The operator welcomes participants to the Agilent Technologies Q1 2024 Earnings Call and introduces the host, Parmeet Ahuja. Other executives joining the call are also introduced. The presentation is being webcast live and all relevant information can be found on the company's website. Non-GAAP financial measures will be referenced and guidance is based on forecasted exchange rates. Historical segment information has been recast due to changes in the company's reporting structure. These changes have no impact on the company's consolidated financial statements.

The speaker, Mike McMullen, is retiring from his role as CEO of Agilent and will be replaced by Padraig McDonnell on May 1. McDonnell has a strong track record and is well-equipped to lead the company. McMullen has confidence in McDonnell's abilities and looks forward to seeing him in action.

In the third paragraph, the new CEO expresses his gratitude for the support of the previous CEO and introduces a new member of the team. The current CEO then takes the lead in discussing the company's financial results for the first quarter, which exceeded expectations despite a challenging market environment. The company maintains its outlook for the full year and attributes its success to stabilization in China and growth in applied markets globally.

In the fourth paragraph of the article, the company's total pharma business is down 12%, but this was expected due to a strong first quarter last year. The applied end markets showed resilience and saw sequential growth from the previous quarter. The company's diversified portfolio and broad end market coverage helped drive performance, with consumables growing mid-single digits and China performing better than expected. The company also completed the expansion of its Shanghai manufacturing facility and made its first customer shipments for its newly released LC/MS offerings. The Agilent CrossLab Group saw a 5% increase in revenue, with growth in all regions except China.

The contracts business at Agilent saw double-digit growth, driven by strong enterprise service contracts. This reflects the company's resilient business strategy and improving connect rates for services and consumables. The Diagnostics and Genomics Group had a 6% decline in revenue, with growth in pathology and NGS QC offset by declines in NGS chemistries and NASD. However, the company remains optimistic about long-term prospects in this area. Agilent also received recognition for its innovative operations at its Waldbronn site and was ranked as one of the top 5 most sustainable companies by Barron's.

Agilent Technologies has been included in the Dow Jones Sustainability Index for the ninth consecutive year and is expecting a slow improvement in the market in the second half of the year. They will continue prioritizing growth and investing in productivity. In the first quarter, their revenue declined by 6.4%, with the pharma market experiencing a 12% decline. However, there was growth in biopharma and advanced materials. The chemical market saw a decline due to a tough comparison from last year.

In the first quarter, the academia and government market saw a 2% increase, while the diagnostics and clinical market declined by 5%. The environmental and forensics market also declined, but new regulations are driving growth in PFAS testing. China and Europe exceeded expectations, while the Americas were in line with expectations. China saw a sequential increase and benefited from a pull-forward of demand from Q2. Europe was down 4% but saw mid-single digit growth sequentially. In the Americas, revenue was down 8% due to declines in pharma and softness in NASD and NGS chemistries. Gross margin was down slightly, while operating margin was also down due to lower demand and mix, despite ongoing cost savings initiatives.

In the first quarter, the company saw higher interest income and strong cash flow, resulting in earnings per share of $1.29. They also invested in expanding their NASD and returned $69 million to shareholders through dividends. They expect to catch up on share repurchasing in the remainder of the year. The company is confident in their full year guidance and expects a decline in revenue for the second quarter due to currency and M&A headwinds. The CFO expresses gratitude to the CEO and congratulates the new CEO.

Mike McMullen, the CEO of Agilent, is stepping down after 37 years and is grateful for the support and engagement from investors. He reflects on the company's transformation into a leading life science and diagnostics company and the accomplishments of the One Agilent team. Despite current market challenges, he is confident in the company's ability to continue delivering strong results. He is pleased to introduce Padraig, who will be taking over as CEO and is highly qualified for the role. Mike expresses his belief that the best is yet to come for Agilent and hands over to Parmeet for the Q&A session.

