Agilent Technologies Reports First-Quarter Fiscal Year 2019 Financial Results

Strong Start to Year as First-Quarter Revenue and EPS Exceed Guidance;
Raising Full Year Guidance

Highlights:

  • Revenue of $1.28 billion, representing reported growth of 6 percent
    with core revenue growth of 6 percent(1)
  • GAAP net income of $504 million, or $1.57 per share
  • Non-GAAP net income of $244 million, or $0.76 per share(2),
    an increase of 15 percent compared to 2018
  • Second-quarter fiscal year revenue guidance of $1.255 billion to
    $1.270 billion, and non-GAAP earnings guidance of $0.70 to $0.72 per
    share(3)
  • Raising fiscal year 2019 revenue guidance to a range of $5.15 billion
    to $5.19 billion and non-GAAP earnings guidance to a range of $3.03 to
    $3.07 per share(3)

SANTA CLARA, Calif.–(BUSINESS WIRE)–Agilent Technologies, Inc. (NYSE: A) today reported revenue of $1.28
billion for the first quarter ended January 31, 2019, up 6 percent year
over year (up 6 percent on a core basis(1)).

On a GAAP basis, first-quarter net income was $504 million or $1.57 per
share, which included a discrete tax benefit of $299 million. This is
compared to last year’s first-quarter net loss of $320 million or $0.99
net loss per share, which included a tax charge of $533 million related
to U.S. Tax Reform legislation.

“We are pleased to start the year with a strong performance driving
excellent revenue and EPS growth and exceeding our guidance,” said Mike
McMullen, Agilent president and CEO. “The Agilent team is delivering on
our commitment to drive superior revenue and earnings growth.”

“Our Agilent team continues to do a great job addressing customer needs
across our business groups,” continued McMullen. “We kicked off 2019
strengthening our best-in-class portfolio bringing new solutions and
services to our customers to help them gain new insights and achieve
greater productivity in their labs.”

Financial Highlights

Life Sciences and Applied Markets Group

First-quarter revenue of $607 million from Agilent’s Life Sciences and
Applied Markets Group (LSAG) grew 2 percent year over year (up 1 percent
on a core basis(1)). Demand in the pharma, environmental and
forensics markets led the results. LSAG’s operating margin for the
quarter was 26.1 percent.

Agilent CrossLab Group

First-quarter revenue of $442 million from Agilent CrossLab Group (ACG)
grew 8 percent year over year (up 10 percent on a core basis(1)).
Growth was excellent across services and consumables, regions and
end-markets. ACG’s operating margin for the quarter was 23.9 percent.

Diagnostics and Genomics Group

First-quarter revenue of $235 million from Agilent’s Diagnostics and
Genomics Group (DGG) grew 13 percent year over year (up 12 percent on a
core basis(1)). Strength in the pharma and clinical and
diagnostics end-markets led an excellent performance. DGG’s operating
margin for the quarter was 14.0 percent.

Second-Quarter and Full-Year Outlook

Agilent expects second-quarter 2019 revenue in the range of $1.255
billion to $1.270 billion. Second-quarter 2019 non-GAAP earnings are
expected to be in the range of $0.70 to $0.72 per share(3).

For fiscal year 2019, the company is raising full-year revenue guidance
to a range of $5.15 billion to $5.19 billion and non-GAAP earnings
guidance to a range of $3.03 to $3.07 per share(3).

Conference Call

Agilent’s management will present more details about its first-quarter
fiscal year 2019 financial results on a conference call with investors
today at 1:30 p.m. (Pacific Time). This event will be webcast live in
listen-only mode. Listeners may log on at www.investor.agilent.com
and select “Q1 2019 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 February 20, 2019 at 4:30 PM (Pacific Time) after the call
and through February 27 by dialing +1 855-859-2056 (or +1 404-537-3406
from outside the United States) and entering pass code 6738126.

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 customers’ most
challenging questions. The company generated revenues of $4.91 billion
in fiscal 2018 and employs 15,300 people worldwide. Information about
Agilent is available at www.agilent.com.
To receive the latest Agilent news, subscribe to our Newsroom.
Follow Agilent on LinkedIn,
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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 revenue
and non-GAAP earnings guidance for the second quarter and full fiscal
year 2019 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 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 annual report on Form 10-K for the fiscal year ended October 31,
2018. 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 Q1 FY19 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. Core revenue
growth rate as projected for Q2 FY19 and full fiscal year 2019 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 non-cash intangibles amortization,
transformational initiatives, acquisition and integration costs, pension
settlement gain, Nucleic Acid Solutions Division (“NASD”) site costs and
special compliance costs. We also exclude 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 Tax Reform. 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 Q2 FY19 and full fiscal
year 2019 excludes primarily the impacts of non-cash intangibles
amortization, transformational initiatives, acquisition and integration
costs, pension settlement gain, Nucleic Acid Solutions Division (“NASD”)
site costs and special compliance costs. We also exclude 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 $26 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
January 31,
2019

