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Highlights:

  • Revenue of $1.27 billion represents 6 percent reported growth; and up 6 percent(1) on a core basis driven by strength in the pharma, diagnostics, environmental and forensics markets
  • GAAP net income of $191 million or EPS of $0.60
  • Non-GAAP net income of $240 million or EPS of $0.76(2),
    up 13 percent year-over-year
  • Raises full-year revenue and non-GAAP EPS guidance
  • Signed definitive agreement to acquire BioTek Instruments,
    a global leader in life science instrumentation, strengthening leadership position in the cell analysis segment

Agilent Technologies, Inc. (NYSE: A) today reported revenue of $1.27 billion for the third quarter ended July 31, 2019, up 6 percent year-over-year (and up 6 percent on a core basis(1)).

On a GAAP basis, third quarter net income was $191 million or $0.60 per share. This compares with $236 million or $0.73 per share in the third quarter of 2018. Non-GAAP net income(2) was $240 million or $0.76 per share during the quarter, compared with $217 million or $0.67 per share during the third quarter a year ago.

"The Agilent team delivered very strong results in the third quarter, exceeding both our top and bottom-line expectations," said Mike McMullen, Agilent president and CEO. "Building on this performance, we are increasing our guidance for the full year. In the quarter, we also announced the pending acquisition of BioTek, continuing our investments in high growth markets. BioTek will significantly expand our presence in the fast-growing field of cell analysis."

Financial Highlights

Life Sciences and Applied Markets Group

Third quarter revenue of $544 million from Agilent's Life Sciences and Applied Markets Group (LSAG) was up 1 percent year-over-year (and flat on a core basis(1)). Demand in the pharma, environmental and forensics markets was strong, offset by expected weakness in the food market. LSAG's operating margin for the quarter was 21.7 percent.

Agilent CrossLab Group

Third quarter revenue of $467 million from the Agilent CrossLab Group (ACG) grew 10 percent year-over-year (up 11 percent on a core basis(1)). Growth was broad-based across all regions and market segments. ACG's operating margin for the quarter was 26.2 percent.

Diagnostics and Genomics Group

Third quarter revenue of $263 million from Agilent's Diagnostics and Genomics Group (DGG) grew 11 percent year-over-year (up 13 percent on a core basis(1)). Growth in the company's Nucleic Acid Solutions Division (NASD), and in the diagnostics and clinical markets drove the strong results. DGG's operating margin for the quarter was 19.1 percent.

Full-Year and Fourth Quarter Outlook

For fiscal year 2019, the company is raising revenue guidance at the midpoint, to a range of $5.105 billion to $5.125 billion. Full-year non-GAAP earnings guidance is being increased to a range of $3.07 to $3.09 per share(3).

Agilent expects fourth quarter 2019 revenue in the range of $1.31 billion to $1.33 billion. Fourth quarter 2019 non-GAAP earnings are expected to be in the range of $0.84 to $0.86 per share(3).

Both the fiscal year and fourth quarter guidance excludes any impact of the pending BioTek acquisition. The acquisition is still expected to be completed in Agilent's fiscal fourth quarter, subject to regulatory approvals and customary closing conditions.

Conference Call

Agilent's management will present more details about its third quarter fiscal year 2019 financial results on a conference call with investors today at 1:30 p.m. (Pacific Time). This event will be webcast live in listen-only mode. Listeners may log on at www.investor.agilent.com and select "Q3 2019 Agilent Technologies Inc. Earnings Conference Call" in the "News & Events — Calendar of Events" section. The webcast will remain available on the company's website for 90 days.

Additional financial information can be found at www.investor.agilent.com by selecting "Financial Results" in the "Financial Information" section.

# # #

Financial Statements for Third Quarter Fiscal 2019

AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

PRELIMINARY

Three Months Ended

Nine Months Ended

July 31,

July 31,

2019

2018 (a)

2019

2018 (a)

Net revenue

$

1,274

$

1,203

$3,796

$

3,620

Costs and expenses:
Cost of products and services

582

544

1,728

1,648

Research and development

101

97

302

283

Selling, general and administrative

366

341

1,075

1,029

Total costs and expenses

1,049

982

3,105

2,960

Income from operations

225

221

691

660

Interest income

10

9

30

28

Interest expense

(18

)

(18

)

(53

)

(57

)

Other income (expense), net

5

30

20

71

Income before taxes

222

242

688

702

Provision (benefit) for income taxes

31

6

(189

)

581

Net income

$

191

$

236

$877

$

121

Net income per share:
Basic

$

0.61

$

0.74

$2.78

$

0.38

Diluted

$

0.60

$

0.73

$2.74

$

0.37

Weighted average shares used in computing net income per share:
Basic

312

320

316

322

Diluted

316

324

320

326

 

(a) Adjusted to include the impact of the adoption of ASU 2017-07 (pension expense reclassification) as of 11/1/2018. There is no impact to net income or net income per share.

