Highlights:
- Revenue of $1.24 billion represents flat reported growth, down
1.7% on a core(1) basis
- GAAP net income of $101 million, or 32 cents per share
- Non-GAAP(2) net income of $223 million, or 71 cents per
share
- Strong operating cash flow of $313 million, up 24% versus prior
year
Agilent Technologies Inc. (NYSE: A) today reported revenue of
$1.24 billion for the second quarter ended April 30, 2020, equal to
revenue reported for the second quarter of 2019 and down 1.7% on a
core(1) basis.
Second-quarter GAAP net income was $101 million, or 32 cents per
share. This compares with $182 million, or 57 cents per share, in
the second quarter of fiscal year 2019. Non-GAAP(2) net income was
$223 million, or 71 cents per share, during the quarter compared
with $228 million, or 71 cents per share, during the second quarter
a year ago.
“Our business was tracking well into late March when we
experienced significant disruption in the U.S. and Europe as
customers closed or restricted access to their facilities to slow
the spread of COVID-19,” said Mike McMullen, Agilent president and
CEO.
“I’m incredibly proud of how the Agilent team has taken quick,
decisive action to ensure the safety of our employees, keep our
operations up and running efficiently, and support our customers
around the world. I believe we are well-positioned to face the
challenges brought on by COVID-19 given our focus on growth, a
resilient business model, a strong balance sheet, and most
importantly, our outstanding team.”
Financial Highlights
Life Sciences and Applied Markets Group
Second-quarter revenue of $526 million from Agilent’s Life
Sciences and Applied Markets Group (LSAG) was down 1% year over
year (down 7% on a core(1) basis). LSAG’s operating margin was
18.7%.
Agilent CrossLab Group
Second-quarter revenue of $449 million from the Agilent CrossLab
Group (ACG) declined 1% year over year (up 1% on a core(1) basis).
ACG’s operating margin was 27.2%.
Diagnostics and Genomics Group
Second-quarter revenue of $263 million from Agilent’s
Diagnostics and Genomics Group (DGG) grew 3% year over year (up 5%
on a core(1) basis). DGG’s operating margin was 21.6%.
Conference Call
Agilent’s management will present additional details regarding
the company’s second-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. Listeners may log on at
www.investor.agilent.com and select “Q2 2020 Agilent Technologies
Inc. Earnings Conference Call” in the “News & Events — Events”
section. The webcast will remain available on the company’s website
for 90 days. Additional financial information can be found at
www.investor.agilent.com by selecting “Financial Summary” in the
“Financials” section.
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 January 31,
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 Q2 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 including the
impact of the 2017 Tax Act. 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 Six Months Ended April 30,
April 30,
2020
2019
2020
2019
Net revenue
$
1,238
$
1,238
$
2,595
$
2,522
Costs and expenses: Cost of products and services
581
569
1,215
1,146
Research and development
197
99
301
201
Selling, general and administrative
358
354
762
709
Total costs and expenses
1,136
1,022
2,278
2,056
Income from operations
102
216
317
466
Interest income
3
10
6
20
Interest expense
(20
)
(17
)
(40
)
(35
)
Other income (expense), net
36
9
57
15
Income before taxes
121
218
340
466
Provision for (benefit from) income taxes
20
36
42
(220
)
Net income
$
101
$
182
$
298
$
686
Net income per share: Basic
$
0.33
$
0.57
$
0.96
$
2.16
Diluted
$
0.32
$
0.57
$
0.95
$
2.13
Weighted average shares used in computing net income per
share: Basic
309
317
310
318
Diluted
312
321
313
322
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
April 30, October 31,
2020
2019
ASSETS Current assets: Cash and cash equivalents
$
1,324
$
1,382
Accounts receivable, net
886
930
Inventory
750
679
Other current assets
211
198
Total current assets
3,171
3,189
Property, plant and equipment, net
836
850
Goodwill and other intangible assets, net
4,503
4,700
Long-term investments
141
102
Other assets
804
611
Total assets
$
9,455
$
9,452
LIABILITIES AND EQUITY Current liabilities: Accounts
payable
$
333
$
354
Employee compensation and benefits
280
334
Deferred revenue
399
336
Short-term debt
700
616
Other accrued liabilities
233
440
Total current liabilities
1,945
2,080
Long-term debt
1,788
1,791
Retirement and post-retirement benefits
340
360
Other long-term liabilities
614
473
Total liabilities
4,687
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; 308 million shares at April 30, 2020 and 309 million
shares at October 31, 2019, issued
3
3
Additional paid-in-capital
5,288
5,277
Retained earnings (accumulated deficit)
15
(18)
Accumulated other comprehensive loss
(538)
(514)
Total stockholders' equity
4,768
4,748
Total liabilities and equity
$
9,455
$
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 Six Months Ended April
30, April 30,
2020
2019
Cash flows from operating activities: Net income
