Revvity(RVTY) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's analysis of financial condition, market risk disclosures, and internal controls Unaudited Financial Statements Presents Revvity, Inc.'s unaudited condensed consolidated financial statements, including operations, balance sheets, and cash flows, reflecting the impact of discontinued operations Condensed Consolidated Statements of Operations Total revenues declined to $709.1 million, with operating income from continuing operations falling to $78.1 million, and net income significantly dropping to $35.6 million Condensed Consolidated Statements of Operations (Three Months Ended, in thousands, except per share data) | | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | | :--- | :--- | :--- | | Total revenue | $709,066 | $895,642 | | Operating income from continuing operations | $78,056 | $232,494 | | Income from continuing operations | $58,622 | $161,601 | | (Loss) income from discontinued operations | $(23,063) | $17,611 | | Net income | $35,559 | $179,212 | | Diluted earnings per share (Net income) | $0.28 | $1.42 | Condensed Consolidated Statements of Operations (Six Months Ended, in thousands, except per share data) | | Six Months Ended July 2, 2023 | Six Months Ended July 3, 2022 | | :--- | :--- | :--- | | Total revenue | $1,383,931 | $1,858,805 | | Operating income from continuing operations | $154,175 | $494,450 | | Income from continuing operations | $83,467 | $345,671 | | (Loss) income from discontinued operations | $521,567 | $10,503 | | Net income | $605,034 | $356,174 | | Diluted earnings per share (Net income) | $4.80 | $2.81 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for Q2 2023 was $35.0 million, a turnaround from a $33.2 million loss in Q2 2022, driven by reduced negative currency adjustments Comprehensive Income (Loss) Summary (in thousands) | | Three Months Ended July 2, 2023 | Three Months Ended July 3, 2022 | | :--- | :--- | :--- | | Net income | $35,559 | $179,212 | | Other comprehensive (loss) income | $(591) | $(212,366) | | Comprehensive income (loss) | $34,968 | $(33,154) | Condensed Consolidated Balance Sheets Total assets increased to $14.22 billion, with cash and equivalents rising to $1.33 billion, while total liabilities decreased to $6.35 billion Key Balance Sheet Items (in thousands) | | July 2, 2023 | January 1, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,331,903 | $454,358 | | Total current assets | $3,523,341 | $3,288,558 | | Goodwill | $6,518,419 | $6,481,768 | | Total assets | $14,218,549 | $14,129,855 | | Total current liabilities | $1,366,830 | $1,544,483 | | Long-term debt | $3,883,738 | $3,923,347 | | Total liabilities | $6,348,591 | $6,746,979 | | Total stockholders' equity | $7,869,958 | $7,382,876 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased to $7.87 billion, driven by net income and comprehensive income, partially offset by stock repurchases and dividends - Key activities impacting stockholders' equity in the first six months of 2023 include net income of $569.5 million, common stock purchases of $275.7 million ($67.5 million in Q1, $208.1 million in Q2), and dividend payments of $17.5 million ($8.8 million in Q1, $8.7 million in Q2)[18] Condensed Consolidated Statements of Cash Flows Net cash outflow from operations was $71.9 million, while investing activities provided $1.29 billion, leading to an overall $862.6 million increase in cash and equivalents Net Cash Flow Summary (Six Months Ended, in thousands) | | July 2, 2023 | July 3, 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(71,856) | $380,700 | | Net cash provided by (used in) investing activities | $1,293,461 | $(84,661) | | Net cash used in financing activities | $(341,458) | $(519,466) | | Net increase (decrease) in cash | $862,576 | $(257,404) | - Investing activities were dominated by $2.07 billion in net cash provided by discontinued operations, offset by $831.2 million in purchases of marketable securities[23] - Financing activities included $273.3 million for purchases of common stock and $50.8 million in payments of senior unsecured notes[24] Notes to Condensed Consolidated Financial Statements Provides detailed accounting policies and financial disclosures, including revenue disaggregation, impact of discontinued operations, debt structure, and share repurchase programs - In March 2023, the company completed the sale of its Applied, Food and Enterprise Services businesses, which are now reported as discontinued operations for all periods presented[28] Revenue by Segment (Three Months Ended July 2, 2023, in thousands) | Segment | Revenue | | :--- | :--- | | Life Sciences | $336,353 | | Diagnostics | $372,713 | | Total | $709,066 | - The sale of the business was for an aggregate price of up to $2.45 billion, with initial cash proceeds of approximately $2.14 billion; the company recognized a pre-tax loss on disposal of $31.2 million in Q2 2023[36][37] - The company repurchased $131.3 million of common stock under its Repurchase Program and $132.5 million under a new $600 million New Repurchase Program during the first six months of 2023[54][55] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2023 financial results, noting a 20.8% revenue decrease driven by Diagnostics, segment performance, and liquidity post-divestiture Overview Revvity, Inc. reported a 20.8% Q2 