Agilent Technologies(A) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Agilent's unaudited condensed consolidated financial statements and detailed notes on key financial areas and accounting policies ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) This section presents Agilent Technologies, Inc.'s unaudited condensed consolidated financial statements, including the statements of operations, comprehensive income (loss), balance sheets, cash flows, and equity, along with detailed notes explaining significant accounting policies, revenue breakdown, share-based compensation, income taxes, inventory, goodwill, fair value measurements, derivatives, retirement plans, warranties, restructuring costs, and debt information Condensed Consolidated Statement of Operations This statement details Agilent's net revenue, income from operations, and net income per share for the specified periods Condensed Consolidated Statement of Operations Highlights (in millions, except per share data) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net revenue | $1,738 | $1,578 | $5,087 | $4,809 | | Income from operations | $360 | $333 | $1,036 | $1,080 | | Net income | $336 | $282 | $869 | $938 | | Diluted Net income per share | $1.18 | $0.97 | $3.05 | $3.20 | Condensed Consolidated Statement of Comprehensive Income (Loss) This statement presents Agilent's net income and other comprehensive income (loss) to arrive at total comprehensive income for the specified periods Condensed Consolidated Statement of Comprehensive Income (Loss) Highlights (in millions) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income | $336 | $282 | $869 | $938 | | Other comprehensive income (loss) | $(3) | $6 | $22 | $(4) | | Total comprehensive income | $333 | $288 | $891 | $934 | Condensed Consolidated Balance Sheets This statement provides a snapshot of Agilent's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets Highlights (in millions) | Metric | July 31, 2025 | October 31, 2024 | | :---------------------------------- | :-------------- | :--------------- | | Cash and cash equivalents | $1,535 | $1,329 | | Total current assets | $4,253 | $3,959 | | Total assets | $12,226 | $11,846 | | Total current liabilities | $1,892 | $1,895 | | Total liabilities | $5,856 | $5,948 | | Total stockholders' equity | $6,370 | $5,898 | Condensed Consolidated Statement of Cash Flows This statement summarizes Agilent's cash inflows and outflows from operating, investing, and financing activities over the specified periods Condensed Consolidated Statement of Cash Flows Highlights (in millions) | Metric | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :---------------------------------- | :------------------------------ | :------------------------------ | | Net income | $869 | $938 | | Net cash provided by operating activities | $1,014 | $1,270 | | Net cash used in investing activities | $(304) | $(304) | | Net cash used in financing activities | $(515) | $(777) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $205 | $189 | | Cash, cash equivalents and restricted cash at end of period | $1,537 | $1,782 | Condensed Consolidated Statement of Equity This statement details changes in Agilent's stockholders' equity, including common stock, retained earnings, and comprehensive income, over the specified periods Condensed Consolidated Statement of Equity Highlights (in millions, except shares in thousands) | Metric | As of October 31, 2024 | As of July 31, 2025 | | :---------------------------------- | :--------------------- | :-------------------- | | Common Stock (Shares) | 285,193 | 283,594 | | Additional Paid-in Capital | $5,450 | $5,548 | | Retained Earnings | $750 | $1,102 | | Accumulated Other Comprehensive Loss | $(305) | $(283) | | Total Stockholders' Equity | $5,898 | $6,370 | - Cash dividends declared for the nine months ended July 31, 2025, were $(212) million ($0.744 per common share), compared to $(206) million ($0.708 per common share) for the same period in 2024[18][20] - Repurchase of common stock for the nine months ended July 31, 2025, totaled $(342) million, compared to $(821) million for the same period in 2024[18][20] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for Agilent's financial statements, covering accounting policies, revenue, share-based compensation, income taxes, and other key financial areas Note 1. Overview, Basis of Presentation and Summary of Significant Accounting Policies Agilent Technologies, Inc. is a global leader in life sciences, diagnostics, and applied markets. The company implemented a new segment structure in November 2024, reorganizing into Life Sciences and Diagnostics Markets, Agilent CrossLab, and Applied Markets. The financial statements are prepared in accordance with GAAP, relying on management estimates, and the company faces risks from global economic conditions, foreign currency fluctuations, and trade policies - Agilent reorganized its segment structure in November 2024 to support a market-focused, customer-centric strategy, creating three new segments: Life Sciences and Diagnostics Markets, Agilent CrossLab, and Applied Markets. All historical financial segment information has been recast[25][26] - The company is subject to risks common in the analytical instrument industry, including global economic and financial market conditions, foreign currency exchange rate fluctuations, and customer demand[29] - Recent changes to tariffs and trade policies did not materially impact results in the first half of fiscal year 2025, but the company continues to monitor their potential influence on future revenue and operational efficiency[30] - Critical accounting policies include revenue recognition, valuation of goodwill and purchased intangible assets, inventory valuation, retirement and post-retirement benefit plan assumptions, and accounting for income taxes[32] Note 2. New Accounting Pronouncements The FASB issued new guidance in May 2025 to improve requirements for identifying accounting acquirers in business combinations involving VIEs, effective for fiscal year 2028, with no expected material impact on Agilent's financial statements - The FASB issued new guidance in May 2025 to improve requirements for identifying the accounting acquirer in transactions involving variable interest entities (VIEs) in business combinations[38] - The amendments are effective for Agilent's fiscal year 2028, including interim periods, and are not expected to have a material impact on the condensed consolidated financial statements[38][39] Note 3. Revenue Agilent's total net revenue for the three months ended July 31, 2025, was $1,738 million, and for the nine months, it was $5,087 million, showing growth across all segments