Strong Third Quarter, Raising Full Year
Guidance
Highlights:
- GAAP net income of $175 million, or
$0.54 per share
- Non-GAAP net income of $191 million, or
$0.59 per share(1), $0.09 above midpoint guidance of $0.50
per share
- Revenue of $1.11 billion, representing
growth of 7 percent (core revenue growth of 7.5 percent(2)
versus midpoint guidance of 4.0 percent)
- Increasing fiscal year 2017 core
revenue growth guidance from a midpoint of 5.0 percent to a
midpoint of 6.0 percent(2). Increasing fiscal year 2017
non-GAAP earnings guidance from a midpoint of $2.18 to a midpoint
of $2.30 per share(3).
- Raising fiscal year 2017 free cash flow
guidance by $40 million to $665 million(4).
Agilent Technologies, Inc. (NYSE: A) today reported revenue
of $1.11 billion, up 7 percent year over year (up 7.5 percent on a
core basis(2)) for the third fiscal quarter ended July 31,
2017.
Third-quarter GAAP net income was $175 million, or $0.54 per
share. Last year’s third-quarter GAAP net income was $124 million,
or $0.38 per share.
During the third quarter, Agilent had intangible amortization of
$27 million, acquisition and integration costs of $4 million,
transformation costs of $3 million, and $1 million in other costs.
Excluding these items and a tax benefit of $19 million, Agilent
reported third-quarter non-GAAP net income of $191 million, or
$0.59 per share(1).
“Our team is executing very well. We had another great quarter
delivering above-market revenue growth, expanding operating margins
and growing our adjusted EPS,” said Mike McMullen, Agilent
President and CEO. “We saw strength across all our business
groups.”
“Our focus remains on driving sustainable above-market growth
and providing long-term value to our shareholders,” he added. “We
launched several new products that raise the bar on new
capabilities for our customers. We also closed the acquisition of
Cobalt Light Systems, enhancing our customer value proposition and
providing us with immediate entry into the attractive, fast-growing
Raman spectroscopy market.”
Third-quarter revenue of $531 million from Agilent’s Life
Sciences and Applied Markets Group (LSAG) grew 5 percent year over
year (up 7 percent on a core basis(2)), with strength in
chemical and energy, pharma and environmental end markets. LSAG’s
operating margin for the quarter was 21.3 percent.
Third-quarter revenue of $386 million from Agilent CrossLab
Group (ACG) grew 7 percent year over year (up 8 percent on a core
basis(2)). Both services and consumables saw solid growth
across all end markets and geographies. ACG’s operating margin for
the quarter was 23.4 percent.
Third-quarter revenue of $197 million from Agilent’s Diagnostics
and Genomics Group (DGG) grew 9 percent year over year (up 8
percent on a core basis(2)) led by pharma and diagnostic and
clinical end markets. DGG’s operating margin for the quarter was
16.9 percent.
Agilent expects fourth-quarter 2017 revenue in the range of
$1.15 billion to $1.17 billion. Fourth-quarter 2017 non-GAAP
earnings are expected to be in the range of $0.60 to $0.62 per
share(3).
For fiscal year 2017, Agilent expects revenue of $4.435 billion
to $4.455 billion and non-GAAP earnings of $2.29 to $2.31 per
share(3). The guidance is based on July 31, 2017, currency
exchange rates.
About Agilent Technologies
Agilent Technologies Inc. (NYSE: A) is a global leader in life
sciences, diagnostics and applied chemical markets. With more than
50 years of insight and innovation, Agilent instruments, software,
services, solutions, and people provide trusted answers to its
customers’ most challenging questions. The company generated
revenues of $4.20 billion in fiscal 2016 and employs about 13,000
people worldwide. Information about Agilent is available at
www.agilent.com.
Agilent’s management will present more details about its
third-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 “Q3 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 August 22 by dialing +1
855 859-2056 (or +1 404 537 3406 from outside the United States)
and entering pass code 55782589.
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 fourth 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 April 30, 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, 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. 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 Q3 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 Q4 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 $27 million per quarter.
(4) Free cash flow as projected for fiscal year 2017 is a
non-GAAP measure determined by deducting the projected capital
expenditures for fiscal year 2017 from the projected operating cash
flow for fiscal year 2017.
