A telephone replay of the conference call will be available at
approximately 4:30 p.m. PST today through May 29, 2017 by dialing
+1 800-585-8367 (or +1 404-537-3406 from outside the United States)
and entering pass code 8574751.
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 future revenue, earnings and profitability; planned new
products; market trends; the future demand for the company’s
products and services; customer expectations; and revenue and
non-GAAP earnings guidance for the third quarter and full fiscal
year 2017. 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 our 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 we are 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 our
cost-cutting initiatives will impair our ability to develop
products and remain competitive and to operate effectively; the
impact of geopolitical uncertainties and global economic conditions
on our operations, our markets and our ability to conduct business;
the ability to improve asset performance to adapt to changes in
demand; the ability of our 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 our quarterly report on Form 10-Q
for the quarter ended Jan. 31, 2017. 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) Non-GAAP net income and non-GAAP earnings per share
primarily excludes the impacts of acquisition and integration
costs, transformation initiatives, business exit and divestiture
costs, non-cash intangibles amortization, and pension settlement
and curtailment gains. We also exclude any tax benefits that are
not directly related to ongoing operations and which are either
isolated or is 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 6 of the attached tables along
with additional information regarding the use of this non-GAAP
measure.
(2) Core revenue growth excludes the impact of currency, the NMR
business and acquisitions and divestitures within the past 12
months. Core revenue is a non-GAAP measure. A reconciliation
between Q2 FY17 GAAP revenue and core revenue is set forth on page
8 of the attached tables along with additional information
regarding the use of this non-GAAP measure. Core revenue growth as
projected for full fiscal year 2017 excludes the impact of
currency, the NMR business and acquisitions and divestitures within
the past 12 months. Most of these exclude amounts that 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.
(3) Non-GAAP earnings per share as projected for Q3 FY17 and
full fiscal year 2017 excludes primarily the future impact of
acquisition and integration costs, pension settlement gain, and
non-cash intangibles amortization. We also exclude any tax benefits
that are not directly related to ongoing operations and which are
either isolated or is not expected to occur again with any
regularity or predictability. Most of these excluded amounts that
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 $30 million per quarter.
NOTE TO EDITORS: Further technology, corporate citizenship and
executive news is available on the Agilent news site at
www.agilent.com/go/news.
AGILENT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS (In millions, except per share
amounts) (Unaudited) PRELIMINARY
Three Months Ended April 30,
Percent
2017 2016
Inc/(Dec)
Net revenue $ 1,102 $ 1,019 8 % Costs and expenses:
Cost of products and services 510 489 4 % Research and development
84 81 4 % Selling, general and administrative 307
318 (3 %) Total costs and expenses 901
888 1 % Income from operations 201 131 53 %
Interest income 5 3 67 % Interest expense (20 ) (18 ) 11 %
Other income (expense), net 5 1 —
Income before taxes 191 117 63 % Provision for income
taxes 27 26 4 % Net income $ 164 $ 91
80
%
Net income per share: Basic $ 0.51 $ 0.28 Diluted $
0.50 $ 0.28 Weighted average shares used in computing net
income per share: Basic 321 326 Diluted 325 328 Cash
dividends declared per common share $ 0.132 $ 0.115 The
preliminary income statement is estimated based on our current
information. Page 1
AGILENT TECHNOLOGIES,
INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts) (Unaudited)
PRELIMINARY Six Months Ended
April 30, Percent 2017 2016
Inc/(Dec) Net revenue $ 2,169 $ 2,047 6 %
Costs and expenses: Cost of products and services 1,003 980 2 %
Research and development 163 159 3 % Selling, general and
administrative 596 622 (4 %)
Total costs and expenses
1,762 1,761 — Income from
operations 407 286 42 % Interest income 9 5 80 % Interest
expense (40 ) (36 ) 11 % Other income (expense), net 8
4 100 % Income before taxes 384 259 48
% Provision for income taxes 52 47 11 % Net
income $ 332 $ 212 57 % Net income per
share: Basic $ 1.03 $ 0.65 Diluted $ 1.02 $ 0.64 Weighted
average shares used in computing net income per share: Basic 322
327 Diluted 325 330 Cash dividends declared per common share
$ 0.264 $ 0.230 The preliminary income statement is
estimated based on our current information. Page 2
AGILENT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME (In millions)
(Unaudited) PRELIMINARY
Three Months Ended Six Months Ended April 30,
April 30, 2017 2016 2017 2016
Net income $ 164 $ 91 $ 332 $ 212 Other comprehensive
income (loss), net of tax: Unrealized loss on derivative
instruments (1 ) (9 ) —
(6
) Amounts reclassified into earnings related to derivative
instruments (1 ) — (1 ) (1 ) Foreign currency translation 7 145 4
89 Net defined benefit pension cost and post retirement plan costs:
Change in actuarial net loss 9 6 26 21 Change in net prior service
benefit (2 ) (3 ) (3 ) (11 ) Other
comprehensive income 12 139 26
92 Total comprehensive income $ 176
$ 230 $ 358 $ 304 The
preliminary statement of comprehensive income is estimated based on
our current information. Page 3
AGILENT
TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except par value and share amounts)
(Unaudited) PRELIMINARY
April
30,
October 31, 2017
2016(a)
ASSETS
Current assets:
Cash and cash equivalents $ 2,389 $ 2,289 Accounts receivable, net
677 631 Inventory 548 533 Other current assets 186
182
Total current assets
3,800 3,635 Property, plant and equipment, net 675 639
Goodwill 2,568 2,517 Other intangible assets, net 373 408 Long-term
investments 134 135 Other assets 466 460
Total assets $ 8,016 $ 7,794
LIABILITIES AND EQUITY Current liabilities: Accounts payable
$ 265 $ 257 Employee compensation and benefits 241 235 Deferred
revenue 301 269 Short-term debt 241 — Other accrued liabilities
139 184
Total current liabilities
1,187 945 Long-term debt 1,802 1,904 Retirement and
post-retirement benefits 317 360 Other long-term liabilities
335 339 Total liabilities 3,641
3,548 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; 321 million shares at April 30, 2017 and 614
million shares at October 31, 2016, issued
3 6
Treasury stock at cost; zero shares at
April 30, 2017 and 290 million shares at October 31, 2016
— (10,508 ) Additional paid-in-capital 5,239 9,159 Retained
earnings (accumulated deficit) (393 ) 6,089 Accumulated other
comprehensive loss (477 ) (503 ) Total stockholders'
equity 4,372 4,243 Non-controlling interest 3
3 Total equity 4,375 4,246 Total
liabilities and equity $ 8,016 $ 7,794 (a)
Includes the impact of the adoption of ASU 2015-15. The
preliminary balance sheet is estimated based on our current
information. Page 4
AGILENT TECHNOLOGIES,
INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions) (Unaudited) PRELIMINARY
Three Months
Three Months Six Months Six
Months Ended Ended Ended Ended
April 30, April 30, April 30, April 30,
2017 2016 2017 2016 Cash flows from
operating activities: Net income $ 164 $ 91 $ 332 $ 212
Adjustments to reconcile net income to net cash provided by (used
in) operating activities: Depreciation and amortization 54 64 109
130 Share-based compensation 15 13 35 36 Excess and obsolete
inventory related charges 8 8 15 12 Other non-cash expenses, net —
6 2 8 Changes in assets and liabilities: Accounts receivable (17 )
34 (48 ) 19 Inventory (3 ) — (29 ) (13 ) Accounts payable (3 ) (35
) 6 (53 ) Employee compensation and benefits 50 34 7 (13 ) Other
assets and liabilities (11 ) 39 (56 )
27 Net cash provided by operating activities (a) 257
254 373 365 Cash flows from investing activities:
Investments in property, plant and equipment (43 ) (25 ) (75 ) (63
) Proceeds from divestitures — — 1 — Proceeds from sale of
investment securities — — — 1 Payment to acquire cost method
investment — (80 ) — (80 ) Loan to equity method investment — (3 )
— (3 ) Change in restricted cash and cash equivalents, net — — —
245 Payment in exchange for convertible note — — — (1 ) Acquisition
of businesses and intangible assets, net of cash acquired —
— (70 ) (235 ) Net cash used in
investing activities (43 ) (108 ) (144 ) (136 ) Cash flows
from financing activities: Issuance of common stock under employee
stock plans 8 8 26 32 Payment of taxes related to net share
settlement of equity awards (1 ) — (13 ) (5 ) Payment of dividends
(43 ) (37 ) (85 ) (75 ) Proceeds from revolving credit facility 97
155 228 255 Repayment of revolving credit facility (45 ) — (87 )
(20 ) Treasury stock repurchases (83 ) (94 )
(194 ) (294 ) Net cash provided by (used in) financing
activities (67 ) 32 (125 ) (107 ) Effect of exchange rate
movements 1 30 (4 ) 14 Net increase in cash and cash
equivalents 148 208 100 136 Cash and cash equivalents at
beginning of period 2,241 1,931
2,289 2,003 Cash and cash equivalents
at end of period $ 2,389 $ 2,139 $ 2,389 $
2,139 (a) Cash payments included in operating
activities: Severance payments $ 2 $ 1 $ 3 $ 3 Income tax payments
(refunds), net $ 14 $ (16 ) $ 41 $ 21 Interest payments $ 11 $ 8 $
40 $ 37 The preliminary cash flow is estimated based on our
current information. Page 5
AGILENT TECHNOLOGIES,
INC. NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATIONS
(In millions, except per share amounts) (Unaudited)
PRELIMINARY Three Months Ended
Six Months Ended April 30, April 30,
2017 Diluted EPS 2016
Diluted EPS 2017 Diluted EPS
2016
Diluted EPS GAAP Net
income $ 164 $ 0.50 $ 91 $ 0.28 $ 332 $ 1.02 $ 212 $ 0.64 Non-GAAP
adjustments: Intangible amortization 31 0.10 40 0.12 62 0.19 83
0.25 Business exit and divestiture costs — — 1 — — — 5 0.02
Transformational initiatives — — 10 0.03 2 0.01 21 0.06 Acquisition
and integration costs 7 0.02 12 0.04 23 0.07 17 0.05 Pension
curtailment gain — — — — — — (15 )
(0.05
) Pension settlement gain — — — — (32 ) (0.10 ) (1 ) — Other 2 0.01
1 — 4 0.01 3 0.01 Adjustment for taxes (a) (17 )
(0.05 ) (10 ) (0.03 ) (32 )
(0.10 ) (27 ) (0.08 ) Non-GAAP
Net income $ 187 $ 0.58 $ 145 $
0.44 $ 359 $ 1.10 $ 298 $
0.90 (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 six months ended April 30, 2017, management uses a
non-GAAP effective tax rate of 19.0%. In the same periods last
year, management used a non-GAAP effective tax rate of 20.0%.