$
298
$
686
Adjustments to reconcile net income to net cash provided by
(used in) operating activities: Depreciation and amortization
155
107
Share-based compensation
44
40
Excess and obsolete inventory related charges
9
7
Asset impairment charges
99
— Unrealized gain on equity securities
(27)
(1)
Other non-cash expenses, net
3
3
Changes in assets and liabilities: Accounts receivable, net
25
(17)
Inventory
(85)
(21)
Accounts payable
(10)
(8)
Employee compensation and benefits
(50)
(13)
Other assets and liabilities
(207)
(318)
Net cash provided by operating activities (a)
254
465
Cash flows from investing activities: Investments in
property, plant and equipment
(67)
(78)
Payment to acquire fair value investments
(18)
(18)
Payment in exchange for convertible note
(3)
(2)
Acquisition of businesses and intangible assets, net of cash
acquired —
(248)
Net cash used in investing activities
(88)
(346)
Cash flows from financing activities: Issuance of common
stock under employee stock plans
32
33
Payment of taxes related to net share settlement of equity awards
(33)
(14)
Payment of dividends
(111)
(104)
Proceeds from revolving credit facility
798
— Repayment of revolving credit facility
(713)
— Repayment of finance lease
(4)
— Purchase of non-controlling interest —
(4)
Treasury stock repurchases
(186)
(125)
Net cash used in financing activities
(217)
(214)
Effect of exchange rate movements
(8)
2
Net increase (decrease) in cash, cash equivalents and
restricted cash
(59)
(93)
Cash, cash equivalents and restricted cash at beginning of
period
1,388
2,254
Cash, cash equivalents and restricted cash at end of period
$
1,329
$
2,161
Reconciliation of cash, cash equivalents and
restricted cash to the condensed consolidated balance sheet:
Cash and cash equivalents
$
1,324
$
2,155
Restricted cash, included in other assets
5
6
Total cash, cash equivalents and restricted cash
$
1,329
$
2,161
(a) Cash payments included in operating activities:
Income tax payments (refunds), net
$
286
$
104
Interest payments
$
39
$
36
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 Six Months Ended April 30, April 30,
2020
Diluted EPS
2019
Diluted EPS
2020
Diluted EPS
2019
Diluted EPS
GAAP net income
$
101
$
0.32
$
182
$
0.57
$
298
$
0.95
$
686
$
2.13
Non-GAAP adjustments: Asset impairments
99
0.32
— —
99
0.32
— — Intangible amortization
46
0.15
26
0.08
94
0.30
54
0.17
Transformational initiatives
15
0.05
9
0.03
28
0.09
14
0.04
Acquisition and integration costs
11
0.03
10
0.03
24
0.08
20
0.06
NASD site costs — —
4
0.01
— —
6
0.02
Special compliance costs — —
1
— — —
1
— Other
(29)
(0.09)
5
0.02
(23)
(0.08)
6
0.02
Tax benefit on intra-entity asset transfer — — — — — —
(299)
(0.93)
Adjustment for taxes (a)
(20)
(0.07)
(9)
(0.03)
(45)
(0.14)
(16)
(0.04)
Non-GAAP net income
$
223
$
0.71
$
228
$
0.71
$
475
$
1.52
$
472
$
1.47
(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, 2020, management used a non-GAAP
effective tax rate of 15.5%. For the three months ended April 30,
2019, management used a non-GAAP effective tax rate of 16.48%. For
the six months ended April 30, 2019, management used a non-GAAP
effective tax rate of 16.75%. 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 asset
impairments, amortization of intangibles, transformational
initiatives, acquisition and integration costs, NASD site costs,
special compliance costs 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.
Other
includes certain legal costs and settlements and unrealized gains
related to our equity securities 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 Q2'20 Q2'19 Revenue
$
526
$
529
Gross Margin, %
58.1%
60.6%
Income from Operations
$
98
$
107
Operating margin, %
18.7%
20.3%
Diagnostics and Genomics Group Q2'20
Q2'19 Revenue
$
263
$
254
Gross Margin, %
55.1%
54.8%
Income from Operations
$
57
$
49
Operating margin, %
21.6%
19.3%
Agilent CrossLab Group Q2'20
Q2'19 Revenue
$
449
$
455
Gross Margin, %
52.5%
51.3%
Income from Operations
$
122
$
115
Operating margin, %
27.2%
25.2%
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 asset impairments,
amortization of intangibles, transformational initiatives,
acquisition and integration costs, NASD site costs, and special
compliance 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
Q2'20 Q2'19 % Change Life Sciences and
Applied Markets Group
$
526
$
529
(1%)
Diagnostics and Genomics Group
263
254
3%
Agilent CrossLab Group
449
455
(1%)
Agilent
$
1,238
$
1,238
—
Non-GAAP(excluding Acquisitions
& Divestitures) Year-over-Yearat Constant Currency
(a) Year-over-Year Year-over-Year Percentage
PointImpact fromCurrency Current QuarterCurrency Impact
(b) Non GAAP Revenue by
Segment Q2'20 Q2'19 % Change %
Change Life Sciences and Applied Markets Group
$
485
$
529
(8%)
(7%)
-1 ppt
$
(7)
Diagnostics and Genomics Group
263
254
3%
5%
-2 ppts
(4)
Agilent CrossLab Group
449
455
(1%)
1%
-2 ppts
(9)
Agilent (Core)
$
1,197
$
1,238
(3%)
(2%)
-1 ppt
$
(20)
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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