The Agilent Technologies Q3 2024 Earnings Call is about to begin, with Parmeet Ahuja as the host. The call will feature Agilent's President and CEO, CFO, and other group presidents. The presentation is being webcast live and can be found on the company's website. Non-GAAP financial measures will be discussed, and guidance is based on forecasted exchange rates. Historical segment information has been recast due to changes in the company's reporting structure. Forward-looking statements about the company's financial performance will also be made during the call.

Agilent had a successful third quarter with better-than-expected revenue and earnings. They remain committed to their goal of delivering $100 million in annualized savings by the end of the fiscal year. They have also made investments in their digital ecosystem and are focused on strategic transformation initiatives to drive growth and increase execution capabilities. Additionally, they have announced two acquisitions that demonstrate their focus on biopharma and their digital ecosystem. The company is aware of the fast pace of change in their markets and is working to accelerate their pace of innovation and execution to capitalize on opportunities.

Agilent is focused on key growth areas such as biopharma, PFAS, and Advanced Materials. The company is actively seeking input from employees, customers, and shareholders to continue building on their strengths and moving forward. They are adapting their strategy to market trends and accelerating innovation in areas that will bring long-term growth. The company's Q3 results were better than expected, with all end markets except academia and government performing well. While pharma declined, there was strong performance in small molecule and in providing workflow solutions for PFAS. Europe exceeded expectations, and the other regions performed as expected. The Life Sciences and Applied Markets Group reported a 7% decrease in revenue, but their instrument book-to-bill ratio remained above one.

The group saw a decline in all regions and most end-markets, but Environmental & Forensics had low single-digit growth. Consumables had mid-single digit growth and the LSAG team introduced a new GC that is more sustainable. The Agilent CrossLab Group had mid-single digit revenue growth, with strong growth in service contracts. The Diagnostics and Genomics Group had an 8% decline, with growth in Pathology offset by declines in other areas. Despite the constrained capital equipment environment, Agilent continues to focus on customer relationships and investing in high-growth opportunities.

Agilent has made two important acquisitions in the biopharma industry, including BIOVECTRA and Sigsense. These acquisitions will help expand Agilent's capabilities and portfolio of services. Additionally, Agilent has released their annual ESG report, showcasing their commitment to sustainability and their efforts to help customers reach their sustainability goals. They have also been recognized as one of Time Magazine's top 20 most sustainable companies in the world.

In this paragraph, Bob McMahon discusses the company's results for the quarter and provides details on revenue, income statement, and other financial metrics. He also gives an update on the company's full-year and fourth quarter guidance. Revenue declined but showed a sequential improvement, with the exception of China. The largest end market, pharma, declined while services and pharma performed well. Chemical & Advanced Materials declined due to softness in China, but the Advanced Materials sub-segment saw growth. Academia and government declined, while diagnostics and clinical end-market and Environmental & Forensics showed growth.

In the third quarter, the company's food market declined 3% compared to last year, but showed sequential growth led by Asia, excluding China. Europe performed flat, while the Americas and Asia, excluding China, saw declines. China's revenue also declined but showed improvement sequentially due to increased lab activity. The gross margin and operating margin were slightly down compared to last year but improved sequentially. The company continues to make progress in cost-saving initiatives and managing costs while investing for growth. Net interest income and tax rate were in line with expectations, and the company had $291 million diluted shares outstanding. Earnings per share were $1.32, ahead of expectations but down from last year due to a difficult comparison. Operating cash flow was $452 million, and the company invested $92 million in capital expenditures. Share repurchases were ramped up in the quarter, with $585 million in shares purchased and $68 million paid out in dividends, totaling $653 million returned to shareholders. Overall, the company has a strong balance sheet and healthy cash flows.

The company has completed $500 million of their $750 million share repurchase plan and expects to finish the remaining $250 million in the fourth quarter. Despite the upcoming acquisition, the company's balance sheet and leverage ratios remain strong. Due to their strong performance in the third quarter, they are increasing their revenue and earnings per share guidance for the year. They expect a decline in revenue and earnings, but the impact of currency and M&A is only 60 basis points. The company's full-year guidance for the fourth quarter includes a decline in revenue, but a return to growth in non-GAAP earnings per share. The company expects a 13% tax rate and $287 million diluted shares outstanding for the quarter.