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 July 31,
Percent 2017 2016
Inc/(Dec) Net revenue $ 1,114 $ 1,044 7 %
Costs and expenses: Cost of products and services 518 502 3 %
Research and development 87 86 1 % Selling, general and
administrative 308 310 (1 %) Total
costs and expenses 913 898 2 %
Income from operations 201 146 38 % Interest income 6 3 100
% Interest expense (19 ) (17 ) 12 % Other income (expense), net
5 2 150 % Income before taxes
193 134 44 % Provision for income taxes 18 10 80 %
Net income $ 175 $ 124 41 %
Net income per share: Basic $ 0.55 $ 0.38 Diluted $ 0.54 $
0.38 Weighted average shares used in computing net income
per share: Basic 321 325 Diluted 326 328 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
Nine Months Ended July 31, Percent
2017 2016 Inc/(Dec)
Net revenue $ 3,283 $ 3,091 6 % Costs and expenses:
Cost of products and services 1,521 1,482 3 % Research and
development 250 245 2 % Selling, general and administrative
904 932 (3 %) Total costs and expenses
2,675 2,659 1 % Income from operations
608 432 41 % Interest income 15 8 88 % Interest expense (59
) (53 ) 11 % Other income (expense), net 13 6
117 % Income before taxes 577 393 47 %
Provision for income taxes 70 57 23 % Net income $
507 $ 336 51 % Net income per
share: Basic $ 1.57 $ 1.03 Diluted $ 1.56 $ 1.02 Weighted
average shares used in computing net income per share: Basic 322
326 Diluted 325 329 Cash dividends declared per common share
$ 0.396 $ 0.345 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 Nine Months
Ended July 31, July 31, 2017
2016 2017
2016 Net income $ 175 $ 124 $ 507 $ 336
Other comprehensive income (loss), net of tax: Unrealized
loss on derivative instruments (3 ) (5 ) (3 ) (11 ) Amounts
reclassified into earnings related to derivative instruments (1 ) 1
(2 ) — Foreign currency translation 57 (48 ) 61 41 Net defined
benefit pension cost and post retirement plan costs: Change in
actuarial net loss 8 8 34 29 Change in net prior service benefit
(1 ) (2 ) (4 ) (13 ) Other
comprehensive income (loss) 60 (46 ) 86
46 Total comprehensive income $ 235
$ 78 $ 593 $ 382 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
July
31,
October 31, 2017
2016(a)
ASSETS Current assets: Cash and cash equivalents $ 2,563 $
2,289 Accounts receivable, net 678 631 Inventory 566 533 Other
current assets 189 182 Total current
assets 3,996 3,635 Property, plant and equipment, net 716
639 Goodwill 2,612 2,517 Other intangible assets, net 375 408
Long-term investments 137 135 Other assets 425
460 Total assets $ 8,261 $ 7,794
LIABILITIES AND EQUITY Current liabilities: Accounts payable
$ 289 $ 257 Employee compensation and benefits 230 235 Deferred
revenue 301 269 Short-term debt 280 — Other accrued liabilities
141 184 Total current liabilities 1,241
945 Long-term debt 1,801 1,904 Retirement and
post-retirement benefits 323 360 Other long-term liabilities
285 339 Total liabilities 3,650
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; 322 million shares at July 31, 2017 and 614
million shares at October 31, 2016, issued
3 6
Treasury stock at cost; zero shares at
July 31, 2017 and 290 million shares at October 31, 2016
— (10,508 ) Additional paid-in-capital 5,282 9,159 (Accumulated
deficit) retained earnings (260 ) 6,089 Accumulated other
comprehensive loss (417 ) (503 ) Total stockholders'
equity 4,608 4,243 Non-controlling interest 3
3 Total equity 4,611 4,246 Total
liabilities and equity $ 8,261 $ 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
Nine Months Nine Months Ended Ended
Ended Ended July 31, July 31, July
31, July 31, 2017
2016 2017 2016
Cash flows from operating activities: Net income $ 175 $ 124
$ 507 $ 336 Adjustments to reconcile net income to net cash
provided by (used in) operating activities: Depreciation and
amortization 51 60 160 190 Share-based compensation 13 11 48 47
Excess and obsolete inventory related charges 4 4 19 16 Other
non-cash expenses, net 3 8 5 16 Changes in assets and liabilities:
Accounts receivable 19 — (29 ) 19 Inventory (17 ) 2 (46 ) (11 )
Accounts payable 5 26 11 (27 ) Employee compensation and benefits
(18 ) (1 ) (11 ) (14 ) Other assets and liabilities (7 )
(40 ) (63 ) (13 ) Net cash provided by
operating activities (a) 228 194 601 559 Cash flows from
investing activities: Investments in property, plant and equipment
(43 ) (24 ) (118 ) (87 ) Proceeds from divestitures — — 1 —
Proceeds from sale of investment securities — — — 1 Payment to