The preliminary income statement is estimated based on our current information.

Page 1

AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except par value and share amounts)
(Unaudited)
PRELIMINARY

July 31,

October 31,

2019

2018

ASSETS
Current assets:
Cash and cash equivalents

$

1,765

$

2,247

Accounts receivable, net

856

776

Inventory

660

638

Other current assets

176

187

Total current assets

3,457

3,848

Property, plant and equipment, net

839

822

Goodwill and other intangible assets, net

3,618

3,464

Long-term investments

99

68

Other assets

612

339

Total assets

$

8,625

$

8,541

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable

$

316

$

340

Employee compensation and benefits

270

304

Deferred revenue

344

324

Short-term debt

504

Other accrued liabilities

188

203

Total current liabilities

1,622

1,171

Long-term debt

1,294

1,799

Retirement and post-retirement benefits

225

239

Other long-term liabilities

737

761

Total liabilities

3,878

3,970

Total Equity:
Stockholders' equity:
Preferred stock; $0.01 par value; 125 million shares authorized; none issued and outstanding
Common stock; $0.01 par value, 2 billion shares authorized; 310 million shares at July 31, 2019 and 318 million shares at October 31, 2018, issued

3

3

Additional paid-in-capital

5,270

5,308

Accumulated deficit

(122

)

(336

)

Accumulated other comprehensive loss

(404

)

(408

)

Total stockholders' equity

4,747

4,567

Non-controlling interest

4

Total equity

4,747

4,571

Total liabilities and equity

$

8,625

$

8,541

The preliminary balance sheet is estimated based on our current information.

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AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
PRELIMINARY

Nine Months Ended

July 31,

July 31,

2019

2018

Cash flows from operating activities:
Net income

$

877

$

121

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization

162

154

Share-based compensation

57

56

Excess and obsolete inventory related charges

12

22

Other non-cash (income) expenses, net

4

(13

)

Changes in assets and liabilities:
Accounts receivable, net

(58

)

(9

)

Inventory

(31

)

(66

)

Accounts payable

(9

)

Employee compensation and benefits

(35

)

(24

)

Change in assets and liabilities due to Tax Act

533

Other assets and liabilities

(281

)

(50

)

Net cash provided by operating activities (a)

707

715

Cash flows from investing activities:
Investments in property, plant and equipment

(125

)

(141

)

Payment to acquire fair value investments

(21

)

(11

)

Payment in exchange for convertible note

(2

)

(2

)

Payment to acquire intangible assets

(1

)

Acquisition of businesses and intangible assets, net of cash acquired

(248

)

(437

)

Net cash used in investing activities

(397

)

(591

)

Cash flows from financing activities:
Issuance of common stock under employee stock plans

52

53

Payment of taxes related to net share settlement of equity awards

(15

)

(29

)

Payment of dividends

(155

)

(144

)

Proceeds from revolving credit facility

483

Repayment of revolving credit facility

(593

)

Repayment of debt

(100

)

Purchase of non-controlling interest

(4

)

Treasury stock repurchases

(674

)

(336

)

Net cash used in financing activities

(796

)

(666

)

Effect of exchange rate movements

3

(5

)

Net decrease in cash, cash equivalents and restricted cash

(483

)

(547

)

Cash, cash equivalents and restricted cash at beginning of period

2,254

2,686

Cash, cash equivalents and restricted cash at end of period

$

1,771

$

2,139

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet:
Cash and cash equivalents

$

1,765

$

2,131

Restricted cash, included in other assets

6

8

Total cash, cash equivalents and restricted cash

$

1,771

$

2,139

(a) Cash payments included in operating activities:
Income tax payments (refunds), net

$

108

$

86

Interest payments

$

61

$

68

The preliminary cash flow is estimated based on our current information.