Padraig McDonnell, CEO of Agilent, discusses the company's current success and future plans. He mentions their strong team and customer focus, as well as their strategy for growth through both organic and inorganic means. He also notes their leadership in key platforms and potential for long-term growth. McDonnell is excited about the company's evolution and looks forward to sharing their progress. During the Q&A, a question is asked about the LSAG segment, which had a solid beat driven by consumables and services. McDonnell provides more information on instrument sales and how this may impact the replacement cycle in the future.

The speaker, Bob, responds to a question about the growth in Consumables & Services and the challenges in the instrument side. He notes that the company has seen promising growth and stable lab activity, but deal closure times are still elevated. He also mentions that the Consumables business was up and the Instruments business was down, but better than expected. He addresses the volatility in the Academic & Government market, attributing it to Europe and China, and mentions that there may be some persistent trends in funding and demand in that market.

Padraig McDonnell and Simon discussed the decline in NASD during the last quarter, which was largely due to tough comparisons and a reallocation of funding in Europe towards defense. They also mentioned that funding remains stable in most regions and that they are expecting a step-up in NASD in the fourth quarter. The company has seen a 50% growth in their clinical business this year, and they are optimistic about the long-term prospects of the market. However, they noted that there may be fluctuations between quarters in this business.

In the paragraph, Simon May and Bob McMahon discuss the performance of NASD in Q3 and their expectations for Q4 and 2025. They mention a natural lag between order booking and revenue recognition, and note that Q3 was in line with expectations. They also mention the impact of the IRA and the recent development of Helios, but state that it is too early to determine its impact. They add that they are on track for their full-year estimate for NASD and that their Q4 guidance includes a $20 million step-up. They clarify that they are not assuming a budget flush for their fiscal year end, and that investors should look at the 4Q number on an organic growth basis of down 2% to up 1%.

The speaker asks about the company's expectations for 2025, noting that consensus is just shy of 5% organic growth. The company's representative, Bob, says it is too early to give specific numbers for 2025, but they expect continued steady improvement and growth next year. They are optimistic about the recovery in their markets and mention that China's revenue was down 11% but has improved sequentially, with lab activity looking better. There may be a pause on the capital side in China as they wait for stimulus clarity.

The speaker is asked about their outlook on China for both their fiscal year and the calendar year. They mention seeing an air pocket in Q2 but are optimistic about the mid-term due to potential stimulus. They also note an increase in activity in their services and consumables business in China. The speaker is then asked about the margin construct for next year and mentions the progress of their cost out program and the positive impact it had on margins in Q3. They are unable to provide specific details on the margin algorithm for next year but mention that volume will be a factor.

Bob McMahon and Patrick Donnelly of the company are committed to driving efficiencies and delivering $100 million in annualized savings by the end of 2024. They expect to see a tailwind in 2025, offset by variable pay resets. The company has seen a scale benefit in their ACG business and expects volume to increase in their instrument business, setting them up nicely for next year. They will share more details on this at their Analyst Day in December. Jack Meehan asks about instrument trends and Padraig McDonnell responds that customers are cautious but remain engaged with their sales teams about future projects.

The company is seeing stability and low cancellations in its markets, with a slow but steady improvement in lab activity. Instruments were down low-double digits, with LC and LCMS in the mid-teens and spectroscopy better. In CAM, there was a 5% decline due to overproduction in China, but service and consumables increased by 7%. There was a 14% decrease in instruments, likely due to challenging CapEx spending.

The company's guidance has changed over the past three months, with NASD, China, and biopharma being the main categories affected. The company expects all of these areas to improve next year, with a sequential increase in Q4. This increase is in line with historical trends and does not include a potential budget flush. The company will see the effects of a budget flush in their Q1 numbers.

The company is pleased with the acquisition of BIOVECTRA, which will enhance their offerings and deepen their relationships with pharma customers. There are many synergies between BIOVECTRA and the main business, such as gene editing, sterile fill finish, and microbial fermentation. BIOVECTRA has a slightly higher clinical mix than the main business.

The company's recent acquisition of BIOVECTRA is expected to help with capacity and growth in the next few years. In regards to China, the first quarter saw a pull-forward dynamic of $15 million, resulting in flat or slightly decreased revenue in the second quarter. However, the company expects a slight improvement in the fourth quarter and a return to growth in 2025, though it is too early to predict for next year. The stimulus in China will likely have a gradual impact on the company's revenue over the next few years.