and regions. The report provides a detailed breakdown of revenue by geographical region, end markets (Pharmaceutical, Diagnostics, Chemicals, Food, etc.), and revenue type (Instrumentation vs. Non-instrumentation), along with contract asset and liability balances Total Net Revenue by Region (in millions) | Region | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Americas | $683 | $626 | $2,030 | $1,893 | | Europe | $492 | $432 | $1,397 | $1,316 | | Asia Pacific | $563 | $520 | $1,660 | $1,600 | | Total | $1,738 | $1,578 | $5,087 | $4,809 | Total Net Revenue by End Markets (in millions) | End Market | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Pharmaceutical and Biopharmaceutical | $629 | $540 | $1,817 | $1,647 | | Diagnostics and Clinical | $258 | $242 | $753 | $709 | | Academic and Government | $132 | $128 | $404 | $417 | | Chemicals and Advanced Materials | $399 | $356 | $1,147 | $1,110 | | Food | $157 | $144 | $472 | $440 | | Environmental and Forensics | $163 | $168 | $494 | $486 | | Total | $1,738 | $1,578 | $5,087 | $4,809 | Total Net Revenue by Type (in millions) | Revenue Type | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Instrumentation | $599 | $556 | $1,774 | $1,734 | | Non-instrumentation and other | $1,139 | $1,022 | $3,313 | $3,075 | | Total | $1,738 | $1,578 | $5,087 | $4,809 | - Contract assets (unbilled accounts receivable) increased to $294 million as of July 31, 2025, from $247 million as of October 31, 2024[43] - Contract liabilities (deferred revenue) increased to $800 million as of July 31, 2025, from $701 million as of October 31, 2024[44] Note 4. Share-Based Compensation Agilent recognizes compensation expense for various share-based awards, including stock options, restricted stock units, ESPP, and LTPP awards. Total share-based compensation expense for the three months ended July 31, 2025, was $32 million, and for the nine months, it was $103 million. The fair value of these awards is estimated using models like Black-Scholes and Monte Carlo simulation, with specific assumptions for risk-free interest rates, dividend yields, and volatility Total Share-Based Compensation Expense (in millions) | Category | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Cost of products and services | $13 | $9 | $35 | $32 | | Research and development | $3 | $4 | $11 | $13 | | Selling, general and administrative | $16 | $15 | $57 | $59 | | Total share-based compensation expense | $32 | $28 | $103 | $104 | - The company uses the Black-Scholes option pricing model for employee stock option awards and a Monte Carlo simulation model for LTPP (TSR) awards. Restricted stock units and LTPP (EPS) awards are valued based on the market price of common stock on the grant date, adjusted for expected dividend yield[56][59] Key Assumptions for Share-Based Award Valuation (July 31, 2025) | Assumption | Stock Option Plans | LTPP | | :---------------------------------- | :----------------- | :----------------- | | Weighted average risk-free interest rate | 4.1% | N/A | | Dividend yield | 0.9% | N/A | | Weighted average volatility | 30% | 30% (Agilent shares) | | Expected life | 5.5 years | N/A | | Post-vest holding restriction discount | N/A | 6.7% | Note 5. Income Taxes Agilent reported income tax expense of $30 million with an 8.2% effective tax rate for the three months ended July 31, 2025, and $124 million with a 12.5% effective tax rate for the nine months. The effective tax rate for 2025 was favorably impacted by a $28 million tax benefit from the release of tax reserves. The recently enacted 'One Big Beautiful Bill Act' (OBBBA) is not expected to materially impact the current fiscal year but is being assessed for future periods Income Tax Expense and Effective Tax Rate | Period | Income Tax Expense (in millions) | Effective Tax Rate | | :---------------------------------- | :------------------------------- | :----------------- | | Three Months Ended July 31, 2025 | $30 | 8.2% | | Nine Months Ended July 31, 2025 | $124 | 12.5% | | Three Months Ended July 31, 2024 | $61 | 17.8% | | Nine Months Ended July 31, 2024 | $182 | 16.3% | - The effective tax rate for the three and nine months ended July 31, 2025, was favorably impacted by a $28 million tax benefit related to the release of tax reserves due to a remeasurement of the liability[61] - The United States enacted the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, which is not expected to have any material impact on the current fiscal year's effective tax rate or cash flow, but potential impacts for fiscal year 2026 and beyond are being assessed[65] Note 6. Net Income Per Share Agilent's diluted net income per share for the three months ended July 31, 2025, was $1.18, and for the nine months, it was $3.05. The calculation uses the treasury stock method for share-based awards, and anti-dilutive shares are excluded Net Income Per Share Computations (in millions, except per share data) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income | $336 | $282 | $869 | $938 | | Basic weighted-average shares | 284 | 290 | 285 | 292 | | Diluted weighted-average shares | 285 | 291 | 285 | 293 | | Basic Net income per share | $1.18 | $0.97 | $3.05 | $3.21 | | Diluted Net income per share | $1.18 | $0.97 | $3.05 | $3.20 | - The dilutive effect of share-based awards is reflected using the treasury stock method, considering unamortized share-based compensation expense and in-the-money options/non-vested restricted stock units[66] - Potential common shares excluded from the calculation of diluted earnings per share were not material for the three and nine months ended July 31, 2025 and 2024[68] Note 7. Inventory Agilent's total inventory as of July 31, 2025, was $1,014 million, an increase from $972 million as of October 31, 2024. The inventory primarily consists of finished goods and purchased parts and fabricated assemblies Inventory Composition (in millions) | Category | July 31, 2025 | October 31, 2024 | | :---------------------------------- | :-------------- | :--------------- | | Finished goods | $544 | $523 | | Purchased parts and fabricated assemblies | $470 | $449 | | Total Inventory | $1,014 | $972 | Note 8. Goodwill and Other Intangible Assets Agilent's goodwill totaled $4,475 million as of July 31, 2025, with a reallocation of $1.274 billion in goodwill among segments due to a Q1 FY25 reorganization. No impairment was indicated for goodwill. Other intangible assets, net, decreased to $469 million, with amortization expense of $81 million for the nine months ended July 31, 2025 Goodwill by Segment (in millions) | Segment | October 31, 2024 | July 31, 2025 | | :---------------------------------- | :--------------- | :-------------- | | Life Sciences