Robert W. McMahon
Senior Vice President, Chief Financial Officer at Agilent Technologies
Thanks, Mike, and good afternoon, everyone.
In my remarks today, I will provide some additional details on revenue in the quarter and the year, as well as take you through the income statement and other key financial metrics. I'll then finish up with our guidance for fiscal year 2024 and the first quarter. Unless otherwise noted, my remarks will focus on non-GAAP results.
Agilent finished the fourth quarter with core growth at the top end of guidance and EPS exceeding our expectations as we executed well against challenging macroeconomic conditions. Q4 revenue was $1.69 billion, down 9.7% core and 8.7% on a reported basis. This is after growing 17.5% in Q4 of last year, when we benefitted from the recovery from the Shanghai shutdown in Q2 of last year. This created an estimated 1 point of headwind in the year-on-year results this quarter. As expected, we saw weakness in capital purchases in LSAG with the biggest impact in our China business.
Now, I'd like to share additional detail on our end markets for the quarter. Revenue in our largest market pharma, declined 14% versus 20% growth in Q4 last year. Biopharma declined 2%, while small molecule was down 23%. However, biopharma ex-China was up 7% in the quarter and grew solidly for the year. And while small molecule was down, the decline was most pronounced in China. And outside China, small molecule was up sequentially in the quarter. Chemicals and advanced materials declined 11% versus growth of 27% last year, while flat sequentially. Our chemicals and energy subsegments were down 15%, while advanced materials were down roughly 2% globally and up 4% in the Americas and Europe combined.
The food market was down low-double-digits against a tough 20% growth comparison last year. High-single-digit growth in the Americas was offset by declines in all other regions. In the Americas, PFAS testing is emerging as an important growth area in food testing, helping drive the high-single-digit growth. We expect testing for PFAS chemicals will continue to be a growth driver across multiple end markets over time. The environmental and forensics market declined 3% versus 18% growth last year. Similar to the food market, the Americas region continues to experience strong growth, up double-digits driven by PFAS. This strong performance was primarily offset by softness in China, which was down year-on-year, but up slightly on a sequential basis.
Our business in the diagnostics and clinical market declined 4%. While we delivered low-double-digit growth in our pathology-related businesses, it was more than offset by continued weakness in genomics. The academia and government market was down low-single-digits with strength in the Americas driven by government funding offset by weakness in China and Europe.
Results were pressured across all geographies in the quarter. As Mike mentioned, China was down 31% year-on-year after growing 44% in Q4 of last year, in line with our expectations coming into the quarter. The rest of Asia was down mid-single-digits and both Americas and Europe declined low-single-digits in the quarter.
Before turning to the rest of the P&L, I'd like to quickly summarize some full-year highlights by end market and geography. From an end market perspective, all markets grew low- to mid-single-digits for the year, except for pharma, which was down 2% globally. And in addition, all geographies grew, except China, which was down 5%.
Now, back to the P&L for the quarter. Despite the revenue declines, our team continues to execute at a very high level. Fourth quarter gross margin was 55.8%, and our operating margin was a healthy 27.8% in Q4, which was slightly better than our internal expectations. Below the line, we benefitted from stronger than expected cash flow generating incremental interest income in the quarter. Our tax rate was 13.75% and we had 293 million diluted shares outstanding, both as expected.
Putting it all together, earnings per share were $1.38 for the quarter, exceeding our expectations, albeit down 10% from a year ago when EPS grew 26%. As Mike mentioned, our Q4 results capped a year where we grew 1.5% core on the topline, increased operating margins by 30 basis points and grew EPS by 4%, while overcoming a couple of points of currency headwinds. This is a real statement on the team's ability to quickly adapt to market changes while still delivering leveraged earnings growth.
Turning to cash flow and the balance sheet, I'm incredibly proud of the Agilent team as Q4 continued a string of very strong quarterly cash flow results. In Q4, we generated operating cash flow of $516 million, well over 100% of adjusted net income, and invested $84 million in capital expenditures. Capex spending is driven by our ongoing NASD capacity expansion, which remains on track. For the year, we delivered $1.5 billion in free cash flow, an increase of 44% over last year. Our balance sheet continues to remain healthy as we end the fiscal year with a net leverage ratio of 0.6 times.
