Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Agilent Technologies Inc (A, Financial) posted better-than-expected revenue and earnings for Q3 2024.
- Earnings per share of $1.32 exceeded the high end of guidance by $0.04.
- The company raised its guidance at the midpoint for both revenue and EPS for the full year.
- Agilent Technologies Inc (A) announced two strategic acquisitions focused on biopharma and digital ecosystem enhancement.
- The Agilent CrossLab Group delivered a record operating margin of 34%, demonstrating the strength of its recurring-revenue business.
Negative Points
- Revenue of $1.578 billion declined by 4.4% year-over-year.
- The Life Sciences and Applied Markets Group reported a 7% decline in revenue.
- The Diagnostics and Genomics Group posted an 8% decline in revenue.
- China revenue declined by 11%, with quarterly revenue improving only sequentially.
- Capital-equipment budgets remained constrained, impacting the instrument side of the business.
Q & A Highlights
Q: Can you provide more color on the performance of the Life Sciences and Applied Markets Group (LSAG), particularly regarding consumables and services?
A: Padraig McDonnell (CEO) and Robert McMahon (CFO) noted that LSAG saw promising growth in consumables and services, indicating stable lab activity. However, the instrument side remains challenged, with deal closure times still elevated. Despite this, the instrument book-to-bill ratio was greater than one, suggesting future stability.
Q: What are the trends in the academic and government sectors, especially given the recent declines?
A: Padraig McDonnell (CEO) explained that the 11% decline was against a tough compare due to previous stimulus in EMEA and strong results in APAC. Funding remains stable in most regions except Europe, where there is a reallocation towards defense.
Q: Can you unpack the performance and outlook for NASD, especially given the recent positive announcements?
A: Padraig McDonnell (CEO) and Simon May (President, Diagnostics and Genomics Group) indicated that NASD performed in line with expectations, with strong bookings activity in Q3. They expect a $20 million step-up from Q3 to Q4 and are cautiously optimistic about a return to growth in 2025.
Q: How are you viewing the China market, especially with the potential for stimulus and recent performance?
A: Robert McMahon (CFO) noted that China saw a sequential improvement in lab activity, particularly in services and consumables. They are optimistic about mid-term stimulus impacts, likely more evident in FY25.
Q: What are the expectations for the margin construct going into FY25?
A: Robert McMahon (CFO) highlighted that they are on track to deliver $100 million in incremental annualized savings by the end of FY24, which will benefit FY25. They expect to drive leveraged earnings next year, with ongoing productivity measures and volume recovery in the instrument business.
Q: Can you provide more details on the BIOVECTRA acquisition and its synergies with NASD?
A: Padraig McDonnell (CEO) and Simon May (President, Diagnostics and Genomics Group) emphasized that BIOVECTRA enhances Agilent's capabilities in oligonucleotides and CRISPR therapeutics. It adds microbial fermentation, ADC capabilities, and sterile fill finish, providing a complete gene-editing solution.
Q: What are the trends in the instrumentation market, and how do you see it recovering in 2025?
A: Padraig McDonnell (CEO) and Robert McMahon (CFO) noted that customer sentiment is more positive, with stable funnels and low cancellations. They expect a slow but steady recovery, with no budget flush assumed for Q4, indicating potential upside in Q1 2025.
Q: How is the Agilent CrossLab Group (ACG) performing, particularly in terms of service contracts?
A: Angelica Riemann (President, CrossLab Group) reported strong double-digit growth in service contracts, which represent nearly 70% of the business. The enterprise service offerings are driving productivity and efficiency improvements for customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