2018 (a)

 
Net revenue $ 1,284 $ 1,211
 
Costs and expenses:
Cost of products and services 577 541
Research and development 102 94
Selling, general and administrative   355     347  

Total costs and expenses

  1,034     982  
 
Income from operations 250 229
 
Interest income 10 9
Interest expense (18 ) (20 )
Other income (expense), net   6     15  
 
Income before taxes 248 233
 
Provision for (benefit from) income taxes (256 ) 553
   
Net income (loss) $ 504   $ (320 )
 
 
 
Net income (loss) per share:
Basic $ 1.58 $ (0.99 )
Diluted $ 1.57 $ (0.99 )
 
Weighted average shares used in computing net income (loss) per
share:
Basic 318 323
Diluted 322 323
 
Cash dividends declared per common share $ 0.164 $ 0.149
 
 
 
(a) Adjusted to include the impact of the adoption of ASU
2017-07 (pension expense reclassification) as of 11/1/2018. There is
no impact to net loss or net loss per share.
 
 
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
   
 
January 31, October 31,
2019 2018
ASSETS
 
Current assets:
Cash and cash equivalents $ 2,057 $ 2,247
Accounts receivable, net 833 776
Inventory 653 638
Other current assets   169     187  
Total current assets 3,712 3,848
 
Property, plant and equipment, net 829 822
Goodwill and other intangible assets, net 3,699 3,464
Long-term investments 77 68
Other assets   635     339  
Total assets $ 8,952   $ 8,541  
 
LIABILITIES AND EQUITY
 
Current liabilities:
Accounts payable $ 315 $ 340
Employee compensation and benefits 237 304
Deferred revenue 346 324
Other accrued liabilities   197     203  
Total current liabilities 1,095 1,171
 
Long-term debt 1,798 1,799
Retirement and post-retirement benefits 238 239
Other long-term liabilities   785     761  
Total liabilities   3,916     3,970  
 
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; 318 million shares at January 31, 2019
and 318 million shares at October 31, 2018, issued 3 3
Additional paid-in-capital 5,324 5,308
Retained earnings (accumulated deficit) 90 (336 )
Accumulated other comprehensive loss   (381 )   (408 )
Total stockholders’ equity 5,036 4,567
Non-controlling interest       4  
Total equity   5,036     4,571  
Total liabilities and equity $ 8,952   $ 8,541  
 
 
 
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
         
 
Three Months Ended
January 31, January 31,
2019 2018
Cash flows from operating activities:
Net income (loss) $ 504 $ (320 )
 
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation and amortization 54 51
Share-based compensation 24 31
Excess and obsolete inventory related charges 4 5
Other non-cash expenses, net 3 1
Changes in assets and liabilities:
Accounts receivable, net (22 ) (5 )
Inventory (12 ) (34 )
Accounts payable (16 ) (3 )
Employee compensation and benefits (71 ) (62 )
Change in assets and liabilities due to Tax Act 533
Other assets and liabilities   (255 )   18  
Net cash provided by operating activities (a) 213 215
 
Cash flows from investing activities:
Investments in property, plant and equipment (39 ) (60 )
Payment to acquire fair value investments (2 ) (1 )
Payment in exchange for convertible note (1 )
Acquisition of businesses and intangible assets, net of cash acquired   (248 )   (6 )
Net cash used in investing activities (290 ) (67 )
 
Cash flows from financing activities:
Issuance of common stock under employee stock plans 22 25
Payment of taxes related to net share settlement of equity awards (13 ) (28 )
Payment of dividends (52 ) (48 )
Proceeds from revolving credit facility 274
Repayment of debt and revolving credit facility (139 )
Purchase of non-controlling interest (4 )
Treasury stock repurchases   (75 )   (47 )
Net cash provided by (used in) financing activities (122 ) 37
 
Effect of exchange rate movements 9 25
 
Net increase (decrease) in cash, cash equivalents and restricted cash (190 ) 210
 
Cash, cash equivalents and restricted cash at beginning of period   2,254     2,686  
 
Cash, cash equivalents and restricted cash at end of period $ 2,064   $ 2,896  
 
 
Reconciliation of cash, cash equivalents and restricted cash to the
condensed consolidated balance sheet:
 
Cash and cash equivalents $ 2,057 $ 2,887
Restricted cash, included in other assets   7     9  
Total cash, cash equivalents and restricted cash $ 2,064   $ 2,896  
 