2023 revenue decrease to $709.1 million, driven by a 34% decline in Diagnostics, partially offset by Life Sciences growth - Effective April 26, 2023, the company changed its name from PerkinElmer, Inc. to Revvity, Inc. and its stock ticker to RVTY[89] - Q2 2023 revenue decreased 20.8% YoY to $709.1 million, driven by a 34% decline in Diagnostics revenue, which was partially offset by a 3% increase in Life Sciences revenue[90] - The decrease in Diagnostics revenue was primarily due to a drop in demand for COVID-19 products, while Life Sciences growth was led by the academia and government markets[90] Consolidated Results of Continuing Operations Q2 2023 revenue declined 20.8% to $709.1 million, gross margin contracted to 56.7%, and interest expense decreased due to higher interest income Revenue by Segment (Q2 2023 vs Q2 2022, in millions) | Segment | Q2 2023 Revenue | Q2 2022 Revenue | Change (%) | | :--- | :--- | :--- | :--- | | Diagnostics | $372.9M | $569.2M | -34% | | Life Sciences | $336.4M | $326.6M | +3% | | Total | $709.1M | $895.6M | -20.8% | - Gross margin for Q2 2023 decreased to 56.7% from 61.6% in Q2 2022, primarily due to lower COVID-19 revenue, partially offset by pricing actions[99] - Interest and other expense, net, for Q2 2023 decreased to $6.5 million from $26.2 million YoY, mainly due to a $24.3 million increase in interest income from investing cash proceeds from the business sale[107] - The effective tax rate from continuing operations for Q2 2023 was 18.1%, down from 21.7% in the prior year period, due to projected lower income in higher tax jurisdictions[110] Reporting Segment Results of Continuing Operations Life Sciences revenue grew 3% to $336.4 million, while Diagnostics revenue declined 34% to $372.9 million, significantly impacting operating margins Segment Performance (Q2 2023 vs Q2 2022) | Segment | Revenue Change | Operating Income Change | Operating Margin Change | | :--- | :--- | :--- | :--- | | Life Sciences | +3% | -2% | -200 bps | | Diagnostics | -34% | -65% | -2,012 bps | - Life Sciences revenue growth was driven by a $15.6 million increase in academia and government markets, partially offset by a $5.9 million decrease in pharmaceutical and biotechnology markets[112] - Diagnostics revenue decline was driven by decreased demand for COVID-19 products, with immunodiagnostics revenue down $154.7 million and applied genomics revenue down $38.0 million[116] Discontinued Operations The company completed the sale of its Applied, Food and Enterprise Services businesses for up to $2.45 billion, recognizing a $31.2 million pre-tax loss in Q2 2023 - The company completed the sale of the Business on March 13, 2023, for up to $2.45 billion, receiving ~$2.14 billion in initial cash proceeds[120] Discontinued Operations Financial Summary (in thousands) | | Three Months Ended July 2, 2023 | Six Months Ended July 2, 2023 | | :--- | :--- | :--- | | (Loss) gain on sale | $(31,232) | $835,687 | | (Loss) income from discontinued operations | $(23,063) | $521,567 | Liquidity and Capital Resources The company's liquidity is supported by cash from operations and a credit facility, with $2.14 billion from a business sale allocated for debt, repurchases, and acquisitions - The company plans to use the ~$2.14 billion in cash proceeds from the business sale for debt maturities, opportunistic share repurchases, and strategic acquisitions[125] - As of July 2, 2023, the company had $1.3 billion in cash and cash equivalents and $1.5 billion of borrowing capacity under its senior unsecured revolving credit facility[127] - In the first half of 2023, the company repurchased a total of $263.8 million in common stock under two separate repurchase programs and has $467.5 million remaining under the new program[130] Cash Flow Summary - Continuing Operations (Six Months Ended, in millions) | Cash Flow Activity | Six Months Ended July 2, 2023 | Six Months Ended July 3, 2022 | | :--- | :--- | :--- | | Operating Activities | $28.0M | $423.4M | | Investing Activities | $(771.8)M | $(73.3)M | | Financing Activities | $(341.5)M | $(519.5)M | Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency and interest rate fluctuations, using derivatives to hedge, with its overall risk profile unchanged - The company's primary market risks are changes in interest rates and foreign currency exchange rates[143] - As of July 2, 2023, the company held $1.3 billion in cash and cash equivalents at variable interest rates, making its earnings and cash flows susceptible to interest rate fluctuations[145] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of July 2, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of July 2, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level[147] - No changes occurred during the fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[148] PART II. OTHER INFORMATION This section covers legal proceedings, various risk factors, details on equity security sales and use of proceeds, and other miscellaneous information Legal Proceedings The company is involved in various legal proceedings, but management does not expect a material adverse effect on financial statements - The company is subject to various legal proceedings but does not expect the resolution of these matters to have a material adverse effect on its financial statements[151] Risk Factors Outlines