Revvity(RVTY) - 2024 Q3 - Quarterly Report

Part I. Financial Information Item 1. Unaudited Financial Statements This section presents Revvity, Inc.'s unaudited condensed consolidated financial statements, including operations, balance sheets, and cash flows Condensed Consolidated Statements of Operations The statements show a significant decline in Q3 2023 revenue and net income, primarily due to a loss from discontinued operations Condensed Consolidated Statements of Operations (Unaudited) | | Three Months Ended | | Nine Months Ended | | | :--- | :--- | :--- | :--- | :--- | | (In thousands, except per share data) | Oct 1, 2023 | Oct 2, 2022 | Oct 1, 2023 | Oct 2, 2022 | | Total revenue | $670,739 | $711,803 | $2,054,670 | $2,570,608 | | Operating income from continuing operations | $69,228 | $110,780 | $223,403 | $605,230 | | Income from continuing operations | $32,469 | $69,508 | $115,936 | $415,179 | | (Loss) income from discontinued operations | ($22,972) | $15,839 | $498,595 | $26,342 | | Net income | $9,497 | $85,347 | $614,531 | $441,521 | | Diluted EPS from continuing operations | $0.26 | $0.55 | $0.93 | $3.28 | | Diluted Net EPS | $0.08 | $0.67 | $4.90 | $3.49 | Condensed Consolidated Balance Sheets The balance sheets reflect a decrease in total assets and liabilities, with a significant increase in cash due to proceeds from discontinued operations Condensed Consolidated Balance Sheet Highlights (Unaudited) | (In thousands) | Oct 1, 2023 | Jan 1, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,136,721 | $454,358 | | Total current assets | $2,913,237 | $3,288,558 | | Goodwill | $6,470,139 | $6,481,768 | | Total assets | $13,421,548 | $14,129,855 | | Current portion of long-term debt | $727,539 | $470,929 | | Long-term debt | $3,152,454 | $3,923,347 | | Total liabilities | $5,727,267 | $6,746,979 | | Total stockholders' equity | $7,694,281 | $7,382,876 | Condensed Consolidated Statements of Cash Flows Cash flow statements show a shift to net cash used in operations, significant cash from divestitures, and substantial debt and stock repurchases Cash Flow Summary (Unaudited) | | Nine Months Ended | | | :--- | :--- | :--- | | (In thousands) | Oct 1, 2023 | Oct 2, 2022 | | Net cash (used in) provided by operating activities | ($105,341) | $540,652 | | Net cash provided by (used in) investing activities | $1,728,330 | ($107,167) | | Net cash used in financing activities | ($927,507) | ($585,106) | | Net increase (decrease) in cash | $667,212 | ($203,025) | - Investing activities were primarily driven by $2.07 billion in net cash provided by discontinued operations, which includes proceeds from the sale of the Business[24] - Financing activities included payments of senior unsecured notes of $518.0 million and purchases of common stock totaling $384.0 million[25] Notes to Condensed Consolidated Financial Statements The notes provide detailed disclosures on the basis of presentation, revenue, discontinued operations, debt, segment performance, and share repurchase programs - In March 2023, the company completed the sale of its Applied, Food and Enterprise Services businesses (the "Business"), which are now reported as discontinued operations[29] - The sale of the Business was for an aggregate price of up to $2.45 billion, including ~$2.14 billion in cash proceeds at closing, $75 million for the PerkinElmer brand transfer, and up to $150 million in contingent consideration[37] - The company paid in full $467.1 million of 0.550% Senior Unsecured Notes due in September 2023 and repurchased $54.1 million of its 2024 Notes during the first nine months of 2023[47] - A new stock repurchase program of up to $600.0 million was authorized in April 2023, replacing a previous program; as of October 1, 2023, $355.4 million remained available[55] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 and nine-month financial results, highlighting revenue declines, margin impacts, segment performance, and liquidity management post-divestiture Overview Revvity's Q3 2023 revenue declined 6% year-over-year, primarily due to reduced COVID-19 product demand in the Diagnostics segment - Q3 2023 revenue was $670.7 million, a 6% decrease YoY[89] - The Diagnostics segment revenue decreased 9% ($36.1 million) due to lower demand for COVID-19 products, while Life Sciences segment revenue decreased 2% ($4.9 million)[89] - Consolidated gross margins decreased by 165 basis points in Q3 2023, primarily due to lower COVID-19 revenue[90] Consolidated Results of Continuing Operations Consolidated results show Q3 revenue declined 6% and nine-month revenue fell 20%, with gross margins decreasing and the effective tax rate significantly increasing Q3 Revenue Change by Segment | Segment | Q3 2023 Revenue (in millions) | Q3 2022 Revenue (in millions) | Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Diagnostics | $363.1M | $399.2M | ($36.1M) | -9% | | Life Sciences | $307.9M | $312.8M | ($4.9M) | -2% | | Total | $670.7M | $711.8M | ($41.1M) | -6% | Nine-Month Revenue Change by Segment | Segment | 9M 2023 Revenue (in millions) | 9M 2022 Revenue (in millions) | Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Diagnostics | $1,082.6M | $1,625.7M | ($543.1M) | -33% | | Life Sciences | $972.6M | $945.5M | $27.2M | +3% | | Total | $2,054.7M | $2,570.6M | ($515.9M) | -20% | - The effective tax rate from continuing operations was 35.8% for Q3 2023, compared to 15.4% for Q3 2022, due to projected lower income in certain lower tax rate jurisdictions and an increase in tax reserves of $29.8 million[109] Reporting Segment Results of Continuing Operations Segment results show Life Sciences revenue decline in Q3 but growth over nine months, while Diagnostics faced significant declines due to reduced COVID-19 demand Segment Operating Income (in thousands) | Segment | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 | | :--- | :--- | :--- | :--- | :--- | | Life Sciences | $114,192 | $116,881 | $371,410 | $357,661 | | Diagnostics | $81,741 | $123,428 | $241,414 | $668,981 | - Life Sciences Q3 operating margin decreased 28 basis points due to investments in new product development and growth initiatives[113] - Diagnostics Q3 operating margin decreased 840 basis points primarily due to lower COVID-19 product sales volume[117] Discontinued Operations The company completed the sale of its Applied, Food and Enterprise Services businesses, resulting in a Q3 loss from discontinued operations but a nine-month gain including the sale proceeds - The sale of the Business to an affiliate of New Mountain Capital L.L.C. was completed on March 13, 2023, for up to $2.45 billion[119] Results of Discontinued Operations (in thousands) | | Three Months Ended | | Nine Months Ended | | | :--- | :--- | :--- | :--- | :--- | | | Oct 1, 2023 | Oct 2, 2022 | Oct 1, 2023 | Oct 2, 2022 | | (Loss) gain on sale | ($58) | — | $835,629 | — | | (Loss) income from discontinued operations | ($22,972) | $15,839 | $498,595 | $26,342 | Liquidity and Capital Resources The company's liquidity is strong with significant cash and credit availability, utilizing divestiture proceeds for debt repayment, share repurchases, and strategic acquisitions - Cash and cash equivalents stood at $1.1 billion as of October 1, 2023, with $1.5 billion of borrowing capacity available under the senior unsecured revolving credit facility[126] - Proceeds from the sale of the Business are expected to be used for satisfying debt maturities, opportunistic share repurchases, and strategic acquisitions[123] - The company repurchased a total of $375.9 million in common stock during the first nine months of 2023 under its existing and new repurchase programs[129] - The Board declared a quarterly cash dividend of $0.07 per share for Q3 and Q4 of 2023[139][199] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from interest rate and foreign currency fluctuations, which it manages using derivative instruments - The company is exposed to market risk from changes in interest rates and currency exchange rates[142] - Substantially all of the debt portfolio is fixed interest, but cash and cash equivalents of $1.1 billion earn variable interest rates, creating exposure to interest rate fluctuations[144] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of October 1, 2023, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that as of October 1, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level[147] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[148] Part II. Other Information Item 1. Legal Proceedings The company is subject to various legal proceedings, but management does not expect them to have a material adverse effect on financial statements - The company is subject to various legal proceedings and investigations arising in the ordinary course of business[151] - Management believes the total cost of resolving these contingencies will not have a material adverse effect on the company's condensed consolidated financial statements[151] Item 1A. Risk Factors This section outlines significant business risks, including economic conditions, product demand, M&A execution, competition, supply chain, IT security, and financial leverage - Business & Industry Risks: Declines in customer markets, unfavorable government regulations, and the negative effect of the COVID-19 pandemic on demand for certain products pose significant risks[152][153] - Strategic Risks: Failure to introduce new products in a timely manner, inability to successfully execute acquisitions or divestitures, and intense competition could harm business results[160][163][164] - Operational Risks: Disruptions in the supply of raw materials from single-source suppliers, disruptions in third-party delivery services, and breaches of IT security systems could adversely affect operations[169][170][174] - Financial Risks: A substantial amount of outstanding debt could impact future financing and flexibility; the stock price is subject to volatility, and future dividends could be reduced or eliminated[188][194][199] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2023, the company repurchased over 1 million shares of common stock for approximately $112.4 million under a new repurchase program Issuer Repurchases of Equity Securities (Q3 2023) | Period | Total Shares Purchased | Average Price Paid Per Share (USD) | Shares Purchased as Part of Program | Approx. Dollar Value Remaining in Program (USD) | | :--- | :--- | :--- | :--- | :--- | | Jul 3 - Jul 30, 2023 | 211,455 | $117.14 | 210,736 | $442,849,012 | | Jul 31 - Aug 27, 2023 | 727 | $118.03 | — | $442,849,012 | | Aug 28 - Oct 1, 2023 | 801,256 | $109.26 | 800,000 | $355,447,935 | | Total for Quarter | 1,013,438 | $110.91 | 1,010,736 | $355,447,935 | - On April 27, 2023, a new stock repurchase program for up to $600.0 million was authorized, terminating a prior program; as of October 1, 2023, $355.4 million remained available under the new program[202] Item 5. Other Information During Q3 2023, three executive officers adopted Rule 10b5-1 trading arrangements for future stock sales, with no terminations of such plans - Three Section 16 officers, including the CEO, adopted Rule 10b5-1 trading arrangements during the third quarter of 2023[203] Rule 10b5-1 Trading Arrangements Adopted | Name | Position | Adoption Date | Duration of Arrangement | Aggregate Securities to be Sold (shares) | | :--- | :--- | :--- | :--- | :--- | | Joel S. Goldberg | SVP, General Counsel | Aug 3, 2023 | Dec 1, 2023 - Feb 6, 2024 | Up to 22,613 | | Prahlad Singh | President and CEO | Aug 4, 2023 | Dec 4, 2023 - Feb 6, 2024 | Up to 31,002 | | Tajinder S. Vohra | SVP, Global Operations | Aug 4, 2023 | Dec 4, 2023 - Feb 28, 2024 | Up to 7,918 | Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - Exhibits include certifications from the CEO and CFO under Sarbanes-Oxley Sections 302 and 906[205] - The filing includes Inline XBRL documents for financial statements and notes[205]