With the current challenges in the market, it is great to be a company with a fortress balance sheet and strong cash flow. In the quarter, we paid out $66 million in dividends and spent $80 million to repurchase shares. And for the year, we returned $840 million to shareholders, through $265 million in dividends and $575 million in share repurchases. Looking forward, you may have also seen that we recently announced a 5% increase in our quarterly dividend, providing another source of value to our shareholders. It's worth noting that we have increased our dividend every year since we first began issuing them in 2012.
Now, let's move on to our outlook for the upcoming fiscal year and first quarter. As Mike stated, we expect to see a slow, but steady, recovery throughout fiscal 2024. However, we also acknowledge the continued market uncertainty, high interest rates, volatile exchange rates and depressed capital spending. Like several of our peers, we expect the markets to be down slightly for the year, while we expect to perform better. Given the expected slower market conditions, we have taken additional steps to adjust our cost structure. Incorporated into our guidance is roughly $175 million of cost savings.
Given the significance, I want to provide a little more detail on these actions. Roughly 30% of the savings are related to portfolio optimization decisions we have taken in DGG, the largest of which was the exit of the Resolution Biosciences business. Another 25% is related to material and logistics cost savings as well as optimizing our real estate footprint, with the remaining savings tied to continued reductions in discretionary spend and optimizing our workforce. Along with these actions, we have taken a $46 million charge for restructuring and other related costs in our Q4 GAAP results. These reductions, while difficult, are necessary to ensure we continue to fund our most critical investments as well as fund the variable compensation resets from this year. These actions help ensure the Company delivers leveraged earnings growth in FY '24 and will enable us to emerge even stronger when our markets inevitably return to their long-term growth rates.
As Mike noted earlier, we exited Q4 with some potential signs of stabilization with a book to bill ratio of 1 for the Company and greater than 1 for LSAG instruments. While this is positive, we are going to be prudent in our initial guidance. For the full year guide, we expect revenue in the range of $6.71 billion to $6.81 billion. This represents a core growth range from a slight decline of 0.5% at the low end to 1 point [Phonetic] of growth at the high end. Currency is a headwind of 1.2 points while M&A is also a slight headwind of 10 basis points related to Resolution Bioscience. On a reported basis, we are expecting a decline in the range of 1.8% to 0.3% year-on-year. From a geographic perspective, we expect modest growth in the Americas and Europe. And while we expect to see recovery during the year in China, our initial view is it will still decline for the full year. From a business group perspective, we expect growth in both DGG and ACG, while LSAG instruments will still be pressured. And in terms of phasing, we expect the first half of FY '24 to look similar to the second half of FY '23, with growth in the second half of next year.
We are projecting modest operating margin expansion for the year. And below the line, we expect interest income and expense to offset each other, a tax rate of 13.5%, and 293 million shares outstanding. Fiscal 2024 non-GAAP EPS is expected to be in the range of $5.44 to $5.55. This range represents flat to 2% growth versus FY '23. From a cash flow perspective, we expect another robust year. We are expecting roughly $1.6 billion in operating cash flow and $400 million in capex as spending increases on NASD's Train C and D expansions.
Looking to Q1 2024, we expect revenue in the range of $1.555 billion to $1.605 billion. This represents a core decline of 11.3% to 8.5%, with currency and M&A having a minimal impact. At the midpoint, we are expecting growth that resembles what we just delivered in Q4 and assumes no significant budget flush during the end of this calendar year. This is against another difficult comp of 10% growth in Q1 of last year. First quarter 2024 non-GAAP earnings per share are expected to be between $1.20 and $1.23 as the cost savings fully ramp through the quarter.
As Mike indicated, while we are expecting low growth in 2024, we remain optimistic about the future of our markets and our long-term prospects. Our business remains very profitable and healthy, and I know we will come out stronger as a company when market growth returns.
And now, I will turn the floor back over to Parmeet for your questions. Parmeet?