During a Q&A session, Derik De Bruin from Bank of America asks Mike McMullen and Bob McMahon about the growth trajectory of the NASD business. McMullen and McMahon confirm that Q1 met expectations and that the volume is currently more focused on clinical rather than commercial programs. They remain optimistic about the future of NASD and the forecast for Train C and D, but there may be some potential pushouts into FY '25 due to clinical trial delays.

Agilent is revisiting their clinical trial programs and timelines due to the IRAC. They are keeping their guide the same for now but are excited about their future clinical programs. The decline in pharma revenue is not due to overcapacity, but rather how customers are reacting to the IRAC. There is no clear inflection point yet, but budgets are expected to be released in the second quarter. Customers are still cautious, but there is some stability and fewer are expecting negative budgets. Agilent is closely monitoring the situation.

The speaker discusses their company's performance in China and how it has improved in recent quarters. They note that while the overall economic market in China remains challenging, their business has shown real growth and orders. This gives them confidence in their outlook for the year.

The numbers for the company are slightly better than expected, and they have confidence in the outlook due to ongoing business. The ACG segment had a good quarter, with contract revenue and enterprise services driving growth. Roughly 65% of the total services business is in contracts, and the new ACG Group President credits demand for lab-wide enterprise services as a factor for growth.

The company's portfolio offerings in the lab operations stage have been successful in improving lab efficiency and productivity. This is particularly important for enterprise customers, especially during tough economic times. The attach rate for this business is also increasing, providing stability and potential for growth. In the chemical and advanced materials business, there are some macroeconomic headwinds, but the company is seeing secular growth drivers in applied markets, such as investments in advanced materials for the semiconductor supply chain. There is also growth in battery development and environmental business related to PFAS.

The company's first quarter results were positive, with strong growth in the advanced materials market and a slight decline in the chemical and energy sector. The company's portfolio is strong and they have the ability to cross-sell and upsell. The company is maintaining their organic growth range for the year, despite a slightly lower forecast for the NASD. The chemical and advanced materials markets, as well as academia, are performing better than expected. Overall, the company is pleased with their start to the year.

During a conference call, Puneet Souda from Leerink Partners asked a question about book-to-bill orders and revenue growth in the instrumentation side of the company, specifically in China. Bob McMahon, the speaker, explained that there is typically seasonality in the second quarter and they are expecting a slight decrease in revenue due to the Lunar New Year. He also mentioned that book-to-bill in China was above 1 and below 1 for instruments, which is in line with their normal patterns. Mike McMullen added that they are seeing a normalization of business flow in terms of seasonality and book-to-revenue situations. Puneet also asked about growth in the pharma sector.

The company's biopharma business has been the strongest, particularly in large molecule products. The ACG business and consumables have performed well, indicating activity in the labs. The emerging biotech market is stabilizing, but instrument sales are still down. However, outside of China, the biopharma business grew in the quarter. The book-to-bill for instrumentation was below 1, mainly due to timing. There are no new trends to report in terms of product line or geography. Challenges have been seen in the small molecule side, specifically in liquid chromatography.

The speaker, Mike, asks Phil if he has any thoughts on new trends, but Phil agrees that there are no significant changes. Robert adds that the LSAG business was down 11%, mainly due to the pharma market, but other markets were performing better. Mike mentions that this reflects pressure on the LC business. Rachel asks about monthly trends and if there has been slower spending, but Mike explains that January is typically slow and there are no major changes. Padraig agrees.

The speaker agrees with Mike that the ACG side of the business is doing well, but the capital side is not. They haven't seen any signs of stimulus in China, but if it happens, it will be positive for Agilent. Pricing has trended as expected in the quarter. The EPS guide has an additional $20 million for net interest and other income.

Robert McMahon, responding to a question from Patrick Donnelly, states that the core earnings number has moved lower, but the company is still on track to have more interest income than expected. The cost savings plan is also on track for the full year. The book-to-bill trend for instruments is still expected to be above 1 for the year, with Q1 being a proof point. Dan Brennan asks for clarification on the instrument number for the quarter and how the comps will change as the year progresses.

