NYSE:A Agilent Technologies Q4 2023 Earnings Report $102.80 -0.32 (-0.31%) As of 04/16/2025 03:58 PM Eastern Earnings HistoryForecast Agilent Technologies EPS ResultsActual EPS$1.38Consensus EPS $1.34Beat/MissBeat by +$0.04One Year Ago EPS$1.53Agilent Technologies Revenue ResultsActual Revenue$1.69 billionExpected Revenue$1.67 billionBeat/MissBeat by +$19.57 millionYoY Revenue Growth-8.70%Agilent Technologies Announcement DetailsQuarterQ4 2023Date11/20/2023TimeAfter Market ClosesConference Call DateMonday, November 20, 2023Conference Call Time4:30PM ETUpcoming EarningsAgilent Technologies' Q2 2025 earnings is scheduled for Tuesday, May 27, 2025, with a conference call scheduled on Wednesday, May 28, 2025 at 4:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Agilent Technologies Q4 2023 Earnings Call TranscriptProvided by QuartrNovember 20, 2023 ShareLink copied to clipboard.There are 16 speakers on the call. Operator00:00:00Welcome to the Agilent Technologies Q4 2023 Earnings Conference Call. My name is Beau and I will be coordinating your call today. I will now hand you over to your host, Parmit Ahuja, Vice President, Investor Relations. Please go ahead, sir. Speaker 100:00:21Thank you, Beau, and welcome everyone to Acheron's conference call for the 4th quarter of fiscal year 2023. With me are Mike McMullen, Agilent's President and CEO and Bob McMahon, Agilent's Senior Vice President and CFO. This presentation is being webcast live. The news release for our Q4 financial results, Investor presentation and information to supplement today's discussion along with the recording of this webcast are available on our website at www.investor. Agilent.com. Speaker 100:00:58Today's comments by Mike and Bob will refer to non GAAP Financial measures. You will find the most directly comparable GAAP financial metrics and reconciliations on our website. Unless otherwise noted, all references to increases or decreases in financial metrics are year over year and references to revenue growth are on a core basis. Core revenue growth excludes the impact of currency and any acquisitions and divestitures completed within the past 12 months. Guidance is based on forecasted exchange rates. Speaker 100:01:34We will also make forward looking statements about the financial performance of the company. These statements are subject to risks and uncertainties and are only valid as of today. The company assumes no obligation to update them. Please look at the company's recent SEC filings for a more complete picture of our risks and other factors. And now, I'd like to turn the call over to Mike. Speaker 200:02:00Thanks, Parmit, and thanks, everyone, for joining our call today. Before we get into discussing our results and outlook, I want to mention that we're joined today by Pura McDonald, President of the Agilent CrossLab Group And Sam Raha, President of the Agilent Diagnostics and Genomics Group. We're also joined this call for the first time by Phil Binns, President of the Agilent Life Sciences and Applied Markets Group. Phil's name may be new to some of you, but he's well known at Agilent and in the industry. Phil has been with us for more than 13 years, coming over the Verint acquisition and overseeing our market leading spectroscopy business. Speaker 200:02:38We're extremely pleased to have some of Phil's knowledge, experience and proven leadership strength heading up our LSHE business. In his short time in the role, we've already seen Phil add tremendous value as a member of our senior leadership team. Welcome, Phil. Now, on to our Q4 results. The Agilent team once again continued to perform well under challenging market conditions. Speaker 200:03:03Revenue of $1,690,000,000 declined 9.7% core after increasing 17.5% last year. This is at the high end of our guidance. Our proactive approach to manage our cost structure in this market environment helped us deliver healthy 4th quarter operating margins of 27.8%. Q4 earnings per share of $1.38 exceeded our guidance. While this was a decline of 10%, it comes against a tough compare last year when EPS grew 26%. Speaker 200:03:36While the market continues to be challenging, we believe we're starting to see signs of stabilization. As an encouraging data point for the quarter, Our book to bill ratio is 1 for the company and greater than 1 for our LSAG instruments. Let's now take a close look at our Q4 Starting with our regional results. During the quarter, while down year on year, we delivered sequential growth except for China as expected. In China, our business declined 31% year on year, after growing 44% in Q4 last year. Speaker 200:04:08While China was down sequentially, these results are very much in line with our expectations. In the year on year, monthly performance improved slightly as the quarter progressed. In