01—Abstract
Summary
Summary of the 10-Q filed March 5, 2019. Cited figures are marked; the original filing is the authoritative source.
Agilent Technologies, Inc. reported a significant turnaround in its financial performance for the three months ended January 31, 2019, compared to the same period in the prior year.
The company swung from a net loss of $320 milliona to a net income of $504 million. This substantial improvement was primarily driven by a discrete tax benefit of $299 million related to a restructuring and extension of its tax incentive in Singapore, alongside the impact of the U.S. Tax Cuts and Jobs Act in the prior year, which resulted in a large tax charge. Operationally, Agilent saw a 6% increase in total net revenue, reaching $1,284 million, supported by growth across its key segments: Life Sciences and Applied Markets (up 2%), Diagnostics and Genomics (up 13%), and Agilent CrossLab (up 8%).
The company also continued its focus on capital allocation, repurchasing $75 millionb in common stock and paying $52 million in dividends during the quarter. Management expressed optimism for future growth, anticipating contributions from recent acquisitions to offset potential negative impacts from foreign currency movements.
02—Key points
Key Highlights
- Reported a substantial swing from a net loss of $320 million in Q1 FY18 to a net income of $504 million in Q1 FY19.
- Total net revenue increased by 6% year-over-year to $1,284 million.
- Diagnostics and Genomics segment showed strong growth, with revenue up 13% year-over-year.
- Acquired ACEA Biosciences for approximately $250 million in cash in November 2018, integrating its results from the acquisition date.
- Returned $75 million to shareholders through share repurchases and paid $52 million in dividends during the quarter.
- Implemented a significant operational restructuring in Singapore, resulting in a $299 million tax benefit.
- Operating margin improved by 1 percentage point year-over-year to 19.5%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2019, Agilent Technologies, Inc. kept $0.39.
- Revenue$1.28B100.0%
- Cost of revenue−$577.0M44.9%
- Gross profit$707.0M55.1%
- Operating costs−$457.0M35.6%
- Operating income$250.0M19.5%
- Interest, other & tax$254.0M19.8%
- Net income$504.0M39.3%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed March 5, 2019Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $1.28B$1.21B | +6.0% |
| Cost of Revenue | $577.00M$541.00M | +6.7% |
| Gross Profit | $707.00M$670.00M | +5.5% |
| R&D Expenses | $102.00M$94.00M | +8.5% |
| SG&A Expenses | $355.00M$347.00M | +2.3% |
| Operating Expenses | $1.03B$982.00M | +5.3% |
| Operating Income | $250.00M$229.00M | +9.2% |
| Interest Expense | $18.00M$20.00M | −10.0% |
| Net Income | $504.00M-$320.00M | +257.5% |
| EPS (Basic) | $1.58$-0.99 | +259.6% |
| EPS (Diluted) | $1.57$-0.99 | +258.6% |
| Shares Outstanding (Basic) | 318.00M323.00M | −1.5% |
| Shares Outstanding (Diluted) | 322.00M323.00M | −0.3% |
05—Questions
Frequently Asked Questions
What is the primary driver for the significant increase in net income year-over-year?
The primary driver for the substantial increase in net income from a loss of $320 million to a gain of $504 million was a discrete tax benefit of $299 million recognized in the first quarter of fiscal year 2019. This benefit resulted from a restructuring and extension of the company's tax incentive in Singapore, combined with the application of new accounting rules related to intra-entity asset transfers. In contrast, the prior year's period was negatively impacted by a large tax charge related to the U.S. Tax Cuts and Jobs Act.
How did Agilent's different business segments perform in terms of revenue?
Agilent experienced revenue growth across all its segments. The Life Sciences and Applied Markets segment grew by 2%, the Diagnostics and Genomics segment showed robust growth of 13%, and the Agilent CrossLab segment increased by 8%. Overall, total net revenue grew by 6% year-over-year.
What is the company's outlook regarding foreign currency impacts and acquisitions?
Agilent anticipates that foreign currency movements will continue to negatively impact revenue for the remainder of fiscal year 2019. However, the company expects that the contributions from recent acquisitions, such as ACEA Biosciences, will help to partially offset these negative currency impacts.
What significant accounting changes were adopted by the company?
The company adopted ASC Topic 606, Revenue from Contracts with Customers, on November 1, 2018, using a modified retrospective approach. This adoption resulted in a net increase to beginning retained earnings of $23 million. Additionally, the company adopted new guidance for reporting comprehensive income, which led to a reclassification of $7 million from Accumulated Other Comprehensive Income to Retained Earnings. They also adopted new guidance for accounting for leases, effective November 1, 2019.
06—Continue