and Diagnostics Markets | $3,000 | $2,998 | | Agilent CrossLab | $1,168 | $1,168 | | Applied Markets | $309 | $309 | | Total Goodwill | $4,477 | $4,475 | - In the first quarter of fiscal year 2025, $1.274 billion of goodwill was reallocated from the Applied Markets segment to the Agilent CrossLab ($909 million) and Life Sciences and Diagnostics Markets ($365 million) segments due to a reorganization[71] - No goodwill impairment was indicated as the fair values for all three reporting units were in excess of their carrying values[71] Net Book Value of Other Intangible Assets (in millions) | Category | October 31, 2024 | July 31, 2025 | | :---------------------------------- | :--------------- | :-------------- | | Purchased technology | $315 | $263 | | Trademark/Tradename | $25 | $20 | | Customer relationships | $184 | $167 | | Backlog | $9 | $7 | | Third-party technology and licenses | $14 | $12 | | Total Intangible Assets | $547 | $469 | - Amortization expense of intangible assets was $26 million for the three months and $81 million for the nine months ended July 31, 2025[75] Note 9. Fair Value Measurements Agilent measures financial assets and liabilities at fair value using a three-level hierarchy. As of July 31, 2025, total assets measured at fair value were $911 million, primarily in Level 1 (cash equivalents, trading securities) and Level 2 (derivative instruments, other investments). Total liabilities measured at fair value were $55 million, all in Level 2. The company recorded $15 million in investment impairments for the nine months ended July 31, 2025 Financial Assets Measured at Fair Value (July 31, 2025, in millions) | Category | Total Fair Value | Level 1 | Level 2 | Level 3 | | :---------------------------------- | :--------------- | :------ | :------ | :------ | | Cash equivalents (money market funds) | $824 | $824 | $— | $— | | Derivative instruments (foreign exchange contracts) | $13 | $— | $13 | $— | | Trading securities | $39 | $39 | $— | $— | | Other investments | $35 | $— | $35 | $— | | Total Assets | $911 | $863 | $48 | $— | Financial Liabilities Measured at Fair Value (July 31, 2025, in millions) | Category | Total Fair Value | Level 1 | Level 2 | Level 3 | | :---------------------------------- | :--------------- | :------ | :------ | :------ | | Derivative instruments (foreign exchange contracts) | $16 | $— | $16 | $— | | Deferred compensation liability | $39 | $— | $39 | $— | | Total Liabilities | $55 | $— | $55 | $— | - During the nine months ended July 31, 2025, Agilent recorded impairments of investments totaling $15 million[86] - For the nine months ended July 31, 2025, non-marketable equity securities without readily determinable fair values had $29 million in downward adjustments and $15 million in impairments[91] Note 10. Derivatives Agilent uses derivative instruments, primarily foreign exchange forward contracts, to hedge foreign currency cash flow exposures and net investments in foreign operations. These are categorized as cash flow hedges, net investment hedges, or other non-designated hedges. As of July 31, 2025, the aggregate notional amount for cash flow hedges was $(492) million, and for net investment hedges was $(34) million. The company manages credit risk by selecting major financial institutions as counterparties - Agilent uses foreign exchange contracts to hedge forecasted operational cash flow exposures (cash flow hedges) and net investments in foreign operations (net investment hedges)[96][99] Aggregate Notional Amount of Open Foreign Exchange Forward Contracts (July 31, 2025, in millions USD) | Designation | Aggregate Notional Amount | | :---------------------------------- | :------------------------ | | Cash Flow Hedges | $(492) | | Net Investment Hedges | $(34) | | Derivatives not designated as hedging instruments | $(30) | - The company mitigates credit risk by limiting counterparties to major financial institutions based on their credit ratings[101] - At July 31, 2025, $10 million of existing net gain is expected to be reclassified from accumulated other comprehensive income (loss), with an estimated $3 million loss reclassified to cost of sales within the next twelve months for cash flow hedges[106] Note 11. Retirement Plans and Post Retirement Pension Plans Agilent's net periodic benefit cost (income) for its retirement and post-retirement plans for the nine months ended July 31, 2025, was $(3) million for U.S. defined benefit plans, $(22) million for Non-U.S. defined benefit plans, and $(3) million for U.S. post-retirement benefit plans. A net loss of $14 million was recognized from the settlement of the Netherlands defined benefit plan during the period Total Net Periodic Benefit Cost (Income) (Nine Months Ended July 31, in millions) | Plan Type | 2025 | 2024 | | :---------------------------------- | :----- | :----- | | U.S. Defined Benefit Plans | $(3) | $2 | | Non-U.S. Defined Benefit Plans | $(22) | $(7) | | U.S. Post Retirement Benefit Plans | $(3) | $(1) | - During the nine months ended July 31, 2025, Agilent transferred assets and obligations of its Netherlands defined benefit plan, resulting in a net loss of $14 million included in other income (expense), net[109] - Employer contributions to non-U.S. defined benefit plans for the nine months ended July 31, 2025, were $18 million, with an expected $4 million for the remainder of 2025[110] Note 12. Warranties and Contingencies Agilent accrues for standard warranty costs based on historical trends, with an ending accrual balance of $28 million as of July 31, 2025. Bank guarantees totaled approximately $40 million. The company is involved in various legal proceedings but does not anticipate any material impact on its financial condition or results of operations Standard Warranty Accrual Activity (Nine Months Ended July 31, in millions) | Item | 2025 | 2024 | | :---------------------------------- | :----- | :----- | | Standard warranty accrual, beginning balance | $30 | $29 | | Accruals for warranties including change in estimates | $37 | $45 | | Settlements made during the period | $(39) | $(44) | | Standard warranty accrual, ending balance | $28 | $30 | - Bank guarantees were approximately $40 million as of July 31, 2025, an increase from $37 million as of October 31, 2024[113] - No pending lawsuits, claims, investigations, or proceedings are currently believed to have a material impact on Agilent's business, financial condition, results of operations, or cash flows[114] Note 13. Restructuring and Other Related Costs Agilent has implemented restructuring plans in fiscal years 2025, 2024, and 2023 to optimize management structure and reduce costs. The FY25 plan is expected to reduce annual costs by $75-$80 