addition, orders were slightly higher than revenue for the quarter. While it is too early to call these two data points a trend, We see this as a current sign of potential stabilization. In late September, I traveled to China for the first time since the COVID outbreak To meet with the Agilent team, key customers and government officials, I was reminded of both the sheer size of the Chinese economy and our market there. Speaker 200:04:42I saw firsthand the work being done to bolster economic activity in the near term and create an environment that will support continued growth into the future. I remain convinced China will continue to play an important role in life sciences and I'm confident that the China market will return to growth. And looking at our largest end market, pharma declined 14%, driven by continued caution among customers on capital expenditures for new instruments. Within pharma, biopharma formed better than small molecule. Geographically, our biopharma business outside China grew high single digits. Speaker 200:05:20Looking at performance by business unit, the Life Science and Applied Markets Group delivered revenue of $928,000,000 down 18% core Versus a tough compare last year above 22%. Customers continue to hold off on capital expenditures, particularly in the pharma segment of LSAG's business, which declined in the high 20% range. This is against growth in the low 20s last year. On the other hand, We continue to see strong customer demand and growth in our PeakVast solutions as well as continued strength in the Advanced Materials segment. These are 2 secular trends we've highlighted before and we remain optimistic about future growth in these market segments. Speaker 200:06:02While the market environment remains challenged, we continue to innovate and provide unique solutions for our customers. The new products we launched in June at ASMS, In particular, the 6,595 LC Triple Quad, which is focused on key applications like PFAS, Continue to generate positive customer interest and new orders. We are also bringing innovative new solutions for customers across the biopharma value chain. We saw a number of our online PLC systems with large biopharma companies. The systems are easy to use, Reliable and delivers significant value by providing fully automated analysis of critical quality attributes, allowing real time decision making outside the lab. Speaker 200:06:46The Agilent Cross Site Group posted revenue of $404,000,000 up 4% core and 6% on a reported basis. ACG delivered growth across all end markets and in all regions except China. The contract services business was up double digits, offset by the services associated with new instrument placements. Our strategy of increasing the connect rate continues to pay off. In the quarter, the contract services business represented 65% of ACG revenue, a number that has grown nicely over the years. Speaker 200:07:21The Diagnostics and Genomics Group delivered revenue of $356,000,000 flat on a core basis and up 1% reported. DDG's results led by the pathology and NASD businesses, which both delivered low double digit growth. These strong results were offset by the continued market challenge in genomics for both consumables and instruments. Our NASDAQ portfolio and capacity expansion are continuing as planned. We're confident in the long term growth prospects for the markets we serve. Speaker 200:07:51Before I finish covering DGG, I want to thank Sam Raha for his contributions over the years Help us to build a strong foundation for the DGG business. Speaker 300:08:00I wish Sam well. In addition Speaker 200:08:03to these business group highlights during the quarter, We will recognize for our commitment to sustainability. Agile's near long term targets for reaching net 0 greenhouse gas emissions have been improved by the highly regarded Science Based Targets Initiative. A year ago, we entered 2023 sharing a view of economic and industry uncertainty as we guided for moderating growth in the second half of twenty twenty three. We had not anticipated, however, The significance of the market headwinds the industry eventually faced, particularly in the pharma market in China. Despite the challenging market conditions, we delivered full year revenue of $6,830,000,000 growing 1.5% core. Speaker 200:08:48While our full year growth was lower than initially expected, we met or exceeded every quarterly guidance range we provided, A solid testament to the team's execution ability. Included in FY 'twenty three results, our 4 year compound annual growth rate is 7%. This is at the high end of our long term growth guidance. In FY 'twenty three, we delivered operating margins of 27.4%. This is up 30 basis points this year and up more than 400 basis points over the last 4 years. Speaker 200:09:20Earnings per share of $5.44 were up 4%, delivering leverage earnings growth for the year. Our full year compound annual growth rate for EPS is 15%. Looking back, 2023 was a challenging year. What I'm particularly proud of is the Agilent team's ability to quickly pivot and take action to adjust these challenges while staying relentlessly focused on our customers. While we work to significantly reduce expenses, Aflac's customer satisfaction ratings remain on all time highs. Speaker 200:09:53At the same time, Our employee engagement continues to be excellent as we achieved a number of best employer awards over the last year. All this helped us deliver another year to leverage earnings in an extremely difficult market environment. Before turning it over to Bob for more detail, I want to provide some high level perspective on FY 'twenty four and beyond. For 2024, we anticipate a slow but steady recovery throughout the year. In our initial outlook, at the height of our guidance, we expect revenues to return to growth. Speaker 200:10:26At the same time, our range for EPS in the year ahead Our end markets are powered by investments in improving the human condition. The pace of science, Innovation and discovery continues to increase, which will fuel further growth. We remain focused on winning in the marketplace, Our differentiated product services and most importantly, our One Agilent team are all essential to the success of our customers. We are well positioned for long term growth. Bob will now share more detail on the quarter and the year, along with more specifics on our initial view for 2024 and Q1. Speaker 200:11:16Thank you for joining us today. And now, Bob, over to you. Speaker 300:11:20Thanks, Mike, and good afternoon, everyone. In my remarks today, I'll 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 Q1. Unless otherwise noted, my remarks will focus on non GAAP results. Agilent finished the 4th quarter with core growth at the top end of guidance and EPS exceeding our expectations as we executed well against challenging macroeconomic conditions. Speaker 300:11:55Q4 revenue was $1,690,000,000 Down 9.7% core and 8.7% on a reported basis. This is after growing 17.5% in Q4 of last year when we benefited from the recovery from the Shanghai shutdown in Q2 of last year. This created an estimated one 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. Speaker 300:12:33Revenue in our largest market pharma declined 14% Versus 20% growth in Q4 of 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. On outside China, small molecule was up sequentially in the quarter. Speaker 300:13:04Chemicals and Advanced Materials declined 11% versus growth of 27% last year, while flat sequentially. Our Chemicals and Energy sub segments 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. Speaker 300:13:46We 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 to 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. Speaker 300:14:30The 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 and L, I'd like to quickly summarize some full year highlights by end market and geography. Speaker 300:15:11From 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 and L for the quarter. Despite the revenue declines, our team continues to execute at a very high level. 4th 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. Speaker 300:15:47Below the line, we benefited from stronger than expected cash flow generating incremental interest income in the quarter. Our tax rate was 13.75 percent and we had 293,000,000 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% or on the top line, 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. Speaker 300:16:39Turning to cash flow and the balance sheet. I'm incredibly proud of the Agilent team as Q4 continued to string a very strong quarterly cash flow results. In Q4, We generated operating cash flow of $516,000,000 well over 100% of adjusted net income and invested $84,000,000 in capital expenditures. CapEx spending is driven by our ongoing NASD capacity expansion, which remains on track. For the year, we delivered $1,500,000,000 in free cash flow, An increase of 44% over last year. Speaker 300:17:19Our 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 $66,000,000 in dividends and spent $80,000,000 to repurchase shares. And for the year, we returned $840,000,000 to shareholders through $265,000,000 in dividends $575,000,000 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. Speaker 300:18:05It's worth noting that we've 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 Q1. 