Page 3
AGILENT TECHNOLOGIES, INC.
NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
Three Months Ended Nine Months Ended
July 31, July 31,

2019

Diluted EPS

2018

Diluted EPS

2019

Diluted EPS

2018

Diluted EPS
GAAP net income

$

191

$

0.60

$

236

$

0.73

$

877

$

2.74

$

121

$

0.37

Non-GAAP adjustments:
Intangible amortization

25

0.08

26

0.08

79

0.25

76

0.23

Business exit and divestiture costs

1

9

0.03

Transformational initiatives

11

0.03

5

0.02

25

0.08

14

0.04

Acquisition and integration costs

12

0.04

7

0.02

32

0.10

14

0.04

Pension settlement gain

(5

)

(0.02

)

Gain on step acquisition of Lasergen

(20

)

(0.06

)

(20

)

(0.06

)

NASD site costs

6

0.02

2

0.01

12

0.04

6

0.02

Special compliance costs

1

1

2

0.01

3

0.01

Other

11

0.03

1

17

0.05

(12

)

(0.03

)

Adjustment for Tax Reform

533

1.63

Tax benefit on intra-entity asset transfer

(299

)

(0.93

)

Adjustment for taxes (a)

(17

)

(0.04

)

(42

)

(0.13

)

(33

)

(0.11

)

(94

)

(0.28

)

Non-GAAP net income

$

240

$

0.76

$

217

$

0.67

$

712

$

2.23

$

645

$

1.98

 

(a) The adjustment for taxes excludes tax benefits that management believes are not directly related to on-going operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. For the three and nine months ended July 31, 2019, management used a non-GAAP effective tax rate of 16.67% and 16.75%, respectively. In the same periods last year, management used a non-GAAP effective tax rate of 18%.


We provide non-GAAP net income and non-GAAP net income per share amounts in order to provide meaningful supplemental information regarding our operational performance and our prospects for the future. These supplemental measures exclude, among other things, charges related to amortization of intangibles, business exit and divestiture costs, transformational initiatives, acquisition and integration costs, pension settlement gain, gain on step acquisition of Lasergen, NASD site costs, special compliance costs, adjustment for Tax Reform, and tax benefit on intra-entity asset transfer.


Business exit and divestiture costs
include costs associated with business divestitures.


Transformational initiatives
include expenses associated with targeted cost reduction activities such as manufacturing transfers including costs to move manufacturing due to new tariffs and tariff remediation actions, small site consolidations, legal entity and other business reorganizations, insourcing or outsourcing of activities. Such costs may include move and relocation costs, one-time termination benefits and other one-time reorganization costs. Included in this category are also expenses associated with company programs to transform our product lifecycle management (PLM) system, human resources and financial systems.


Acquisition and Integration costs
include all incremental expenses incurred to effect a business combination. Such acquisition costs may include advisory, legal, accounting, valuation, and other professional or consulting fees. Such integration costs may include expenses directly related to integration of business and facility operations, the transfer of assets and intellectual property, information technology systems and infrastructure and other employee-related costs.


Pension settlement gain
resulted from transfer of the substitutional portion of our Japanese pension plan to the government.


Gain on step acquisition of Lasergen
resulted from the measurement at fair value of our equity interest held at the date of business combination.


NASD site costs
include all the costs related to the expansion of our manufacturing of nucleic acid active pharmaceutical ingredients incurred prior to the commencement of commercial manufacturing.


Special compliance costs
include costs associated with transforming our processes to implement new regulations such as the EU's General Data Protection Regulation (GDPR), revenue recognition and certain tax reporting requirements.


Other
includes certain legal costs and settlements in addition to other miscellaneous adjustments.


Adjustment for Tax Reform
primarily consists of an estimated provision of $480 million for U.S. transition tax and correlative items on deemed repatriated earnings of non-U.S. subsidiaries and an estimated provision of $53 million associated with the decrease in the U.S. corporate tax rate from 35% to 21% and its impact on our U.S. deferred tax assets and liabilities. The taxes payable associated with the transition tax, net of tax attributes, on deemed repatriation of foreign earnings is approximately $440 million, payable over 8 years.


Tax benefit on intra-entity asset transfer
relates to our operations in Singapore along with our application of the new accounting rules for income tax consequences of intra-entity transfer of assets as adopted on November 1, 2018.