million. Total restructuring expense since inception of all plans is $196 million, with an aggregate liability of $23 million as of July 31, 2025 - Agilent announced a Fiscal Year 2025 restructuring plan to optimize its management structure, with activities expected to be substantially completed by Q2 FY26[117] - The FY25 plan is estimated to result in an annual reduction of approximately $75 million to $80 million in cost of sales and operating expenses[168] Total Restructuring Expense Since Inception of All Plans (in millions) | Plan | Total Restructuring Expense | | :-------------------------- | :-------------------------- | | Fiscal Year 2025 Plan | $73 | | Fiscal Year 2024 Plan | $73 | | Fiscal Year 2023 Plan | $50 | | Total | $196 | - The aggregate restructuring liability was $23 million as of July 31, 2025, recorded in other accrued liabilities[116] Note 14. Short-Term Debt Agilent maintains various short-term debt facilities, including a $1.5 billion unsecured credit facility and a $300 million uncommitted money market line, with no outstanding borrowings as of July 31, 2025. The company had $55 million outstanding under its U.S. commercial paper program at a 4.55% weighted average interest rate. Current portions of other interest-free loans totaled $4 million - Agilent has a $1.5 billion five-year unsecured credit facility and a $750 million incremental revolving credit facility, with no outstanding borrowings as of July 31, 2025[122] - Under its U.S. commercial paper program, Agilent had $55 million in outstanding borrowings as of July 31, 2025, with a weighted average annual interest rate of 4.55%[126] - The current portion of interest-free loans from the Strategic Innovation Fund (SIF) and Atlantic Canada Opportunities Agency (ACOA), related to the BIOVECTRA acquisition, was $4 million as of July 31, 2025[127] Note 15. Long-Term Debt Agilent's long-term debt primarily consists of senior notes totaling $3,329 million as of July 31, 2025, with no changes to their principal, maturity, or interest terms. The non-current portion of other interest-free loans, related to the BIOVECTRA acquisition, was $21 million Long-Term Senior Notes (in millions) | Note | July 31, 2025 | October 31, 2024 | | :---------------- | :-------------- | :--------------- | | 2026 Senior Notes | $300 | $299 | | 2027 Senior Notes | $597 | $596 | | 2029 Senior Notes | $497 | $496 | | 2030 Senior Notes | $497 | $497 | | 2031 Senior Notes | $845 | $845 | | 2034 Senior Notes | $593 | $593 | | Total Senior Notes | $3,329 | $3,326 | - There have been no changes to the principal, maturity, interest rates, and interest payment terms of the Agilent senior notes in the nine months ended July 31, 2025[128] - The non-current portion of interest-free loans from SIF and ACOA, related to the BIOVECTRA acquisition, was $21 million as of July 31, 2025[129] Note 16. Stockholders' Equity Agilent's stockholders' equity was $6,370 million as of July 31, 2025. The company repurchased $340 million of common stock under its 2023 repurchase program during the nine months ended July 31, 2025, with $34 million remaining authorization. A new $2.0 billion 2024 repurchase program was approved. Cash dividends of $0.744 per common share were paid for the nine-month period - Under the 2023 repurchase program, Agilent repurchased 737,474 shares for $85 million (three months) and 2.734 million shares for $340 million (nine months) ended July 31, 2025[131] - As of July 31, 2025, approximately $34 million remained authorized for repurchase under the 2023 program[131] - A new $2.0 billion 2024 repurchase program was approved on May 29, 2024, effective August 1, 2024[132][134] - Cash dividends paid were $0.248 per common share ($71 million) for the three months and $0.744 per common share ($212 million) for the nine months ended July 31, 2025[135] - Accumulated other comprehensive loss improved from $(305) million as of October 31, 2024, to $(283) million as of July 31, 2025[137] Note 17. Segment Information Agilent operates through three reportable segments: Life Sciences and Diagnostics Markets, Agilent CrossLab, and Applied Markets, following a November 2024 reorganization. Total net revenue for the three months ended July 31, 2025, was $1,738 million, and for the nine months, it was $5,087 million. Total segment income from operations was $437 million and $1,278 million for the respective periods - Agilent's three reportable segments are Life Sciences and Diagnostics Markets, Agilent CrossLab, and Applied Markets, following an organizational structure change in November 2024[141][142] Net Revenue by Segment (in millions) | Segment | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Life Sciences and Diagnostics Markets | $670 | $585 | $1,971 | $1,809 | | Agilent CrossLab | $744 | $691 | $2,153 | $2,041 | | Applied Markets | $324 | $302 | $963 | $959 | | Total net revenue | $1,738 | $1,578 | $5,087 | $4,809 | Segment Income From Operations (in millions) | Segment | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Life Sciences and Diagnostics Markets | $118 | $114 | $364 | $343 | | Agilent CrossLab | $248 | $248 | $700 | $686 | | Applied Markets | $71 | $70 | $214 | $226 | | Total segment income from operations | $437 | $432 | $1,278 | $1,255 | - Unallocated costs, including amortization of intangible assets, acquisition and integration costs, transformational initiatives, and restructuring costs, totaled $(77) million for the three months and $(242) million for the nine months ended July 31, 2025[150] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) This section provides management's perspective on Agilent's financial performance, condition, and future outlook. It covers key financial results, segment performance, critical accounting policies, restructuring efforts, foreign currency impacts, and liquidity. The company reported revenue growth, but also noted impacts from tariffs, product mix, and increased costs, while maintaining a focus on customer experience and productivity Executive Summary This summary highlights Agilent's financial performance, including revenue growth, net income, dividends, and share repurchases, alongside management's strategic focus on customer experience and productivity - Net revenue for the three and nine months ended July 31, 2025, increased 10% and 6% respectively, with foreign currency movements having a 2 percentage point favorable impact (three months) and no impact (nine months)[158] - Revenue growth was broad-based across all segments, geographic regions, and most key end markets, with the BIOVECTRA acquisition contributing approximately 2 percentage points to revenue growth in both periods[158] - Net income for the three and