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. Speaker 300:18:39Given the expected slower market conditions, We've taken additional steps to adjust our cost structure. Incorporated into our guidance is roughly $175,000,000 of cost savings. Given the significance, I want to provide a little more detail on these actions. Roughly 30% of the savings or related to portfolio optimization decisions we've 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. Speaker 300:19:23Along with these actions, we've taken a $46,000,000 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 leverage earnings growth in FY 2024 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're going to be prudent in our initial guidance. Speaker 300:20:10For the full year guide, we expect revenue in the range of $7,100,000,000 to $6,810,000,000 This represents a core growth range from a slight decline of 0.5% at the low end to one point of growth at the high end. Currency is a headwind of 1.2 points, while M and 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. Speaker 300:20:57From 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 twenty twenty four to look similar to the second half of FY twenty twenty three 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 percent and 293,000,000 shares outstanding. Fiscal 2024 non GAAP EPS is expected to be in a range of $5.44 to $5.55 This range represents flat to 2% growth versus FY2023. Speaker 300:21:48From a cash flow perspective, we expect another robust year. We are expecting roughly $1,600,000,000 in operating cash flow and $400,000,000 in CapEx as spending increases on NASD's trained C and D expansions. Looking to Q1, 2024, We expect revenue in the range of $1,555,000,000 to $1,605,000,000 This represents a core decline of 11.3% to 8.5% with currency and M and 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. Speaker 300:22:40Q1 2024 non GAAP earnings per share expected to be between $1.20 $1.23 as the cost savings fully ramped 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 growth 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 Parmit for your questions. Parmit? Speaker 100:23:13Thanks, Bob. Beau, if you could please provide instructions for the Q and A now. Operator00:23:19Thank you, Mr. When prepared to ask your question, please ensure your phone is unmuted locally. We'll go first this afternoon to Vijay Kumar at Evercore ISI. Speaker 400:23:43Hi, guys. Thanks for taking my question. Good morning, Gabe. And some helpful comments here. My Maybe starting with those book to bill comments here, overall company one turn, LSAG instrumentation looks like its turn. Speaker 400:23:58Curious what does book to bill numbers for ex China? And if instrumentation has turned, That Q1 guidance, comps get easier. Why is Q1 assuming no benefit from the Stern and Instrumentation? Speaker 300:24:14Yes. Hey, Vijay, let me take that. I think if you look at the book to bill ratio, It's for LSAG Instruments, it's actually very similar both including China and excluding China. China was actually slightly Positive as well. So that's a good sign. Speaker 300:24:33And as we mentioned in the prepared remarks, we're taking a prudent approach to our Q1. And certainly, we see this as a positive. We did have some we typically do have Seasonality from our Q4 to Q1, but we're taking it kind of 1 quarter at a time. Speaker 200:24:55I think part of the big story too, Vijay, is the 10% comp from last year as well. But as we said in the call, we were It was encouraging to see some initial signs of stabilization with that kind of book to bill on the instrument side. Speaker 400:25:12Understood. I'm glad to hear prudency and right off Speaker 300:25:15the bat Speaker 200:25:16here. We got that into the script, Vijay. Speaker 400:25:22Just one more layer on guidance here. What are you assuming for NAST in China for fiscal 2024? Speaker 300:25:31Yes. So for China, we are thinking mid single digit decline for the full year, so very similar to this year. And then for NESD, right now we're expecting low single digit mid single digit growth. Speaker 400:25:49Yes. Fantastic. Thanks guys. Sure. Operator00:25:54Thank you. We go next now to Patrick Donnelly at Citi. Speaker 500:25:59Hey guys, thanks for taking the questions. Hey, Mike. Maybe kind of a follow-up on the 1Q guide. It seems like again the orders encouraging, maybe a little bit prudent on the guide as you said. I guess when you think about just the implication for the ramp 2Q to 4Q, Is it optimism in the market based on some of those order trends? Speaker 500:26:23Is it obviously the comps get easier in And can you just talk about the visibility into the recovery and kind of what gives you the confidence in the ramp as the year progresses here? Speaker 200:26:33Yes, sure Patrick. How about if I lead off Bob and then you can add any additional comments you'd like to make here. But when we think about this conference around what we described as a Gradual recovery and growth. I think it's first of all important to remind the audience that we