01—Abstract
Summary
Summary of the 10-Q filed March 10, 2015. Cited figures are marked; the original filing is the authoritative source.
Agilent Technologies, Inc. reported financial results for the first quarter ended January 31, 2015, which were significantly impacted by the separation of its electronic measurement business, Keysight Technologies, Inc., completed on November 1, 2014.
This separation led to Keysight's results being classified as discontinued operations. For the quarter, Agilent saw a modest 2% increase in total net revenue to $1,026 million, compared to $1,008 milliona in the prior year. However, net income from continuing operations decreased to $102 million ($0.30 per diluted share) from $121 million ($0.36 per diluted share) in the prior year.
This decrease was partly due to separation-related expenses and transformational charges. The company also noted an unfavorable impact from foreign currency movements. The company has reorganized into three new reportable segments: Life Sciences and Applied Markets, Diagnostics and Genomics, and Agilent CrossLab.
While Life Sciences and Applied Markets revenue grew 2%b, Diagnostics and Genomics revenue declined 6% due to manufacturing issues. Agilent CrossLab showed a 5% revenue increase. Investors should note the ongoing impact of currency fluctuations and the successful completion of the Keysight separation as key themes for the period.
02—Key points
Key Highlights
- Total net revenue increased 2% to $1,026 million, primarily driven by growth in the Life Sciences and Applied Markets and Agilent CrossLab segments.
- Net income from continuing operations decreased to $102 million from $121 million in the prior year, impacted by separation and restructuring costs.
- The company completed the spin-off of Keysight Technologies, Inc. on November 1, 2014, with Keysight's results now reported as discontinued operations.
- The Diagnostics and Genomics segment experienced a 6% revenue decline due to manufacturing issues, though efforts to resolve these were underway.
- Agilent announced a new organizational structure with three reportable segments: Life Sciences and Applied Markets, Diagnostics and Genomics, and Agilent CrossLab.
- Cash flow from operations turned negative at ($20 million) for the quarter, impacted by separation-related expenses and tax payments.
- The company repurchased $6 million of its stock during the quarter under its share repurchase program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2015, Agilent Technologies, Inc. kept $0.06.
- Revenue$1.03B100.0%
- Cost of revenue−$513.0M50.0%
- Gross profit$513.0M50.0%
- Operating costs−$398.0M38.8%
- Operating income$115.0M11.2%
- Interest, other & tax−$52.0M5.1%
- Net income$63.0M6.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2015filed March 10, 2015Financial Statements
Q1 FY2015 against Q1 FY2014
| Line item | Q1 FY2015Q1 FY2014 | Change |
|---|---|---|
| Revenue | $1.03B$1.01B | +1.8% |
| Cost of Revenue | $513.00M$498.00M | +3.0% |
| Gross Profit | $513.00M$510.00M | +0.6% |
| R&D Expenses | $88.00M$88.00M | 0.0% |
| SG&A Expenses | $310.00M$298.00M | +4.0% |
| Operating Expenses | $911.00M$884.00M | +3.1% |
| Operating Income | $115.00M$124.00M | −7.3% |
| Interest Expense | $16.00M$29.00M | −44.8% |
| Net Income | $63.00M$195.00M | −67.7% |
| EPS (Basic) | $0.19$0.59 | −67.8% |
| EPS (Diluted) | $0.19$0.58 | −67.2% |
| Shares Outstanding (Basic) | 336.00M333.00M | +0.9% |
| Shares Outstanding (Diluted) | 338.00M338.00M | 0.0% |
05—Questions
Frequently Asked Questions
What is the impact of the Keysight separation on Agilent's financial results?
The separation of Keysight Technologies, Inc. on November 1, 2014, resulted in Keysight's historical financial results being classified as discontinued operations. This significantly impacted Agilent's balance sheet and cash flow statements, particularly in the current period, due to separation costs and the transfer of assets and liabilities. While revenue from continuing operations saw a modest increase, the net income from continuing operations decreased year-over-year.
How did the company's different business segments perform in this quarter?
Agilent reorganized into three new segments. The Life Sciences and Applied Markets segment saw a 2% revenue increase, driven by growth in most end-markets. The Diagnostics and Genomics segment experienced a 6% revenue decrease, attributed to manufacturing issues, though these were being addressed. The Agilent CrossLab segment, focused on consumables and services, grew revenue by 5%, led by strong performance in pharmaceutical, biotechnology, and food markets.
What is the outlook for Agilent, considering the currency headwinds?
Agilent expects the strong U.S. dollar to continue to negatively impact its performance in the near future. However, the company remains confident that its focus on providing value-driven solutions and its strategic positioning within target market segments will help mitigate these currency headwinds. The company plans to focus on organic growth through innovative product offerings and expanding its services and consumables portfolio.
How did the company manage its cash flow during the quarter?
The company experienced a net cash outflow of $20 million from operating activities during the quarter, a significant change from the $194 million provided in the prior year. This was primarily due to separation-related expenses, transformational and restructuring expenses, and additional income tax payments related to the separation of Keysight. Investing activities used $31 million, while financing activities showed a substantial outflow of $828 million, largely due to cash transferred to Keysight during the separation.
06—Continue