nine months ended July 31, 2025, was $336 million and $869 million, respectively[159] - Agilent paid cash dividends of $0.248 per common share ($71 million) for the three months and $0.744 per common share ($212 million) for the nine months ended July 31, 2025[160] - The company repurchased 737,474 shares for $85 million (three months) and 2.734 million shares for $340 million (nine months) under the 2023 repurchase program, with $34 million remaining authorization as of July 31, 2025[161] - Management's primary focus is on enhancing customer experience, delivering differentiated product solutions, and driving productivity improvements, while actively pursuing mitigation strategies for inflationary and tariff-related pressures[162] Critical Accounting Policies and Estimates This section confirms that there have been no significant changes to Agilent's critical accounting policies, including revenue recognition, inventory valuation, and income tax accounting - There have been no significant changes to Agilent's critical accounting policies, including revenue recognition, inventory valuation, retirement and post-retirement benefit plan assumptions, valuation of goodwill and purchased intangible assets, and accounting for income taxes, as described in the Annual Report on Form 10-K for fiscal year ended October 31, 2024[163] Restructuring and Other Related Costs Agilent announced a Fiscal Year 2025 restructuring plan to optimize its management structure, expected to reduce annual costs by $75-$80 million, with an aggregate liability of $23 million as of July 31, 2025 - Agilent announced a Fiscal Year 2025 restructuring plan to optimize its management structure, with activities expected to be substantially completed by the second quarter of fiscal year 2026[168] - The FY25 plan is estimated to result in an annual reduction of approximately $75 million to $80 million in cost of sales and operating expenses across the three business segments[168] Total Restructuring Expense Since Inception of All Plans (in millions) | Plan | Total Restructuring Expense | | :-------------------------- | :-------------------------- | | Fiscal Year 2025 Plan | $73 | | Fiscal Year 2024 Plan | $73 | | Fiscal Year 2023 Plan | $50 | | Total | $196 | - The aggregate restructuring liability was $23 million as of July 31, 2025, recorded in other accrued liabilities[167] Foreign Currency This section discusses the impact of foreign currency exchange rates on Agilent's revenue growth and its hedging strategies to mitigate currency exposures - The overall effect of changes in foreign currency exchange rates had no impact on revenue growth for the nine months ended July 31, 2025, compared to the same period last year, principally due to the strength of the U.S. dollar[173][260] - Agilent hedges revenue, expenses, and balance sheet exposures not denominated in functional currencies on a short-term (up to a rolling twelve-month period) and anticipated basis, and may also hedge equity balances long-term[174] - Approximately 47% of Agilent's revenue was generated in U.S. dollars during the nine months ended July 31, 2025 and 2024[260] Results from Operations This section analyzes Agilent's operational performance, including net revenue, gross margin, research and development expenses, selling, general and administrative expenses, and overall operating margin Net Revenue Agilent's total net revenue increased 10% for the three months and 6% for the nine months ended July 31, 2025, compared to the prior year. This growth was driven by all segments, geographic regions, and most key end markets, with the BIOVECTRA acquisition contributing approximately 2 percentage points Net Revenue Performance (in millions, except %) | Category | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | YoY Change | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | YoY Change | | :---------------- | :------------------------------- | :------------------------------- | :--------- | :------------------------------ | :------------------------------ | :--------- | | Products | $1,230 | $1,121 | 10% | $3,616 | $3,455 | 5% | | Services and other | $508 | $457 | 11% | $1,471 | $1,354 | 9% | | Total net revenue | $1,738 | $1,578 | 10% | $5,087 | $4,809 | 6% | - Foreign currency movements had a 2 percentage point favorable impact on revenue growth for the three months and no impact for the nine months ended July 31, 2025[175] - Revenue from the BIOVECTRA acquisition contributed approximately 2 percentage points to total net revenue growth in both the three and nine months ended July 31, 2025[175] - Product revenue growth was led by strong performance in CDMO, liquid chromatography, liquid chromatography mass spectrometry, and consumables businesses[176] - Services and other revenue growth reflected strong performance from contract repair, preventative maintenance, and per incident services[177] Net Revenue By Segment Agilent's Life Sciences and Diagnostics Markets segment saw revenue increase by 14% (three months) and 9% (nine months) YoY, driven by the BIOVECTRA acquisition and strong pharmaceutical and diagnostics/clinical markets. Agilent CrossLab revenue grew 8% (three months) and 5% (nine months) YoY, with broad-based growth. Applied Markets revenue increased 7% (three months) but was flat (nine months) YoY, with mixed performance across end markets Net Revenue by Segment (in millions, except %) | Segment | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | YoY Change | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | YoY Change | | :---------------------------------- | :------------------------------- | :------------------------------- | :--------- | :------------------------------ | :------------------------------ | :--------- | | Life Sciences and Diagnostics Markets | $670 | $585 | 14% | $1,971 | $1,809 | 9% | | Agilent CrossLab | $744 | $691 | 8% | $2,153 | $2,041 | 5% | | Applied Markets | $324 | $302 | 7% | $963 | $959 | 0% | | Total net revenue | $1,738 | $1,578 | 10% | $5,087 | $4,809 | 6% | - Life Sciences and Diagnostics Markets revenue growth was significantly impacted by the BIOVECTRA acquisition (4-5 percentage points) and strong performance in the pharmaceutical and diagnostics and clinical markets[178] - Agilent CrossLab experienced revenue growth across most end markets, led by pharmaceutical, chemical and advanced materials, and food markets, driven by services, consumables, and software[179] - Applied Markets saw significant revenue growth in the pharmaceutical and chemical and advanced materials markets for the three months, but was flat for the nine months due to declines in academic and government and chemical and advanced materials markets offsetting