10-QPeriod: Q2 FY2021

THERMO FISHER SCIENTIFIC INC. Quarterly Report for Q2 Ended Apr 3, 2021

Filed May 7, 2021For Securities:TMO

Summary

Thermo Fisher Scientific Inc. reported a substantial increase in revenue and net income for the first quarter of 2021 compared to the same period in 2020. Total revenues reached $9.91 billion, a 59% increase driven by strong demand across all segments, particularly in Life Sciences Solutions and Specialty Diagnostics, which benefited significantly from COVID-19 related products and services. Operating income more than tripled year-over-year, reaching $3.05 billion, with an improved operating margin of 30.8%. The company also announced a significant acquisition agreement to purchase PPD, Inc. for $17.4 billion plus assumed debt, a strategic move expected to close by the end of 2021 and bolster its clinical research services. Despite investing heavily in growth and acquisitions, Thermo Fisher maintained a strong liquidity position, with cash and cash equivalents of $5.58 billion at the end of the quarter.

Financial Highlights

54 data points
Beta

Revenue

$9.91B

Net Income

$2.34B

23.6% Net Margin

EPS (Diluted)

$5.88

Total Assets

$65.93B

Cash & Equivalents

$5.60B

Free Cash Flow

$1.35B

Financial Statements
Beta
Revenue$9.91B
R&D Expenses$320.00M
SG&A Expenses$1.83B
Operating Expenses$6.86B
Operating Income$3.05B
Interest Expense$125.00M
Net Income$2.34B
EPS (Basic)$5.93
EPS (Diluted)$5.88
Shares Outstanding (Basic)394.00M
Shares Outstanding (Diluted)397.00M

Key Highlights

  • 1Total revenues surged to $9.91 billion, a 59% increase year-over-year, driven by significant demand for COVID-19 related products and services, as well as broader market recovery.
  • 2Operating income more than tripled to $3.05 billion, with operating margins expanding significantly from 14.5% to 30.8%, reflecting strong profitability on higher sales and operational efficiencies.
  • 3The company announced a major pending acquisition of PPD, Inc. for approximately $17.4 billion plus $3.5 billion in net debt, aiming to enhance its clinical research and specialized laboratory services capabilities.
  • 4Cash flow from operations was robust, totaling $1.98 billion for the quarter, a substantial increase from $0.36 billion in the prior year's comparable period.
  • 5Thermo Fisher continued its share repurchase program, buying back $2.00 billion of common stock during the quarter, indicating confidence in its financial position and shareholder returns.
  • 6Inventories increased by $313 million to $4.34 billion, primarily to support sales growth, while cash and cash equivalents decreased to $5.58 billion from $10.33 billion due to significant investments and debt repayments.

Frequently Asked Questions

The substantial revenue increase of 59% to $9.91 billion was primarily driven by strong demand for products and services related to COVID-19 testing and treatment, particularly in the Life Sciences Solutions and Specialty Diagnostics segments. Growth was also bolstered by a general recovery in customer activity across various markets.

The acquisition of PPD, Inc. for approximately $17.4 billion is intended to significantly expand Thermo Fisher's clinical research and specialized laboratory services capabilities. This move aims to accelerate innovation and increase drug development productivity for its customers, aligning with the company's strategy to provide comprehensive solutions across the life sciences and healthcare industries.

Thermo Fisher's financing activities used $4.85 billion in Q1 2021, including a significant $2.80 billion repayment of senior notes. While cash and cash equivalents decreased, the company generated strong operating cash flow and believes its existing cash, future cash flow, and available credit facilities will be sufficient to fund operations and the PPD acquisition. The company intends to finance the PPD purchase price with cash on hand and debt issuance.

Key risks related to the PPD acquisition include the possibility that regulatory approvals may not be obtained or may impose unfavorable conditions. Additionally, there's a risk that integrating PPD's business could be more difficult, costly, or time-consuming than expected, potentially hindering the realization of anticipated benefits and cost savings. Management attention and resources could also be diverted during the integration process.