acquire cost method investment — — — (80 ) Loan to equity method
investment — — — (3 ) Change in restricted cash and cash
equivalents, net — — — 245 Payment in exchange for convertible note
(1 ) — (1 ) (1 ) Acquisition of businesses and intangible assets,
net of cash acquired (57 ) — (127 )
(235 ) Net cash used in investing activities (101 ) (24 )
(245 ) (160 ) Cash flows from financing activities: Issuance
of common stock under employee stock plans 32 27 58 59 Payment of
taxes related to net share settlement of equity awards — (1 ) (13 )
(6 ) Payment of dividends (42 ) (37 ) (127 ) (112 ) Proceeds from
revolving credit facility 115 — 343 255 Repayment of revolving
credit facility (76 ) — (163 ) (20 ) Treasury stock repurchases
— (94 ) (194 ) (388 ) Net cash
provided by (used in) financing activities 29 (105 ) (96 ) (212 )
Effect of exchange rate movements 18 (5 ) 14 9 Net
increase in cash and cash equivalents 174 60 274 196 Cash
and cash equivalents at beginning of period 2,389
2,139 2,289 2,003
Cash and cash equivalents at end of period $ 2,563 $ 2,199
$ 2,563 $ 2,199 (a) Cash payments
included in operating activities: Income tax payments (refunds),
net $ 15 $ 33 $ 56 $ 54 Interest payments $ 29 $ 29 $ 69 $ 66
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 Nine Months Ended July
31, July 31, 2017 Diluted
EPS 2016 Diluted EPS
2017 Diluted EPS 2016
Diluted EPS GAAP Net income $ 175 $
0.54 $ 124 $ 0.38 $ 507 $ 1.56 $ 336 $ 1.02 Non-GAAP adjustments:
Asset impairments — — 4 0.01 — — 4 0.01 Intangible amortization 27
0.08 37 0.11 89 0.27 120 0.36 Business exit and divestiture costs —
— 1 — — — 6 0.02 Transformational initiatives 3 0.01 11 0.03 5 0.02
32 0.10 Acquisition and integration costs 4 0.01 11 0.03 27 0.08 28
0.09 Pension curtailment gain — — — — — — (15 ) (0.05 ) Pension
settlement gain — — — — (32 ) (0.10 ) (1 ) — Other 1 — 2 0.01 5
0.02 5 0.02 Adjustment for taxes (a) (19 )
(0.05 ) (30 ) (0.08 ) (51 )
(0.16 ) (57 ) (0.18 ) Non-GAAP Net
income $ 191 $ 0.59 $ 160 $ 0.49
$ 550 $ 1.69 $ 458 $ 1.39
(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, 2017, management uses a
non-GAAP effective tax rate of 16.2% and 18.0%, respectively. 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 asset
impairments, amortization of intangibles, business exit and
divestiture costs, transformational initiatives, acquisition and
integration costs, pension curtailment gain and pension settlement
gain.
Asset impairments include assets that have been
written down to their fair value.
Business exit and
divestiture costs include costs associated with the exit of the
NMR business and other business divestitures.
Transformational initiatives include expenses associated
with targeted cost reduction activities such as manufacturing
transfers, 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 the
post-separation resizing of the IT infrastructure and streamlining
of IT system as well as company programs to transform our product
lifecycle management (PLM) system 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.
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 Q3'17 Q3'16 Revenue $ 531 $ 504
Gross Margin, % 59.7 % 57.8 % Income from Operations $ 113 $ 96
Operating margin, % 21.3 % 19.1 %
Diagnostics and
Genomics Group Q3'17 Q3'16 Revenue $ 197 $ 180
Gross Margin, % 52.7 % 55.8 % Income from Operations $ 33 $ 34
Operating margin, % 16.9 % 18.8 %
Agilent CrossLab
Group Q3'17 Q3'16 Revenue $ 386 $ 360 Gross
Margin, % 49.9 % 48.7 % Income from Operations $ 90 $ 82 Operating
margin, % 23.4 % 22.7 % 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
asset impairments, 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
Year-over-Year
GAAP Revenue by
Segment
Q3'17 Q3'16 % Change
Life Sciences and Applied Markets Group $ 531 $ 504 5 %
Diagnostics and Genomics Group 197 180 9 % Agilent
CrossLab Group 386 360 7 % Agilent $ 1,114
$ 1,044 7 %
Non-GAAP
(excluding NMR and
Acquisitions)
Currency Adjustments Currency-Adjusted (a)
Year-over-Year Year-over-Year
Non GAAP Revenue
by Segment
Q3'17 Q3'16 % Change
Q3'17 Q3'17 Q3'16 %
Change Life Sciences and Applied Markets Group $
531 $ 500 6 % $ (4 ) $ 535 $ 500 7 % Diagnostics and
Genomics Group 194 180 8 % (1 ) 195 180 8 % Agilent CrossLab
Group 384 360 7 % (3 ) 387 360 8 %
Agilent (Core) $ 1,109 $ 1,040 7 % $ (8
) $ 1,117 $ 1,040 7 % (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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