growth in food and pharmaceutical[180] Operating Results Agilent's total gross margin decreased by 3 percentage points (three months) and 2 percentage points (nine months) YoY, primarily due to higher tariffs, shipping costs, and unfavorable product mix. R&D expenses decreased, while SG&A expenses increased. Operating margin was flat for the three months but decreased by 2 percentage points for the nine months, influenced by similar cost pressures and transformational initiatives Operating Results Highlights (in millions, except margin data) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | YoY Change | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | YoY Change | | :---------------------------------- | :------------------------------- | :------------------------------- | :--------- | :------------------------------ | :------------------------------ | :--------- | | Total gross margin | 51.1% | 54.2% | (3) ppts | 52.2% | 54.5% | (2) ppts | | Research and development | $111 | $127 | (13)% | $336 | $368 | (9)% | | Selling, general and administrative | $417 | $395 | 6% | $1,281 | $1,171 | 9% | | Operating margin | 20.7% | 21.1% | (0.4) ppts | 20.4% | 22.5% | (2.1) ppts | | Income from operations | $360 | $333 | 8% | $1,036 | $1,080 | (4)% | - Gross margin decreased due to higher tariffs and shipping costs, unfavorable product mix, higher wages, and variable pay, partially offset by higher sales volume and lower warranty and restructuring expenses[181][182] - Research and development expenses decreased due to lower restructuring expenses and salary expenses related to workforce reduction activities[183] - Selling, general and administrative expenses increased due to higher corporate infrastructure costs, transformational initiatives, and variable pay[184] - Other income (expense), net for the nine months ended July 31, 2025, included a $28 million net loss on equity securities, a $15 million impairment loss on investments, and a $14 million settlement loss from the Netherlands defined benefit pension plan[190] Segment Overview This section provides a detailed analysis of the financial performance and strategic focus of Agilent's three reportable segments: Life Sciences and Diagnostics Markets, Agilent CrossLab, and Applied Markets Life Sciences and Diagnostics Markets This segment provides solutions for life sciences research and diagnostics, including LC/LCMS, cell analysis, CDMO services (BIOVECTRA), pathology solutions, companion diagnostics, genomics, and biomolecular analysis. Revenue increased 14% (three months) and 9% (nine months) YoY, driven by strong performance in pharmaceutical and diagnostics/clinical markets, with BIOVECTRA contributing significantly. Gross and operating margins decreased due to tariffs, unfavorable mix, and increased costs - Life Sciences and Diagnostics Markets segment revenue increased 14% (three months) and 9% (nine months) YoY, with BIOVECTRA business contributing 4-5 percentage points to revenue growth[178][200] - Strong revenue growth was observed in the pharmaceutical market (CDMO, liquid chromatography, liquid chromatography mass spectrometry) and the diagnostics and clinical market (pathology, companion diagnostics)[204][205] - Gross margin for products and services decreased 4 percentage points (three months) and 3 percentage points (nine months) YoY, mainly due to increased tariffs, shipping costs, unfavorable business mix, and increased variable pay[207] - Operating margin decreased 2 percentage points (three months) and was flat (nine months) YoY, impacted by similar cost pressures[210] - The segment remains optimistic about long-term growth opportunities, leveraging LC/LCMS platforms and the CDMO business, and plans continued investment in R&D and expansion in developing/emerging markets[206] Agilent CrossLab The Agilent CrossLab segment provides extensive services, consumables, software, and laboratory automation solutions. Revenue increased 8% (three months) and 5% (nine months) YoY, with growth across most end markets, particularly pharmaceutical, chemical and advanced materials, and food. Gross and operating margins decreased due to higher tariffs, shipping costs, and increased wages/variable pay - Agilent CrossLab segment revenue increased 8% (three months) and 5% (nine months) YoY, with foreign currency having a 3 percentage point favorable impact (three months) and 1 percentage point unfavorable impact (nine months)[212][213] - Strong revenue growth was observed in the pharmaceutical, chemical and advanced materials, food, and environmental and forensics markets, driven by services, consumables, and software and informatics businesses[216][217] - Gross margin decreased 3 percentage points (three months) and 2 percentage points (nine months) YoY, impacted by higher tariffs and shipping costs, higher wages, and variable pay[220] - Operating margin decreased 3 percentage points (three months) and 1 percentage point (nine months) YoY, due to similar cost pressures and higher corporate infrastructure expenses[223] - The segment is well-positioned for continued success by supporting a growing installed base, leveraging digital and remote capabilities, and benefiting from geographical diversification[218] Applied Markets The Applied Markets segment provides application-focused instruments and software, including GC/GCMS, ICP-MS, molecular spectroscopy, and vacuum businesses. Revenue increased 7% (three months) but was flat (nine months) YoY, with strong growth in chemicals and advanced materials, pharmaceutical, and food markets for the three months, but mixed performance for the nine months. Gross and operating margins decreased due to tariffs, shipping costs, and variable pay - Applied Markets segment revenue increased 7% (three months) and was flat (nine months) YoY, with foreign currency having a 2 percentage point favorable impact (three months) and no impact (nine months)[226] - For the three months, strong revenue growth was seen in chemicals and advanced materials, pharmaceutical, and food markets. For the nine months, strong growth in food and pharmaceutical markets was offset by declines in academic and government and chemicals and advanced materials markets[228][229] - Gross margin decreased 2 percentage points (three months) and 1 percentage point (nine months) YoY, impacted by higher tariffs and shipping costs, higher variable pay, and unfavorable currency movements[232] - Operating margin decreased 1 percentage point in both periods YoY, due to similar cost pressures[235] - The segment anticipates continued steady market recovery and long-term growth opportunities, with ongoing investments in application-focused solutions[231] Financial Condition This section