Agilent Technologies(US:A)2024-03-04 16:00Part I Item 1. Condensed Consolidated Financial Statements (Unaudited) Agilent's unaudited Q1 FY2024 financial statements are presented, detailing a segment reorganization - In Q1 2024, the company reorganized its operating segments, moving the cell analysis business from the Life Sciences and Applied Markets segment to the Diagnostics and Genomics segment, with all historical financial segment information recast to conform to this new structure24142 Condensed Consolidated Statement of Operations Agilent reported Q1 FY2024 net revenue of $1,658 million, a decrease from the prior year, with net income remaining stable at $348 million Q1 FY2024 vs. Q1 FY2023 Statement of Operations Highlights (in millions, except per share amounts) | Metric | Three Months Ended Jan 31, 2024 | Three Months Ended Jan 31, 2023 | | :--- | :--- | :--- | | Total Net Revenue | $1,658 | $1,756 | | Products | $1,209 | $1,323 | | Services and other | $449 | $433 | | Income from Operations | $384 | $426 | | Net Income | $348 | $352 | | Diluted EPS | $1.18 | $1.19 | Condensed Consolidated Balance Sheet As of January 31, 2024, Agilent's total assets increased to $10,948 million, while total liabilities decreased to $4,760 million Balance Sheet Summary (in millions) | Metric | January 31, 2024 | October 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $4,338 | $4,186 | | Total Assets | $10,948 | $10,763 | | Total Current Liabilities | $1,617 | $1,603 | | Long-term Debt | $2,555 | $2,735 | | Total Liabilities | $4,760 | $4,918 | | Total Stockholders' Equity | $6,188 | $5,845 | Condensed Consolidated Statement of Cash Flows Net cash provided by operating activities significantly increased to $485 million in Q1 FY2024, with cash used in investing and financing activities Cash Flow Summary (in millions) | Cash Flow Activity | Three Months Ended Jan 31, 2024 | Three Months Ended Jan 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $485 | $296 | | Net cash used in investing activities | $(95) | $(104) | | Net cash used in financing activities | $(240) | $(17) | | Net increase in cash | $157 | $197 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, segment revenue, restructuring costs, debt, and share repurchase programs Q1 FY2024 Revenue by Segment (in millions) | Segment | Q1 2024 Revenue | Q1 2023 Revenue | | :--- | :--- | :--- | | Life Sciences and Applied Markets | $846 | $943 | | Diagnostics and Genomics | $407 | $432 | | Agilent CrossLab | $405 | $381 | | Total | $1,658 | $1,756 | - The FY23 Restructuring Plan incurred costs of $3 million in Q1 2024, totaling $49 million since inception, aiming to reduce workforce and consolidate facilities by end of fiscal 2024116118 - The company paid cash dividends of $0.236 per share ($69 million total) in Q1 2024, with approximately $1.524 billion remaining authorized for share repurchases133134 - In Q1 2024, the company prepaid $180 million on its term loan, reducing the outstanding balance to $420 million127232 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses a 6% year-over-year decline in Q1 2024 net revenue due to customer capital expenditure pressures, while highlighting strong liquidity and cost-saving strategies Results of Operations Overall net revenue decreased 6% year-over-year to $1,658 million, driven by weakness in Americas and Asia Pacific, while operating margin declined Overall Operating Results (in millions, except margin data) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Total Net Revenue | $1,658 | $1,756 | (6)% | | Total Gross Margin | 54.8% | 55.1% | (0.3) ppts | | Operating Margin | 23.2% | 24.3% | (1.1) ppts | | Income from Operations | $384 | $426 | (10)% | - Product revenue declined 9% year-over-year, primarily due to decreases in liquid chromatography, mass spectrometry, and cell analysis businesses, reflecting customer capital expenditure pressures177178 - Services and other revenue grew 4% year-over-year, driven by strong demand for contract repair and maintenance177178 Segment Overview Life Sciences and Applied Markets and Diagnostics and Genomics segments saw revenue declines, while Agilent CrossLab achieved 6% growth Segment Performance (Q1 FY2024 vs Q1 FY2023, in millions) | Segment | Net Revenue (YoY Change) | Operating Income (YoY Change) | Operating Margin | | :--- | :--- | :--- | :--- | | Life Sciences & Applied Markets | $846 (-10%) | $236 (-22%) | 27.9% | | Diagnostics & Genomics | $407 (-6%) | $70 (-4%) | 17.3% | | Agilent CrossLab | $405 (+6%) | $122 (+19%) | 30.2% | - Life Sciences and Applied Markets experienced significant revenue declines in the pharmaceutical and