 
(a) Cash payments included in operating activities:
 
Income tax payments (refunds), net $ 21 $ 32
Interest payments $ 25 $ 29
 
 
 
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
January 31,
  2019  

Diluted
EPS

  2018  

Diluted
EPS

 
GAAP net income (loss) $ 504 $ 1.57 $ (320 ) $ (0.99

(b)

Non-GAAP adjustments:
Intangible amortization 28 0.09 25 0.08
Transformational initiatives 5 0.02 4 0.01
Acquisition and integration costs 10 0.03 3 0.01
Pension settlement gain (5 ) (0.01 )
NASD site costs 2 0.01 2 0.01
Special compliance costs 1
Other 1 1
Adjustment for Tax Reform 533 1.63
Tax benefit on intra-entity asset transfer (299 ) (0.93 )
Adjustment for taxes (a)   (7 )   (0.03 )   (28 )   (0.08 )
Non-GAAP net income $ 244   $ 0.76   $ 216   $

0.66

(c)

 
 
(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 months ended
January 31, 2019 and 2018, management used a non-GAAP effective tax
rate of 17% and 18%, respectively.
 
(b) GAAP diluted net loss per share was computed using
323 million weighted average diluted shares which excludes from
consideration the anti-dilutive effects of all potential common
shares outstanding.
 
(c) Non-GAAP diluted net income per share was computed
using 327 million weighted average diluted shares which includes the
dilutive effects of potential common shares outstanding.
 
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, transformational
initiatives, acquisition and integration costs, pension settlement
gain, NASD site costs, special compliance costs, adjustment for Tax
Reform, and tax benefit on intra-entity asset transfer.
 
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.
 
Pension settlement gain resulted from transfer of the
substitutional portion of our Japanese pension plan to the
government.
 
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 the
EU’s General Data Protection Regulation (GDPR), revenue recognition
and certain tax reporting requirements.
 
Other includes certain legal costs and settlements in
addition to other miscellaneous adjustments.
 
Adjustment for Tax Reform primarily consists of an estimated
provision of $480 million for U.S. transition tax and correlative
items on deemed repatriated earnings of non-U.S. subsidiaries and an
estimated provision of $53 million associated with the decrease in
the U.S. corporate tax rate from 35% to 21% and its impact on our
U.S. deferred tax assets and liabilities. The taxes payable
associated with the transition tax, net of tax attributes, on deemed
repatriation of foreign earnings is approximately $440 million,
payable over 8 years.
 
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
Q1’19 Q1’18
Revenue $ 607 $ 596
Gross Margin, % 62.1 % 62.1 %
Income from Operations $ 159 $ 154
Operating margin, % 26.1 % 25.9 %
 
 
Diagnostics and Genomics Group
Q1’19 Q1’18
Revenue $ 235 $ 207
Gross Margin, % 54.0 % 54.2 %
Income from Operations $ 33 $ 24
Operating margin, % 14.0 % 11.7 %
 
 
Agilent CrossLab Group
Q1’19 Q1’18
Revenue $ 442 $ 408
Gross Margin, % 51.3 % 50.4 %
Income from Operations $ 105 $ 87
Operating margin, % 23.9 % 21.2 %
 
 
 
 
 
 
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, pension settlement
gain, 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

Q1’19 Q1’18 % Change
 
Life Sciences and Applied Markets Group $ 607 $ 596 2 %
 
Diagnostics and Genomics Group 235 207 13 %
 
Agilent CrossLab Group 442 408 8 %
   
Agilent $ 1,284 $ 1,211 6 %
 
 
 
 
Non-GAAP

(excluding Acquisitions & Divestitures)

Year-over-Year

at Constant Currency (a)

 

Non GAAP Revenue by Segment

Q1’19 Q1’18

Year-over-Year

% Change

Year-over-Year

% Change

Percentage Point
Impact from
Currency

Current Quarter
Currency Impact (b)

 
Life Sciences and Applied Markets Group $ 593 $ 596 1 % -1 ppt $ (11 )
 
Diagnostics and Genomics Group 229 207 10 % 12 % -2 ppts (4 )
 
Agilent CrossLab Group 436 408 7 % 10 % -3 ppts (12 )
     
Agilent (Core) $ 1,258 $ 1,211 4 % 6 % -2 ppts $ (27 )
 
 
 
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
 

Contacts

INVESTOR CONTACT:
Ankur Dhingra
+1 408 345 8948
ankur_dhingra@agilent.com

EDITORIAL CONTACT:
Stefanie Notaney
+1 408 345 8955
stefanie.notaney@agilent.com

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