10-QPeriod: Q2 FY2024

THERMO FISHER SCIENTIFIC INC. Quarterly Report for Q2 Ended Jun 29, 2024

Filed August 2, 2024For Securities:TMO

Summary

Thermo Fisher Scientific Inc. (TMO) reported its second-quarter and first-half 2024 results, demonstrating resilience amidst a moderating macroeconomic environment. Total revenues saw a slight decline year-over-year for both periods, primarily due to a decrease in COVID-19 related product demand. However, the company continues to show strong operational execution with an increase in GAAP operating income and margin, driven by productivity improvements and a favorable business mix, partially offset by lower restructuring charges compared to the prior year. Adjusted operating income and margin remained stable, highlighting the company's consistent performance. The company also announced the significant acquisition of Olink Holding AB, a move aimed at bolstering its Life Sciences Solutions segment in the high-growth proteomics market. This strategic acquisition, along with ongoing focus on innovation and customer partnerships, positions Thermo Fisher for future growth. Despite the revenue headwinds from declining COVID-19 related sales, the company's strong cash flow generation and robust balance sheet provide confidence in its ability to navigate current market conditions and pursue strategic growth initiatives.

Financial Highlights

55 data points
Beta

Revenue

$10.54B

Net Income

$1.55B

14.7% Net Margin

EPS (Diluted)

$4.04

Total Assets

$98.50B

Cash & Equivalents

$7.10B

Free Cash Flow

$1.66B

Financial Statements
Beta
Revenue$10.54B
R&D Expenses$339.00M
SG&A Expenses$2.11B
Operating Expenses$8.72B
Operating Income$1.82B
Net Income$1.55B
EPS (Basic)$4.05
EPS (Diluted)$4.04
Shares Outstanding (Basic)382.00M
Shares Outstanding (Diluted)383.00M

Key Highlights

  • 1Total revenues for the three months ended June 29, 2024, were $10.54 billion, a 1% decrease from the prior year's $10.69 billion, with six-month revenues at $20.89 billion, down 2% from $21.40 billion.
  • 2GAAP operating income increased by 15% to $1.82 billion for the quarter and by 11% to $3.48 billion for the six months, demonstrating strong operational leverage.
  • 3GAAP diluted earnings per share (EPS) rose 15% to $4.04 for the quarter and 10% to $7.50 for the six months, reflecting improved profitability.
  • 4The company successfully acquired Olink Holding AB for $3.21 billion, enhancing its capabilities in the rapidly growing proteomics market within the Life Sciences Solutions segment.
  • 5Free cash flow remained strong, with $2.58 billion generated in the first six months of 2024, up from $1.54 billion in the same period last year.
  • 6The company repurchased $3.00 billion of common stock in the first six months of 2024 and maintained a $1.00 billion authorization for future repurchases.
  • 7Revenue growth was negatively impacted by declining demand for COVID-19 related products and services across multiple segments.

Frequently Asked Questions

The acquisition of Olink Holding AB was completed on July 10, 2024, shortly after the reporting period ended. The preliminary purchase price was $3.21 billion, consisting of $3.19 billion in cash and $0.06 billion in fair value of noncontrolling interest. The acquisition is expected to enhance Thermo Fisher's Life Sciences Solutions segment by adding differentiated proteomics solutions, complementing existing offerings and accelerating protein biomarker discovery. The goodwill recorded from this acquisition is not expected to be tax-deductible.

The decline in demand for products and services supporting COVID-19 vaccines and therapies significantly impacted Thermo Fisher's revenue. Sales of products related to COVID-19 testing were $0.02 billion in Q2 2024, down from $0.08 billion in Q2 2023. For the first six months, these sales were $0.05 billion in 2024, down from $0.22 billion in 2023. This moderation in COVID-19 related demand was a primary driver for the overall revenue decline across several segments.

Thermo Fisher Scientific expects its existing cash and cash equivalents, along with future cash flow from operations and available borrowing capacity under its revolving credit facility, to be sufficient to meet its cash requirements for at least the next 24 months. The company generated $3.21 billion in net cash from operating activities in the first six months of 2024. Its primary uses of capital are mergers and acquisitions, followed by share buybacks and dividends.

The increase in GAAP operating income and EPS is primarily attributed to strong productivity improvements, including benefits from the company's Practical Process Improvement (PPI) business system, global sourcing, and cost efficiencies from restructuring actions. Additionally, a more favorable business mix and lower levels of restructuring and other charges compared to the prior year also contributed to the improved profitability metrics.