Puneet Souda asks about the growth of instrumentation and Padraig McDonnell and Bob McMahon explain that it has been slow but steady, with positive customer sentiment and activity in testing labs. They also mention that they are not factoring in any budget flush in their Q4 estimates. Souda also asks about the recent drug pricing negotiations with Medicare, which is expected to have an impact on IRA and will continue to do so with 15 drugs being negotiated annually over the next three years.

In the paragraph, Padraig McDonnell discusses the cautious approach of large pharma customers in terms of R&D spend and consolidation. Puneet Souda asks for more information, and McDonnell explains that while the number of R&D programs is increasing in certain areas, the overall spend is normalizing. The next question, from Michael Ryskin, focuses on the difference in performance between small molecule and large molecule businesses, with Bob McMahon explaining that small molecule did better than expected and even grew in Europe.

During a recent conference call, the company discussed the need for instrument replacements and the impact on their business. They noted that while their IRA and pricing were not as bad as expected, their strength lies in development and production. The biopharma business was down due to their NASD business, but without it, they saw mid-single digit growth. Services in both biopharma and small molecules saw growth, and the company plans to focus on their new acquisition, BIOVECTRA, in the CDMO market.

The speaker is discussing the company's acquisition of BIOVECTRA and their plans for future growth in the CDMO business. They see a lot of potential for growth and are excited about the opportunities it presents. They also mention their existing position in the RNA modality and the potential for future expansion in complementary capabilities and modalities. They also mention the company's performance in China, which was down 11% but still better than expected.

During a recent investor call, Bob McMahon, a representative for a company, was asked about the company's performance in the third quarter. He stated that the company's guidance for China remains the same, with a low-double-digit decrease. However, the company saw a sequential improvement in their pharma sector, with services and consumables performing better than expected. When asked about the company's NSD business, McMahon did not give a specific number but stated that it performed in line or slightly better than expected. The company had previously projected a decrease in NSD for the quarter, but it ended up performing better than expected.

In the fourth quarter, the company expects to see growth in all segments, with LSAG expected to be up slightly, consumables performing well, and instruments down slightly. DGD is expected to be down mid-single digits and ACG up mid-single digits to high-end. Small Molecule performance improved, with Europe seeing growth, but the specific performance excluding China was not mentioned.

Padraig McDonnell and Bob McMahon discuss the performance of their company, which saw good growth in Europe, but stable growth in other markets. They also talk about the lack of budget flushing impact on pharma instrumentation, which they attribute to their close relationships with customers. They expect a similar trend in the upcoming quarter and are not anticipating any significant budget flushes. They also mention that they are having planning conversations with pharma accounts for 2025 and are not expecting a return to normal growth next year, but rather a gradual recovery over the next few years.

The company has a strong understanding of their sales funnel and installed base, and they are not expecting any major changes by the end of the year. However, they are seeing more discussions about a slow and steady recovery for next year. It is too early to predict when things will fully return to normal, but they expect a gradual recovery throughout the next fiscal year. The ACG division has performed well, with a diverse range of products and strong margins, despite challenges with capital expenditures. The company is pleased with the business's performance and Angelica will provide more information on the contracted business.

The final question of the call came from Doug Schenkel with Wolfe Research. He had three questions that he wanted to quickly ask. The first was regarding the math of recurring revenue growth and how it seemed like instruments must have been down around 20% in the quarter. Bob had mentioned earlier that it was down low-double digits, so there seemed to be a discrepancy. The second question was about the China stimulus and if there were any changes in dynamics regarding conversions or cancellations. There were rumors that there had been some recent changes in the shape of the stimulus.

The speaker is addressing three questions about the company's performance in 2025. The first question is about potential growth in Q4 2024, and the second is about the company's growth trajectory in 2025. The speaker mentions a possible need for improved market conditions or Chinese stimulus to achieve mid-single digit growth in 2025. The third question is about the company's performance in China, and the speaker notes that there has been an increase in activity and potential for stimulus, but it is still too early to make any definitive statements.

The speaker, Parmeet Ahuja, thanks everyone for joining the call and says they will not discuss their plans for FY 2025, but expect improvement throughout the year. The operator then thanks everyone for joining and ends the call.

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