Thermo Fisher Scientific(TMO) - 2024 Q3 - Quarterly Results

Third Quarter 2024 Financial and Operational Highlights This section summarizes Thermo Fisher Scientific's financial performance and strategic achievements for the third quarter of 2024 Q3 2024 Key Financial Metrics Thermo Fisher Scientific reported third-quarter 2024 revenue of $10.60 billion, with GAAP diluted EPS at $4.25 and adjusted EPS at $5.28 Q3 2024 Key Financial Metrics | Metric | Q3 2024 (USD Billions) | | :----- | :--------------------- | | Revenue | $10.60 | | GAAP Diluted EPS | $4.25 | | Adjusted EPS | $5.28 | Operational and Strategic Achievements The company advanced its growth strategy through the launch of innovative new products, strategic partnerships, and expansion of its pharma services and clinical research lab networks - Launched the Thermo Scientific Iliad scanning transmission electron microscope for advanced materials research[4] - Introduced the Applied Biosystems MagMAX Sequential DNA/RNA kit to enhance DNA/RNA isolation from blood cancer samples[4] - Released Invitrogen Vivofectamine Delivery Solutions for novel nucleic acid delivery in therapeutic applications[4] - Partnered with the National Cancer Institute on the myeloMATCH precision medicine umbrella trial, leveraging next-generation sequencing[5] - Expanded pharma services sites in Cincinnati, Ohio, and Bend, Oregon, to enhance solid dose formulation capabilities[5] - Expanded global laboratory services network with a new bioanalytical lab in Gothenburg, Sweden[5] Management Commentary CEO Marc N. Casper expressed satisfaction with strong Q3 financial results, noting sequential improvement in growth and differentiated performance driven by their growth strategy and PPI Business System - CEO Marc N. Casper reported strong Q3 financial results with sequential growth improvement[6] - Performance driven by proven growth strategy and PPI Business System, leading to meaningful commercial wins[6] - Company is well-positioned to achieve 2024 objectives and create value for stakeholders[6] Third Quarter 2024 Detailed Financial Results This section provides a detailed breakdown of Thermo Fisher Scientific's GAAP and non-GAAP financial performance, along with segment-specific results and revenue growth analysis for Q3 2024 GAAP Earnings Results (Q3) For the third quarter of 2024, GAAP revenue was $10.60 billion, showing a slight increase from the prior year, while GAAP diluted EPS decreased to $4.25 Q3 GAAP Financial Results (YoY Comparison) | Metric | Q3 2024 (USD Billions) | Q3 2023 (USD Billions) | YoY Change | | :----- | :--------------------- | :--------------------- | :--------- | | Revenue | $10.60 | $10.57 | +0.28% | | GAAP Diluted EPS | $4.25 | $4.42 | -3.85% | | GAAP Operating Income | $1.84 | $1.86 | -1.08% | | GAAP Operating Margin | 17.3% | 17.6% | -0.3 ppts | Non-GAAP Earnings Results (Q3) Adjusted EPS for Q3 2024 was $5.28, a decrease from $5.69 in Q3 2023, with adjusted operating income and margin also declining year-over-year Q3 Non-GAAP Financial Results (YoY Comparison) | Metric | Q3 2024 (USD Billions) | Q3 2023 (USD Billions) | YoY Change | | :----- | :--------------------- | :--------------------- | :--------- | | Adjusted EPS | $5.28 | $5.69 | -7.19% | | Adjusted Operating Income | $2.36 | $2.56 | -7.69% | | Adjusted Operating Margin | 22.3% | 24.2% | -1.9 ppts | Business Segment Performance (Q3) In Q3 2024, Laboratory Products and Biopharma Services remained the largest segment by revenue, while Life Sciences Solutions continued to have the highest segment income margin Q3 2024 Segment Revenues (YoY Comparison) | Segment | Q3 2024 Revenue (USD Millions) | Q3 2023 Revenue (USD Millions) | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | | Life Sciences Solutions | $2,387 | $2,433 | -1.85% | | Analytical Instruments | $1,808 | $1,754 | +3.08% | | Specialty Diagnostics | $1,129 | $1,083 | +4.25% | | Laboratory Products and Biopharma Services | $5,740 | $5,728 | +0.21% | Q3 2024 Segment Income Margins (YoY Comparison) | Segment | Q3 2024 Margin | Q3 2023 Margin | Change (ppts) | | :-------------------------------- | :------------- | :------------- | :------------ | | Life Sciences Solutions | 35.4% | 35.9% | -0.5 | | Analytical Instruments | 24.9% | 26.7% | -1.8 | | Specialty Diagnostics | 25.9% | 26.1% | -0.2 | | Laboratory Products and Biopharma Services | 13.5% | 16.4% | -2.9 | Revenue Growth Analysis (Q3) Third quarter revenue growth, organic revenue growth, and Core organic revenue growth were all flat year-over-year, though they showed sequential improvement from Q2 2024 Q3 2024 Revenue Growth Rates | Metric | Q3 2024 Growth | | :------------------------- | :------------- | | Revenue growth | 0% | | Acquisitions impact | 1% | | Currency translation impact | 0% | | Organic revenue growth | 0% | | COVID-19 testing revenue impact | 0% | | Core organic revenue growth | 0% | - Revenue, organic revenue, and Core organic revenue all improved sequentially from Q2 2024[6] Full Year 2024 Guidance This section outlines Thermo Fisher Scientific's updated financial outlook for the full year 2024 Full Year 2024 Guidance Thermo Fisher Scientific has raised its full-year adjusted EPS guidance for 2024, while maintaining its revenue guidance range Full-Year 2024 Guidance Update | Metric | Previous Guidance | New Guidance | | :----- | :---------------- | :----------- | | Adjusted EPS | $21.29 to $22.07 | $21.35 to $22.07 | | Revenue | $42.4 to $43.3 billion | $42.4 to $43.3 billion | Company Information This section provides an overview of Thermo Fisher Scientific, its mission, and important disclosures regarding forward-looking statements and investor communications About Thermo Fisher Scientific Thermo Fisher Scientific is a global leader in serving science, with annual revenue exceeding $40 billion, dedicated to enabling customers to make the world healthier, cleaner, and safer - Thermo Fisher Scientific is the world leader in serving science, with annual revenue over $40 billion[12] - Mission: To enable customers to make the world healthier, cleaner and safer[12] - Key brands include Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific, Unity Lab Services, Patheon, and PPD[12] Safe Harbor Statement The press release includes forward-looking statements subject to various risks and uncertainties, such as the COVID-19 pandemic, technological changes, economic conditions, and regulatory impacts - Contains forward-looking statements subject to risks and uncertainties, including the COVID-19 pandemic, technological change, and economic conditions[13] - Important factors that could cause actual results to differ are detailed in SEC filings (Form 10-K, 10-Q)[13] - The company disclaims any obligation to update forward-looking statements[13] Conference Call Details Thermo Fisher Scientific hosted an earnings conference call on October 23, 2024, to discuss financial performance and future expectations, with replay available through November 6, 2024 - Earnings conference call held on October 23, 2024, at 8:30 a.m. Eastern Daylight Time[11] - Access code for the call was 296868[11] - A replay of the call is available through November 6, 2024, on the company's website[11] Consolidated Financial Statements (GAAP) This section presents Thermo Fisher Scientific's condensed consolidated GAAP financial statements, including statements of income, balance sheets, and cash flows Condensed Consolidated Statements of Income (Three Months Ended September 28, 2024) The condensed consolidated statements of income for the three months ended September 28, 2024, show a slight increase in revenue but a decrease in net income attributable to Thermo Fisher Scientific Inc. compared to the prior year Condensed Consolidated Statements of Income (Three Months) | (Dollars in millions except per share amounts) | September 28, 2024 | September 30, 2023 | | :--------------------------------------------- | :----------------- | :----------------- | | Revenues | $10,598 | $10,574 | | Cost of revenues | 6,180 | 6,145 | | Selling, general and administrative expenses | 1,739 | 1,578 | | Amortization of acquisition-related intangible assets | 450 | 584 | | Research and development expenses | 346 | 319 | | Restructuring and other costs | 45 | 84 | | Total costs and operating expenses | 8,759 | 8,710 | | Operating income | 1,838 | 1,864 | | Interest income | 277 | 246 | | Interest expense | (356) | (359) | | Other income/(expense) | (16) | 14 | | Income before income taxes | 1,742 | 1,765 | | Provision for income taxes | (99) | (53) | | Equity in earnings/(losses) of unconsolidated entities | (14) | (17) | | Net income | 1,629 | 1,695 | | Less: net income/(losses) attributable to noncontrolling interests and redeemable noncontrolling interest | — | (20) | | Net income attributable to Thermo Fisher Scientific Inc. | $1,630 | $1,715 | | Basic EPS | $4.26 | $4.44 | | Diluted EPS | $4.25 | $4.42 | Condensed Consolidated Statements of Income (Nine Months Ended September 28, 2024) For the nine months ended September 28, 2024, consolidated revenues slightly decreased compared to the prior year, but net income attributable to Thermo Fisher Scientific Inc. increased, alongside an improvement in operating income Condensed Consolidated Statements of Income (Nine Months) | (Dollars in millions except per share amounts) | September 28, 2024 | September 30, 2023 | | :--------------------------------------------- | :----------------- | :----------------- | | Revenues | $31,484 | $31,971 | | Cost of revenues | 18,326 | 18,905 | | Selling, general and administrative expenses | 5,156 | 4,897 | | Amortization of acquisition-related intangible assets | 1,514 | 1,775 | | Research and development expenses | 1,016 | 1,010 | | Restructuring and other costs | 151 | 379 | | Total costs and operating expenses | 26,163 | 26,966 | | Operating income | 5,321 | 5,005 | | Interest income | 851 | 570 | | Interest expense | (1,073) | (985) | | Other income/(expense) | (2) | (32) | | Income before income taxes | 5,096 | 4,558 | | Provision for income taxes | (507) | (151) | | Equity in earnings/(losses) of unconsolidated entities | (75) | (58) | | Net income | 4,514 | 4,349 | | Less: net income/(losses) attributable to noncontrolling interests and redeemable noncontrolling interest | 9 | (16) | | Net income attributable to Thermo Fisher Scientific Inc. | $4,505 | $4,365 | | Basic EPS | $11.79 | $11.31 | | Diluted EPS | $11.75 | $11.25 | Condensed Consolidated Balance Sheets As of September 28, 2024, total assets increased to $100.36 billion from $98.73 billion at December 31, 2023, primarily driven by an increase in goodwill and short-term investments Condensed Consolidated Balance Sheets | (In millions) | September 28, 2024 | December 31, 2023 | | :--------------------------------------------- | :----------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $4,645 | $8,077 | | Short-term investments | 2,000 | 3 | | Accounts receivable, net | 8,255 | 8,221 | | Inventories | 5,430 | 5,088 | | Other current assets | 3,453 | 3,200 | | Total current assets | 23,783 | 24,589 | | Property, plant and equipment, net | 9,412 | 9,448 | | Acquisition-related intangible assets, net | 16,262 | 16,670 | | Other assets | 4,180 | 3,999 | | Goodwill | 46,726 | 44,020 | | Total assets | $100,364 | $98,726 | | Liabilities, redeemable noncontrolling interest and equity | | | | Short-term obligations and current maturities of long-term obligations | $4,116 | $3,609 | | Other current liabilities | 10,485 | 10,403 | | Total current liabilities | 14,601 | 14,012 | | Other long-term liabilities | 5,466 | 6,564 | | Long-term obligations | 31,197 | 31,308 | | Redeemable noncontrolling interest | 127 | 118 | | Total equity | 48,972 | 46,724 | | Total liabilities, redeemable noncontrolling interest and equity | $100,364 | $98,726 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 28, 2024, net cash provided by operating activities increased to $5.38 billion, but increased cash usage in investing and financing activities led to an overall decrease in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (Nine Months) | (In millions) | Nine Months Ended September 28, 2024 | Nine Months Ended September 30, 2023 | | :--------------------------------------------- | :----------------------------------- | :----------------------------------- | | Operating activities | | | | Net cash provided by operating activities | $5,377 | $4,683 | | Investing activities | | | | Purchases of property, plant and equipment | (920) | (1,074) | | Acquisitions, net of cash acquired | (3,132) | (3,660) | | Purchases of investments | (2,065) | (200) | | Net cash used in investing activities | (5,861) | (4,766) | | Financing activities | | | | Net proceeds from issuance of debt | 1,204 | 3,466 | | Repayment of debt | (1,107) | (2,000) | | Purchases of company common stock | (3,000) | (3,000) | | Dividends paid | (434) | (387) | | Net cash used in financing activities | (3,126) | (2,194) | | Decrease in cash, cash equivalents and restricted cash | (3,427) | (2,369) | | Cash, cash equivalents and restricted cash at end of period | $4,670 | $6,168 | Free Cash Flow (Nine Months) | Metric | Nine Months Ended September 28, 2024 | Nine Months Ended September 30, 2023 | | :----- | :----------------------------------- | :----------------------------------- | | Free cash flow (non-GAAP measure) | $4,498 | $3,685 | Reconciliation of Non-GAAP Financial Measures This section provides detailed reconciliations of GAAP to non-GAAP financial measures for both the three and nine months ended September 28, 2024, along with supplemental information on the definitions and exclusions for these non-GAAP metrics Three Months Ended September 28, 2024 This section provides reconciliations of GAAP to non-GAAP financial measures for the third quarter of 2024, detailing adjustments made for items such as acquisition-related intangible asset amortization, restructuring costs, and other specific expenses Adjusted Operating Income and Margin (Q3) Reconciliation of Adjusted Operating Income and Margin (Q3) | (Dollars in millions) | September 28, 2024 | % of Revenues | September 30, 2023 | % of Revenues | | :--------------------------------------------- | :----------------- | :------------ | :----------------- | :------------ | | GAAP operating income | $1,838 | 17.3% | $1,864 | 17.6% | | Cost of revenues adjustments (a) | 9 | 0.1% | 14 | 0.1% | | Selling, general and administrative expenses adjustments (b) | 21 | 0.2% | 14 | 0.1% | | Restructuring and other costs (c) | 45 | 0.4% | 84 | 0.8% | | Amortization of acquisition-related intangible assets | 450 | 4.2% | 584 | 5.6% | | Adjusted operating income (non-GAAP measure) | $2,362 | 22.3% | $2,560 | 24.2% | Adjusted Net Income (Q3) Reconciliation of Adjusted Net Income (Q3) | (Dollars in millions) | September 28, 2024 | September 30, 2023 | | :--------------------------------------------- | :----------------- | :----------------- | | GAAP net income attributable to Thermo Fisher Scientific Inc. | $1,630 | $1,715 | | Cost of revenues adjustments (a) | 9 | 14 | | Selling, general and administrative expenses adjustments (b) | 21 | 14 | | Restructuring and other costs (c) | 45 | 84 | | Amortization of acquisition-related intangible assets | 450 | 584 | | Other income/expense adjustments (d) | 3 | (9) | | Provision for income taxes adjustments (e) | (139) | (192) | | Equity in earnings/losses of unconsolidated entities | 14 | 17 | | Noncontrolling interests adjustments (f) | (6) | (19) | | Adjusted net income (non-GAAP measure) | $2,026 | $2,208 | Adjusted Earnings Per Share (Q3) Reconciliation of Adjusted EPS (Q3) | (Per share amounts) | September 28, 2024 | September 30, 2023 | | :--------------------------------------------- | :----------------- | :----------------- | | GAAP diluted EPS attributable to Thermo Fisher Scientific Inc. | $4.25 | $4.42 | | Cost of revenues adjustments (a) | 0.02 | 0.04 | | Selling, general and administrative expenses adjustments (b) | 0.05 | 0.03 | | Restructuring and other costs (c) | 0.12 | 0.22 | | Amortization of acquisition-related intangible assets | 1.17 | 1.50 | | Other income/expense adjustments (d) | 0.01 | (0.02) | | Provision for income taxes adjustments (e) | (0.36) | (0.49) | | Equity in earnings/losses of unconsolidated entities | 0.04 | 0.04 | | Noncontrolling interests adjustments (f) | (0.02) | (0.05) | | Adjusted EPS (non-GAAP measure) | $5.28 | $5.69 | Free Cash Flow (Q3) Reconciliation of Free Cash Flow (Q3) | (Dollars in millions) | September 28, 2024 | September 30, 2023 | | :--------------------------------------------- | :----------------- | :----------------- | | GAAP net cash provided by operating activities | $2,167 | $2,414 | | Purchases of property, plant and equipment | (271) | (332) | | Proceeds from sale of property, plant and equipment | 20 | 66 | | Free cash flow (non-GAAP measure) | $1,915 | $2,148 | Nine Months Ended September 28, 2024 This section presents the reconciliation of GAAP to non-GAAP financial measures for the nine months ended September 28, 2024, showing adjustments for various non-recurring or non-operational items Adjusted Operating Income and Margin (9M) Reconciliation of Adjusted Operating Income and Margin (9M) | (Dollars in millions) | September 28, 2024 | % of Revenues | September 30, 2023 | % of Revenues | | :--------------------------------------------- | :----------------- | :------------ | :----------------- | :------------ | | GAAP operating income | $5,321 | 16.9% | $5,005 | 15.7% | | Cost of revenues adjustments (a) | 25 | 0.1% | 73 | 0.2% | | Selling, general and administrative expenses adjustments (b) | (24) | -0.1% | 28 | 0.1% | | Restructuring and other costs (c) | 151 | 0.5% | 379 | 1.2% | | Amortization of acquisition-related intangible assets | 1,514 | 4.8% | 1,775 | 5.5% | | Adjusted operating income (non-GAAP measure) | $6,987 | 22.2% | $7,260 | 22.7% | Adjusted Net Income (9M) Reconciliation of Adjusted Net Income (9M) | (Dollars in millions) | September 28, 2024 | September 30, 2023 | | :--------------------------------------------- | :----------------- | :----------------- | | GAAP net income attributable to Thermo Fisher Scientific Inc. | $4,505 | $4,365 | | Cost of revenues adjustments (a) | 25 | 73 | | Selling, general and administrative expenses adjustments (b) | (24) | 28 | | Restructuring and other costs (c) | 151 | 379 | | Amortization of acquisition-related intangible assets | 1,514 | 1,775 | | Other income/expense adjustments (d) | (8) | 36 | | Provision for income taxes adjustments (e) | (190) | (534) | | Equity in earnings/losses of unconsolidated entities | 75 | 58 | | Noncontrolling interests adjustments (f) | (6) | (19) | | Adjusted net income (non-GAAP measure) | $6,042 | $6,161 | Adjusted Earnings Per Share (9M) Reconciliation of Adjusted EPS (9M) | (Per share amounts) | September 28, 2024 | September 30, 2023 | | :--------------------------------------------- | :----------------- | :----------------- | | GAAP diluted EPS attributable to Thermo Fisher Scientific Inc. | $11.75 | $11.25 | | Cost of revenues adjustments (a) | 0.07 | 0.19 | | Selling, general and administrative expenses adjustments (b) | (0.06) | 0.07 | | Restructuring and other costs (c) | 0.39 | 0.98 | | Amortization of acquisition-related intangible assets | 3.95 | 4.57 | | Other income/expense adjustments (d) | (0.02) | 0.09 | | Provision for income taxes adjustments (e) | (0.50) | (1.38) | | Equity in earnings/losses of unconsolidated entities | 0.20 | 0.15 | | Noncontrolling interests adjustments (f) | (0.02) | (0.05) | | Adjusted EPS (non-GAAP measure) | $15.76 | $15.87 | Free Cash Flow (9M) Reconciliation of Free Cash Flow (9M) | (Dollars in millions) | September 28, 2024 | September 30, 2023 | | :--------------------------------------------- | :----------------- | :----------------- | | GAAP net cash provided by operating activities | $5,377 | $4,683 | | Purchases of property, plant and equipment | (920) | (1,074) | | Proceeds from sale of property, plant and equipment | 40 | 76 | | Free cash flow (non-GAAP measure) | $4,498 | $3,685 | Supplemental Information Regarding Non-GAAP Financial Measures This section defines the non-GAAP financial measures used by Thermo Fisher Scientific, including organic revenue growth, Core organic revenue growth, adjusted operating income, net income, EPS, and free cash flow, detailing the specific items excluded from GAAP measures - Non-GAAP measures include organic revenue growth (excluding acquisitions/divestitures and currency) and Core organic revenue growth (further excluding COVID-19 testing revenue)[22] - Adjusted operating income, net income, and EPS exclude acquisition-related costs, restructuring activities, certain isolated gains/losses, amortization of acquisition-related intangible assets, and specific tax impacts[23][24][25] - Free cash flow is defined as operating cash flow excluding net capital expenditures, used to assess cash generation for investing and financing activities[26] - The company does not provide forward-looking GAAP financial measures due to the unpredictability of certain items[27]