01—Abstract
Summary
Summary of the 10-Q filed March 3, 2020. Cited figures are marked; the original filing is the authoritative source.
Agilent Technologies, Inc. reported total net revenue of $1,357 milliona for the three months ended January 31, 2020, a 6% increase year-over-year.
This growth was driven by increases across all three business segments: Life Sciences and Applied Markets, Diagnostics and Genomics, and Agilent CrossLab. Despite the revenue growth, net income saw a significant decrease to $197 millionb from $504 million in the prior year period, largely due to a substantial tax benefit recognized in the prior year.
The company experienced a net cash outflow from operating activities of $59 millionc, primarily impacted by a one-time tax payment of $226 million related to an intellectual property transfer, a notable shift from the $213 million cash inflow in the prior year. Agilent continues to return capital to shareholders through dividends and share repurchases.
02—Key points
Key Highlights
- Total net revenue increased by 6% to $1,357 million, with growth observed across all three business segments.
- Net income significantly decreased to $197 million from $504 million in the prior year, primarily due to a large discrete tax benefit recorded in Q1 2019 ($299 million related to Singapore tax incentive).
- Operating margin decreased by 4 percentage points to 15.9% due to increased expenses in R&D, SG&A (including acquisition/integration costs and legal costs), and a lower gross margin.
- Net cash used in operating activities was $59 million, a reversal from $213 million generated in the prior year, heavily influenced by a one-time $226 million tax payment for IP transfer.
- The company continues its capital return program, paying $56 million in dividends and repurchasing $60 million of its stock during the quarter.
- A settlement with Twist Bioscience Corporation for $22.5 million regarding intellectual property claims was reached in February 2020, resolving all litigation.
- The company notes that the public health crisis in China impacted revenue in January 2020 and expects it to reduce business results in the first half of fiscal year 2020, though remains optimistic about long-term growth.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, Agilent Technologies, Inc. kept $0.15.
- Revenue$1.36B100.0%
- Cost of revenue−$634.0M46.7%
- Gross profit$723.0M53.3%
- Operating costs−$508.0M37.4%
- Operating income$215.0M15.8%
- Interest, other & tax−$18.0M1.3%
- Net income$197.0M14.5%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed March 3, 2020Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $1.36B$1.28B | +5.7% |
| Cost of Revenue | $634.00M$577.00M | +9.9% |
| Gross Profit | $723.00M$707.00M | +2.3% |
| R&D Expenses | $104.00M$102.00M | +2.0% |
| SG&A Expenses | $404.00M$355.00M | +13.8% |
| Operating Expenses | $1.14B$1.03B | +10.4% |
| Operating Income | $215.00M$250.00M | −14.0% |
| Interest Expense | $20.00M$18.00M | +11.1% |
| Net Income | $197.00M$504.00M | −60.9% |
| EPS (Basic) | $0.64$1.58 | −59.5% |
| EPS (Diluted) | $0.63$1.57 | −59.9% |
| Shares Outstanding (Basic) | 310.00M318.00M | −2.5% |
| Shares Outstanding (Diluted) | 313.00M322.00M | −2.8% |
05—Questions
Frequently Asked Questions
What drove the significant decrease in net income despite revenue growth?
The substantial decrease in net income from $504 million to $197 million was primarily due to a significant one-time tax benefit of $299 million recognized in the prior year's quarter (ended January 31, 2019) related to the extension of a tax incentive in Singapore. Without this prior-year benefit, the company's net income performance would appear more stable.
Why was there a cash outflow from operating activities in this quarter, a reversal from the prior year?
The company experienced a net cash outflow of $59 million from operating activities compared to a $213 million inflow in the prior year. This reversal was significantly influenced by a one-time tax payment of $226 million related to the transfer of intellectual property during the current quarter. Additionally, deferred tax cash flows also shifted from an inflow in the prior year to a smaller outflow in the current period.
How did acquisitions impact the financial results for the quarter?
Acquisitions made in fiscal year 2019 contributed positively to revenue growth, adding approximately 8 percentage points to the Life Sciences and Applied Markets business revenue growth. However, these acquisitions also contributed to increased Selling, General, and Administrative (SG&A) expenses, including acquisition and integration costs, and Research and Development (R&D) expenses due to additional associated costs.
What is the company's outlook given the emerging public health crisis?
Agilent acknowledged that the public health crisis that started in China negatively impacted revenue in January 2020 and expects it to reduce business results in the first half of fiscal year 2020. Despite this short-term uncertainty, the company remains optimistic about its long-term growth opportunities and continues to focus on a balanced capital allocation strategy.
06—Continue