significant risks to the company's business, including market conditions, supply chain, intellectual property, regulatory compliance, foreign operations, and substantial debt Risks Related to Business Operations and Industry Business operations face risks from market dependency, government funding, COVID-19 impact, supply chain disruptions, and the ability to retain key personnel - Business is highly dependent on customer markets (pharma, biotech, academic) and government funding, which are subject to economic and political uncertainties[152] - Demand for COVID-19 related products declined in 2022 and H1 2023 and is expected to continue declining[155][156] - The company faces risks from supply chain disruptions, as certain critical raw materials and components are sourced from limited or single suppliers[170] - Failure to successfully execute acquisitions, integrate new businesses, or realize the full value of intangible assets ($9.7 billion as of July 2, 2023) could adversely affect results[163][175] Risks Related to Intellectual Property Risks include failure to protect patents, costly IP litigation, and potential loss of competitive advantage from inability to renew licensed technologies - The company may not be successful in protecting its patents and trade secrets, which are critical for maintaining a competitive advantage[177] - The company may face expensive litigation if third parties challenge its patents or claim that its products infringe on their IP[178] - Loss of licensed rights could force the company to stop selling certain products or lose a competitive advantage[179] Risks Related to Legal, Government and Regulatory Matters The company faces risks from product liability claims, non-compliance with FDA and global regulations, and changes in healthcare industry laws - The company faces inherent risks of product liability claims, which could result in substantial liability exceeding insurance coverage[181] - Failure to comply with regulations from the FDA and other global agencies could lead to product recalls, fines, and criminal prosecution[182] - The healthcare industry is highly regulated; non-compliance with laws regarding fraud, abuse, and patient privacy could result in significant fines and penalties[185] Risks Related to Foreign Operations Foreign operations expose the company to risks from currency fluctuations, political instability, trade protection measures, and differing international laws - The majority of the company's revenue came from outside the U.S. in fiscal 2022, exposing it to risks such as currency fluctuations, political instability, and trade protection measures[187] - Specific risks include sanctions related to the conflict in Ukraine, import/export licensing requirements, and differing laws regarding taxes, labor, and intellectual property[188] Risks Related to Debt Substantial debt levels could limit financial flexibility, expose the company to interest rate risk, and trigger default if restrictive covenants are breached - Substantial debt levels could require significant cash flow for debt service, reducing funds for acquisitions and stock repurchases, and limiting operational flexibility[189] - Debt instruments contain restrictive covenants limiting the ability to pay dividends, sell assets, and incur certain other obligations[191][196] - Failure to comply with financial covenants could lead to an event of default and require early prepayment of debt[193] Risks Related to Ownership of our Common Stock Common stock ownership risks include significant price volatility influenced by financial performance and market sentiment, and the potential reduction or elimination of future dividends - The company's common stock price is subject to significant volatility due to factors like financial performance, market sentiment, and competitor actions[194][197] - The Board of Directors may reduce or eliminate the common stock dividend in the future to fund growth, repurchase shares, or conserve capital[199] Unregistered Sales of Equity Securities and Use of Proceeds Details stock repurchase activities for Q2 2023, including the repurchase of 1,707,305 shares for $205.9 million under a new $600 million program Issuer Repurchases of Equity Securities (Quarter Ended July 2, 2023) | Period | Total Number of Shares Purchased | Average Price Paid Per Share ($) | Maximum Dollar Value that May Yet Be Purchased Under the Programs ($) | | :--- | :--- | :--- | :--- | | April 3, 2023—April 30, 2023 | 557,282 | $132.34 | $149,591,197 | | May 1, 2023—May 28, 2023 | 338,031 | $116.10 | $574,752,955 | | May 29, 2023—July 2, 2023 | 811,992 | $114.91 | $467,534,970 | | Total for Quarter | 1,707,305 | $120.83 | $467,534,970 | - On April 27, 2023, the Board terminated the existing repurchase program and authorized a new $600.0 million stock repurchase program, which expires on April 26, 2025[202] Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the second quarter of 2023 - No directors or officers adopted or terminated Rule 10b5-1 trading plans during the second quarter of 2023[203] Exhibits Lists exhibits filed with the Form 10-Q, including corporate governance documents, credit agreement amendments, and CEO/CFO certifications - Key exhibits filed include corporate governance documents, an amendment to the credit agreement, and required CEO/CFO certifications[203]