chemical markets, with weakness in liquid and gas chromatography and mass spectrometry products180196 - Diagnostics and Genomics saw a significant revenue decline in the pharmaceutical market due to lower sales in its cell analysis and nucleic acid solutions businesses181206 - Agilent CrossLab demonstrated strong revenue growth across all end markets, led by high demand for repair, maintenance, and compliance services182213215 Financial Condition, Liquidity and Capital Resources Agilent's liquidity remains strong with increased cash from operations, used for capital expenditures, debt prepayment, and dividends - Net cash provided by operating activities significantly increased to $485 million in Q1 2024 from $296 million in Q1 2023, mainly due to improved working capital management, including lower inventory cash usage and higher cash from accounts payable222223 - The company prepaid $180 million of its term loan and paid $69 million in dividends, with no shares repurchased during the quarter227228232 - Capital expenditures totaled $90 million, largely for the expansion of the nucleic acid therapeutics manufacturing facility in Frederick, Colorado, with total expected capex for the year approximately $400 million225 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from foreign currency and interest rate fluctuations using derivative instruments, with minimal material impact from hypothetical adverse movements - The company is exposed to foreign currency exchange rate risk, as approximately 54% of its revenue was generated in non-U.S. dollar currencies in Q1 2024, mitigated by hedging programs236237 - A sensitivity analysis indicated that a hypothetical 10% adverse movement in foreign exchange rates or interest rates would not have a material effect on the company's financial position or results238239 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of January 31, 2024, with no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures are effective as of the end of the period240 - There were no material changes in the company's internal control over financial reporting during the quarter ended January 31, 2024241 Part II Item 1. Legal Proceedings The company is involved in various lawsuits and claims arising in the ordinary course of business, but does not anticipate a material impact on its financial condition - The company is involved in ordinary course lawsuits and investigations but states there are no pending matters currently believed to be reasonably possible of having a material impact on its business or financials242 Item 1A. Risk Factors Agilent faces significant risks including global economic sensitivity, intense competition, regulatory compliance, operational disruptions, and financial market volatility - Business is sensitive to global economic conditions, customer spending policies, and geopolitical uncertainties, particularly in China, which can reduce demand and lengthen sales cycles243249253 - The company faces significant regulatory risks, including compliance with FDA and foreign agency rules (like EU IVDR), complex data privacy laws (GDPR), and anti-corruption laws (FCPA), with non-compliance potentially leading to fines and business restrictions268271273 - Operational risks include dependence on contract manufacturing, potential disruptions at consolidated manufacturing sites, and significant security breaches or failures of critical IT systems287289294 - Financial risks include potential adverse effects from changes in tax laws (such as OECD's Pillar Two), the impact of outstanding debt on financial flexibility, and market risks affecting pension plan assets and cash investments297298301 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company has a $2.0 billion share repurchase program, but no shares were repurchased during Q1 FY2024 - The company has a $2.0 billion share repurchase program (the "2023 repurchase program")311 - No shares were repurchased during the three months ended January 31, 2024, with approximately $1.524 billion remaining available for repurchase under the program312 Item 5. Other Information No officers or directors adopted, modified, or terminated Rule 10b5-1 trading arrangements during the first quarter of fiscal 2024 - During the quarter ended January 31, 2024, no officers or directors adopted, modified, or terminated a Rule 10b5-1 trading arrangement313 Item 6. Exhibits The exhibits filed with the Form 10-Q report include CEO and CFO certifications and Inline XBRL documents for financial data - The exhibits filed with the report include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and XBRL interactive data files315