assesses Agilent's financial health, focusing on liquidity, capital resources, and cash flow performance from operating, investing, and financing activities Liquidity and Capital Resources Agilent believes its current cash, operating cash flow, and access to capital markets are sufficient to meet its liquidity requirements for the foreseeable future, including working capital, capital expenditures, acquisitions, stock repurchases, and dividends. Cash and cash equivalents increased to $1,535 million as of July 31, 2025 - Agilent believes its cash and cash equivalents, cash generated from operations, and ability to access capital markets and credit lines will satisfy its liquidity requirements for at least the next twelve months and beyond[237] - Cash and cash equivalents were $1,535 million as of July 31, 2025, compared to $1,329 million as of October 31, 2024[238] Net Cash Provided by Operating Activities Net cash provided by operating activities decreased to $1,014 million for the nine months ended July 31, 2025, from $1,270 million in the prior year. This change was primarily driven by cash used in accounts receivable ($44 million), inventory ($72 million), and accounts payable ($13 million), along with increased income tax payments Net Cash Provided by Operating Activities (in millions) | Period | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :---------------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $1,014 | $1,270 | - Accounts receivable used cash of $44 million (2025) compared to providing $67 million (2024), with Days' Sales Outstanding (DSO) increasing to 72 days (2025) from 70 days (2024)[240] - Inventory used cash of $72 million (2025) compared to providing $15 million (2024), while inventory days on-hand decreased to 107 days (2025) from 122 days (2024)[240] - Accounts payable used cash of $13 million (2025) compared to providing $78 million (2024), mainly due to more expenditures for direct materials and tariff impacts[240] - Net cash paid for income taxes increased to $304 million (2025) from $284 million (2024)[239] Net Cash Used in Investing Activities Net cash used in investing activities remained constant at $304 million for the nine months ended July 31, 2025, compared to the prior year. Investments in property, plant, and equipment increased to $314 million, primarily for expanding manufacturing capacity for nucleic acid-based therapeutics Net Cash Used in Investing Activities (in millions) | Period | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :---------------------------------- | :------------------------------ | :------------------------------ | | Net cash used in investing activities | $(304) | $(304) | - Investments in property, plant, and equipment increased to $314 million (2025) from $285 million (2024), primarily for planned expansion of manufacturing capacity for nucleic acid-based therapeutics in Frederick, Colorado[243] - Total capital expenditures for the current year are expected to be approximately $400 million[243] Net Cash Used in Financing Activities Net cash used in financing activities decreased to $515 million for the nine months ended July 31, 2025, from $777 million in the prior year, mainly due to lower share repurchases. The company paid $212 million in cash dividends and had $55 million outstanding under its commercial paper program Net Cash Used in Financing Activities (in millions) | Period | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :---------------------------------- | :------------------------------ | :------------------------------ | | Net cash used in financing activities | $(515) | $(777) | - Payments for repurchase of common stock decreased to $340 million (2025) from $815 million (2024)[246] - Cash dividends paid increased to $212 million (2025) from $206 million (2024)[249] - Borrowings under the commercial paper program were $1,118 million (borrowed) and $1,103 million (repaid) in 2025, compared to $610 million (borrowed) and $235 million (repaid) in 2024[253] - The $600 million delayed draw term loan was paid in full as of October 31, 2024[254] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Agilent is exposed to foreign currency exchange rate risks and interest rate risks, which it manages through derivative financial instruments like options and forward contracts. The company's hedging programs aim to offset gains and losses on underlying exposures, primarily on a short-term basis. A sensitivity analysis indicates that hypothetical 10% adverse movements in exchange rates or interest rates would not materially affect its financial position or results - Agilent is exposed to foreign currency exchange rate risks inherent in sales commitments, anticipated sales, and assets/liabilities denominated in non-functional currencies[259] - The company uses derivative financial instruments, including option and forward contracts, to hedge certain foreign currency exposures, primarily on a short-term basis (up to twelve months), and may hedge equity balances long-term[259][260] - Approximately 47% of Agilent's revenue was generated in U.S. dollars during the nine months ended July 31, 2025 and 2024[260] - A sensitivity analysis indicated that a hypothetical 10% adverse movement in foreign exchange rates or interest rates would not have a material effect on Agilent's condensed consolidated financial position, results of operations, or cash flows[261][263] - Agilent is also exposed to interest rate risk due to the mismatch between fixed-rate debt interest expense and variable interest income from cash, cash equivalents, and other short-term investments[262] ITEM 4. CONTROLS AND PROCEDURES Agilent's management, including the Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of its disclosure controls and procedures as of July 31, 2025, and concluded they are effective. There were no material changes in internal control over financial reporting during the quarter - Agilent's disclosure controls and procedures were evaluated and deemed effective as of July 31, 2025, ensuring timely and appropriate communication of information to management for SEC disclosure[264] - There were no changes in internal control over financial reporting during the quarter ended July 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[265] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, and other information related to Agilent's operations and governance ITEM 1. LEGAL PROCEEDINGS Agilent is involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business, including intellectual property, commercial, real estate, environmental, and employment matters. However, the company currently believes that no pending matters are reasonably possible of having a