Our management uses non-GAAP measures to evaluate the performance of our core businesses, to estimate future core performance and to compensate employees. Since management finds this measure to be useful, we believe that our investors benefit from seeing our results “through the eyes” of management in addition to seeing our GAAP results. This information facilitates our management’s internal comparisons to our historical operating results as well as to the operating results of our competitors.


Our management recognizes that items such as amortization of intangibles can have a material impact on our cash flows and/or our net income. Our GAAP financial statements including our statement of cash flows portray those effects. Although we believe it is useful for investors to see core performance free of special items, investors should understand that the excluded items are actual expenses that may impact the cash available to us for other uses. To gain a complete picture of all effects on the company’s profit and loss from any and all events, management does (and investors should) rely upon the GAAP income statement. The non-GAAP numbers focus instead upon the core business of the company, which is only a subset, albeit a critical one, of the company’s performance.


Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.


The preliminary non-GAAP net income and diluted EPS reconciliation is estimated based on our current information.

Page 4
AGILENT TECHNOLOGIES, INC.
SEGMENT INFORMATION
(In millions, except where noted)
(Unaudited)
PRELIMINARY
Life Sciences and Applied Markets Group
Q3'19 Q3'18
Revenue

$

544

$

540

Gross Margin, %

60.5%

61.3%

Income from Operations

$

118

$

122

Operating margin, %

21.7%

22.7%

Diagnostics and Genomics Group
Q3'19 Q3'18
Revenue

$

263

$

237

Gross Margin, %

55.7%

56.8%

Income from Operations

$

50

$

43

Operating margin, %

19.1%

18.0%

Agilent CrossLab Group
Q3'19 Q3'18
Revenue

$

467

$

426

Gross Margin, %

52.1%

50.1%

Income from Operations

$

122

$

98

Operating margin, %

26.2%

23.1%

 

Income from operations reflect the results of our reportable segments under Agilent's management reporting system which are not necessarily in conformity with GAAP financial measures. Income from operations of our reporting segments exclude, among other things, charges related to amortization of intangibles, business exit and divestiture costs, transformational initiatives, acquisition and integration costs, gain on step acquisition of Lasergen, NASD site costs, and special compliance costs.


Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.


The preliminary segment information is estimated based on our current information.

Page 5

AGILENT TECHNOLOGIES, INC.

RECONCILIATIONS OF REVENUE BY SEGMENT EXCLUDING

ACQUISITIONS, DIVESTITURES AND THE IMPACT OF CURRENCY ADJUSTMENTS (CORE)

(in millions)

(Unaudited)

PRELIMINARY

Year-over-Year
GAAP
Year-over-Year
GAAP Revenue by Segment Q3'19 Q3'18 % Change
Life Sciences and Applied Markets Group

$ 544

$ 540

1%

Diagnostics and Genomics Group

263

237

11%

Agilent CrossLab Group

467

426

10%

Agilent

$ 1,274

$ 1,203

6%

 

Non-GAAP
(excluding Acquisitions & Divestitures)
Year-over-Year
at Constant Currency (a)
Year-over-Year Year-over-Year Percentage Point
Impact from
Currency
Current Quarter
Currency Impact
(b)
Non GAAP Revenue by Segment Q3'19 Q3'18 % Change % Change
Life Sciences and Applied Markets Group

$ 532

$ 540

(2%)

-2 ppts

$ (7)

Diagnostics and Genomics Group

263

237

11%

13%

-2 ppts

(4)

Agilent CrossLab Group

460

426

8%

11%

-3 ppts

(11)

Agilent (Core)

$ 1,255

$ 1,203

4%

6%

-2 ppts

$ (22)

 

We compare the year-over-year change in revenue excluding the effect of recent acquisitions and divestitures and foreign currency rate fluctuations to assess the performance of our underlying business.


(a)
The constant currency year-over-year growth percentage is calculated by recalculating all periods in the comparison period at the foreign currency exchange rates used for accounting during the last month of the current quarter, and then using those revised values to calculate the year-over-year percentage change.


(b)
The dollar impact from the current quarter currency impact is equal to the total year-over-year dollar change less the constant currency year-over-year change.


The preliminary reconciliation of GAAP revenue adjusted for recent acquisitions and divestitures and impact of currency is estimated based on our current information.

Page 6

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