do expect the first half of the year to be very much like what we saw in the half of 2023. But looking forward, why do we think that things are going to be different in the second half, which is, though it's initial and still early, There are some early signs of potential stabilization that you see in our order book. Speaker 200:27:05The fact that book to bill for the company was above 1, the fact that we had the same result in our instrument business, It's been the most pressured part of the company. And listen, while it's too early for customers to be confirming their 2024 budgets with us, Let's go back to the sales funnel, which is a predictor of potential growth, right? So our sales funnels continue to show a lot of interest from customers And we know that at some point in time, those things will start to release. The funnels remain healthy. And listen, in an environment like this, we've seen these things before, which was healthy capital spending has been constrained. Speaker 200:27:41So some release can be expected. And we hear I don't want to get too far down my skis on this, but we hear customers talk about some new focused investments. I think We're not calling for a big broad based market recovery, but certain segments of the market are going to be better. We're talking about some investments in R and D tools, what's going to PFAS testing capacity expansion plan we're hearing from our customers, Advanced Materials. And then as you mentioned earlier, Patrick, there is an easier compare in second half twenty twenty four as well. Speaker 200:28:12So we do expect this return to growth and I think it's not simply the hope. We've got Some information to kind of back up our thinking there. Again, we'll know a lot better about how things look when we get to the budgeting phase with our customers in early 2024. Again, right now, the markets for capital instruments still remain quite challenged. And as I mentioned earlier, we are seeing encouraging signs of potential stabilization. Speaker 200:28:38It's going to be a journey for our return into growth and I think our guide reflects that. And again, I think we've got High degree of confidence this is what the back half of the year will look like. Speaker 300:28:49Yes. Hey, and Patrick, you asked about Q1. As I mentioned in the prepared remarks, I think we're more taking a prudent approach here. But we're also going up against last year where we did have a budget flush. It happened earlier in the year, but for delivery in November December and we're assuming that we're not seeing that or building that into our estimates. Speaker 300:29:13So if that happens then that would be a nice thing for all of us. Speaker 200:29:17Yes, absolutely Bob. Speaker 500:29:19That's helpful. Yes, I appreciate that Bob. And maybe Bob just on the margin side, helpful to hear you talk through a few of the different Moving pieces, it sounds like some cost savings in DGG among others. I guess can you just give a bit more color on kind of the moving pieces where you're pulling some levers, the ability to take out Some additional costs to hit these margin numbers, obviously you talked about margins being up a bit. I think there are some headwinds like incentive comp things like that. Speaker 500:29:45So maybe just talk about The gives and takes there and confidence in terms of some of the cost outs. Speaker 300:29:50Yes, that's a great insight there, Patrick. Yes, Because we do have some add backs, I would say that so don't take that $175,000,000 and drop it to the bottom line because we have some resets. I would say Roughly half of that is kind of a reset between our sales comp and variable pay. If we think about it, it's really across the P and L. The biggest piece actually is in DGG with the exit of the res bio business, but we've also taken some tough decisions in other product lines to streamline The portfolio there and I would say roughly a little over 30% of that is associated with that. Speaker 300:30:28The other 25% is really within our COGS. Our OFS team has done a phenomenal job of really kind of leaning into reducing our costs around logistics and material costs. And then I talked about the site consolidation as well, which will show up and down the P and L. So we've taken a look at our real estate footprint and have actually closed several smaller sites between around the world really. And then the final piece is really kind of infrastructure which would be discretionary spend, but then also headcount reductions that would be focused on areas where we've right sized it to the demand. Speaker 200:31:15And Patrick, this is Mike. Yes, sorry about the confidence about the growth recovery. I think when it comes to hitting the 175 High degree of confidence, we control this 100% and we'll deliver on this. Speaker 