material impact on its business, financial condition, results of operations, or cash flows - Agilent is involved in various lawsuits, claims, investigations, and proceedings, including intellectual property, commercial, real estate, environmental, and employment matters, arising in the ordinary course of business[266] - The company currently believes that no pending matters are reasonably possible of having a material impact on its business, consolidated financial condition, results of operations, or cash flows[266] ITEM 1A. RISK FACTORS This section details various risks that could adversely affect Agilent's business, financial condition, and operating results. These risks are categorized into business and strategic, regulatory/legal/compliance, operational, and financial/tax risks, covering areas such as economic conditions, international operations, product development, government funding, acquisitions, regulatory compliance, AI technologies, manufacturing, IT systems, and tax laws Business and Strategic Risks Agilent faces business and strategic risks from general economic conditions, market demand fluctuations, and international operations, including foreign currency and tariffs. The company's success depends on timely new product introductions and customer capital spending, while strategic initiatives, acquisitions, and divestitures pose integration and financial risks - General economic conditions, including slower global growth, increasing interest rates, and inflationary pressures, may adversely impact Agilent's operating results and financial condition[267] - International sales and operations are subject to risks from foreign currency fluctuations, political instability, trade policy changes (tariffs), and supply chain disruptions, which could negatively affect financial results[268][271][273] - Failure to timely introduce successful new products and services, or accurately predict customer needs, could lead to product obsolescence and harm operating results[274] - Demand for Agilent's products and services depends on customer capital spending, R&D budgets, and government funding, which can fluctuate significantly due to various factors[278] - Strategic initiatives, acquisitions, and divestitures carry risks of unexpected costs, integration difficulties, failure to realize anticipated synergies, and potential impairment charges[284][285][286][287] Regulatory, Legal and Compliance Risks Agilent is exposed to regulatory, legal, and compliance risks, including the need to maintain effective internal controls and adhere to various governmental regulations (e.g., health, safety, data privacy, anti-corruption, import/export). The company also faces challenges related to FDA regulations, toxic substance laws, government contracting, and the rapidly evolving legal and ethical landscape of artificial intelligence technologies - Failure to maintain an effective system of internal controls could lead to inaccurate financial reporting and a loss of investor confidence[291] - Compliance with complex and frequently changing international, federal, state, and local regulations (e.g., GDPR, PIPL, FCPA, UK Bribery Act, FDA) could incur significant expenses, lead to penalties, product recalls, or operational restrictions[292][293][294][296] - The development, deployment, and use of artificial intelligence (AI) technologies present risks related to inaccurate/biased algorithms, intellectual property, data privacy, ethical concerns, and a rapidly evolving legal and regulatory environment[306][307][308] - Third parties may claim infringement of their intellectual property, potentially leading to costly litigation, licensing expenses, product redesigns, or injunctions against sales[309] - Failure to successfully enforce Agilent's own intellectual property rights could result in competitive injury and require significant resources[310][312] Operational Risks Agilent's operational risks include potential mismatches between manufacturing capacity and product demand, challenges in managing manufacturing consolidation and outsourcing, and disruptions from catastrophic events or IT system failures. These factors could lead to adverse effects on gross margins, product delivery, reputation, and overall operational effectiveness - Agilent's operating results may suffer if its manufacturing capacity does not match the demand for its products, leading to adverse effects on gross margins (excess capacity) or inability to fulfill orders (insufficient capacity)[313] - Failure to successfully manage the consolidation and streamlining of manufacturing operations, or dependence on contract manufacturing and outsourcing (including IT and logistics), may disrupt product delivery and impair operational effectiveness[314][315] - Catastrophic losses to factories, facilities, or the distribution system due to fire, flood, terrorism, public health crises, or extreme weather events could seriously harm operations, despite insurance coverage limitations[316][317] - Significant disruptions or security breaches in information technology systems could lead to loss of sales, misappropriation of confidential information, and reputational damage[318] Financial and Tax Risks Agilent faces financial and tax risks, including the impact of financial market performance on retirement plans, potential increases in income taxes due to changes in tax laws (e.g., OECD Pillar Two, OBBBA) or unfavorable tax examination resolutions, and the risks associated with its outstanding debt. The company also notes that future dividend payments are not assured and adverse conditions in global banking could impact liquidity - Agilent's retirement and post-retirement pension plans are subject to financial market risks (e.g., interest rates, asset performance) that could increase funding obligations and adversely impact results of operations and cash flows[319] - Changes in tax laws (e.g., OECD Pillar Two, OBBBA), unfavorable resolution of tax examinations, or changes in tax incentives could significantly increase income taxes and adversely affect financial results[320][321][323][324] - Outstanding debt and potential future debt could adversely affect financial condition, liquidity, and results of operations by increasing vulnerability to downturns and reducing cash flow available for other purposes[325][326] - The timing, declaration, amount, and payment of any future dividends are at the discretion of the Board of Directors and are not assured, which could adversely affect the market price of common stock[327][328] - Adverse conditions in the global banking industry and credit markets may impact the value of cash investments or impair liquidity[330] [ITEM 2. UNREGISTERED SALES OF EQUITY