The company's LSAG was down 11% in the second quarter, but this included a 6% growth in the consumables business. The LSAG is expected to be down low teens in the second quarter due to a $15 million shift in capital equipment from Q2 to Q1. The company expects more favorable compares in Q3 and Q4. In China, the company is cautiously optimistic and expects a mid-single digit decline for the year, with pharma being the main area of decline. Other markets performed better.

The company's chem and advanced material business grew slightly in the quarter, while the forensics and environmental segment saw a small decline. The company expects continued stabilization in the Chinese market, but is not yet ready to call it an inflection point. Consumables and services continue to outperform expectations in China. Pharma was down 12% in the quarter, with biopharma up 2% and small molecule down 20% ex China. The company expects better comps for small molecule in China in the future. Consumables returned to growth in the quarter.

The consumables business has been consistent globally, which shows that lab activity is robust. There has been good traction around workflow development, which drives the services business. The consumables business has also seen strong positive trends in connect rates, which bodes well for future recurring revenue growth. In the genomics business within DGG, there have been two different experiences.

The company is seeing growth in its NGS QC activities and consumables, but the genomics chemistry side was down due to difficult comparisons. The academic end market showed stability and even grew 2% in the quarter, thanks to the company's efforts to build out its portfolio. The funding situation for universities is stable, with private sector funding becoming increasingly important. The company also saw money in China.

The speaker discusses the company's positive performance and global outlook for the rest of the year. They address a question about guidance and explain that while first half sales may be lower than last year, the second half is expected to see growth due to easier comparisons. The speaker also mentions looking at a 2-year stack basis for a better understanding of the company's performance.

The speaker discusses the company's financial outlook and how it has changed since the initial outlook. The Q2 guide remains relatively unchanged, but there has been a slight decrease in core outlook due to changes in the China business. The Q3 and Q4 outlooks have also been updated.

The speaker explains that Q1 had a beat, but they are taking some of that out of the second half of the year. Q2 is as expected, except for a timing shift in China. The rest of Q1's beat will help in the second half of the year. The speaker is asked about visibility in the business and the ability to predict near-term sales. The speaker responds that there has been no improvement or decline in the business, and that the normal cadence of business is continuing. They have yet to see the second half materialize in terms of the order book, which is typical for this time of year. The speaker also mentions that deal closure times remain elevated but stable, and deal win rates have been consistent. There has been no increase in cancellations and the funnel continues to grow, led by the aftermarket business. The speaker clarifies that the closure times are longer than they have been in the past, but there is no elongation. The questioner asks if there will be sequential growth in Q2 in China similar to Q1.

In this paragraph, Robert McMahon and Dan Leonard discuss the timing of Mike McMullen's retirement. McMullen explains that he has been contemplating this decision for a while and wanted to give the Board enough time to choose a successor, which they did in selecting Padraig. McMullen expresses his love for working with Agilent but ultimately decided to retire due to family commitments. Dan Leonard congratulates McMullen on his retirement and mentions that he always seemed to have fun in his role. The next question comes from Luke Sergott from Barclays.

Luke Sergott asks about the margins on the quarter, specifically the decline in DGG and LSAG. CEO Robert McMahon explains that the decline is due to volume decreases and mix changes, but expects improvement throughout the year as cost actions take full effect and volumes increase. The Q2 guide shows a decline in most end markets, with some of the shift in China business from Q2 to Q1 impacting results. The final question from Paul Knight asks about the market growth rate for Agilent's markets, to which McMahon does not provide a specific answer.

Mike McMullen, CEO of a company, was asked about his perspective on the future growth of the market. He mentioned that the market is expected to grow at a rate of 4-6%, with certain segments growing faster. He also mentioned that there may be some changes in geographic growth, with China and Europe potentially seeing more growth. He also mentioned that Japan may see a rejuvenation in the semi industry. He concluded by saying that the diversified nature of both end markets and geographies is a strength of the business. The moderator then thanked McMullen and closed the call.

The operator is ending the call and thanking everyone for participating.

This summary was generated with AI and may contain some inaccuracies.