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 amortization of intangibles, business
exit and divestiture costs, transformational initiatives,
acquisition and integration costs, pension curtailment gain and
pension settlement gain.
Business exit and divestiture costs
include costs associated with the exit of the NMR business and the
divestiture of the XRD business.
Transformational initiatives
include expenses associated with targeted cost reduction activities
such as manufacturing transfers, small site consolidations,
reorganizations, insourcing or outsourcing of activities. Such
costs may include move and relocation costs, one-time termination
benefits and other one-time reorganization costs.
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.
Pension curtailment gain resulted
from certain retirement plans benefit reductions.
Pension settlement gain resulted
from transfer of the substitutional portion of our Japanese pension
plan to the government.
Other includes certain legal costs
and settlements in addition to 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 6
AGILENT TECHNOLOGIES, INC. SEGMENT
INFORMATION (In millions, except where noted)
(Unaudited) PRELIMINARY
Life Sciences and Applied Markets
Group
Q2'17 Q2'16 Revenue $ 523 $ 495 Gross Margin, % 59.9
% 58.5 % Income from Operations $ 110 $ 94 Operating margin, % 21.1
% 19.0 %
Diagnostics and Genomics Group
Q2'17 Q2'16 Revenue $ 201 $ 178 Gross Margin, % 57.6
% 54.1 % Income from Operations $ 49 $ 27 Operating margin, % 24.2
% 15.0 %
Agilent CrossLab Group Q2'17
Q2'16 Revenue $ 378 $ 346 Gross Margin, % 49.7 % 49.3 %
Income from Operations $ 82 $ 74 Operating margin, % 21.6 % 21.5 %
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, business exit and
divestiture costs, transformational initiatives, acquisition and
integration costs, pension curtailment gain and pension settlement
gain. 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 7
AGILENT TECHNOLOGIES, INC.
RECONCILIATIONS OF REVENUE BY SEGMENT
EXCLUDING THE NMR BUSINESS,
ACQUISITIONS, DIVESTITURES AND THE
IMPACT OF CURRENCY ADJUSTMENTS (CORE)
(in millions) (Unaudited) PRELIMINARY
Year-over-Year
GAAP
GAAP Revenue by
Segment
Q2'17
Q2'16
Year-over-Year% Change
Life Sciences and Applied Markets Group $ 523 $ 495 6 %
Diagnostics and Genomics Group 201 178 13 % Agilent
CrossLab Group 378 346 9 % Agilent $ 1,102
$ 1,019
Non-GAAP
CurrencyAdjustments
Currency-Adjusted (a)
Non GAAP Revenue
by Segment
Q2'17 Q2'16
Year-over-Year% Change
Q2'17 Q2'17 Q2'16
Year-over-Year Change
Life Sciences and Applied Markets Group excluding NMR $ 523
$ 494 6 % $ (3 ) $ 526 $ 494 6 % Diagnostics and Genomics
Group excluding acquisition 198 178 12 % (2 ) 200 178 13 %
Agilent CrossLab Group excluding acquisition 376 346 9 % (4 ) 380
346 10 % Agilent
Revenue (Core) $ 1,097 $ 1,018 $ (9 ) $ 1,106 $ 1,018
9 % (a) We compare the year-over-year change in revenue
excluding the effect of the NMR business, recent acquisitions and
divestitures and foreign currency rate fluctuations to assess the
performance of our underlying business. To determine the impact of
currency fluctuations, current period results for entities
reporting in currencies other than United States dollars are
converted into United States dollars at the actual exchange rate in
effect during the respective prior periods. The preliminary
reconciliation of GAAP revenue adjusted for the NMR business,
recent acquisitions and divestitures and impact of currency is
estimated based on our current information. Page 8
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Agilent Technologies, Inc.INVESTOR CONTACT:Alicia Rodriguez, +1
408-345-8948alicia_rodriguez@agilent.comorEDITORIAL
CONTACT:Stefanie Notaney, +1
408-345-8955stefanie.notaney@agilent.com
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