500:31:29Very helpful. Thanks Mike and Bob. Appreciate it. Operator00:31:35Thank you. We'll go next now to Matt Sykes at Goldman Sachs. Speaker 600:31:39Hey, good afternoon. Thanks for taking my questions. Sure, Matt. Maybe just on NASD, I know it's just over the past call it year and a half, we've We've gone from high double digits to low double digits and next year mid single digits, which is probably just some level of normalization as you ramp capacity. But just given the step up in CapEx you're guiding to next year, is there some wiggle room in terms of how you guys lay that capacity out? Speaker 600:32:05Or is the confidence in that End market growth enough to keep investing in that area next year? Speaker 200:32:14Yes, I'll jump right in on that one. So I tried to make that come out in the script, but our plans to continue to invest for the Long term growth of this business remains high. We're going full steam ahead on the capital expansions and they're Tracking according to plan. In fact, I think we'll probably do a little bit better on the cost side when all said and done relative to The CapEx that's involved. And Bob, maybe you can talk a little bit about some of the things we're seeing relative and I think we've commented on this before, but what are we seeing in the marketplace relative to 2024 relative to NASD. Speaker 300:32:48Yes, I think, Matt, it's a great question. And so if we look at the details of kind of the mix, Actually, I would say we have the most healthy mix of portfolio in NASD in 24 than we've had. So a significant increase in the number of programs that we are going to have being going through. Now it's a bigger component of clinical volume versus commercial volume, Which I actually think bodes very well for the future going forward. We have seen some, I would say some pausing of certain customers as they associated with IRA, but we think that that's transitory. Speaker 300:33:27So as Mike said, We're not at all concerned about the long term growth prospects of this market. And in fact, many of the programs that we're seeing come into our Portfolio are actually as what we had talked about in previous calls, much larger targeted patient populations, Which really speaks well to the volume. And then as Mike mentioned, we're actually expanding our portfolio, our And so it's not just siRNA, but we're having the ability to continue to grow our CRISPR GMP grade CRISPR business as well as antisense. So we're continuing to do that as well. Speaker 200:34:06Hey, and Sam, I know This will be your last call, but I thought it might be interesting for you to jump in here for a second. As part of your transition, you've been talking to a lot of our key customers. And I think We're hearing the same story from them about long term growth between investment here. Speaker 700:34:20Yes, absolutely. Mike, I'll just add a couple of things to your and Bob's comments. 1, we are now on contract with more major pharma than we ever have been. And it's very promising. If you look at publicly the percentage of their overall R and D budgets that they're now spending on therapeutic oligos and we are in the driver's seat to win those opportunities. Speaker 700:34:43And just in the last couple of weeks alone, I've spoken with a number of our lead pharma partners and Dave reaffirmed, so there's a slight Navigation through the IRA, as Bob mentioned, the conviction on their end of the market potential remains unchanged and we are in the leadership position to pursue that. Thanks, Speaker 800:35:02Sam. Got it. That's great Speaker 600:35:04amount of detail. Thank you. Maybe just Bob for you, just on pricing, Kind of what's embedded for next year as you think about pricing and how is pricing kind of trended over the course of this year? Are we back to sort of Normalized levels of pricing that you guys have historically achieved or is there still some pricing gains to see sort of as we move into next year in certain areas of your business? Speaker 300:35:26Yes. Hey, Matt, that's a great question. And we ended the Q4 at just a little under 3% and For the full year was greater than that. So it actually continues to be hold up very well. What we're building into our plan for next year It's roughly 2 percentage points of price, which as you know is greater than our historical kind of pre COVID levels. Speaker 300:35:49And so what we've been able to do I think is Really speaks to the value of the value proposition that we have as well as the emerging mix of our businesses as well. Speaker 400:36:01Thank you. Operator00:36:04Thank you. We go next now to Rachel Battenstall at JPMorgan. Speaker 900:36:10Great. Good afternoon and thanks for taking the questions. So first up, I just want to ask on China. You mentioned that the region was down 30% this quarter. That was in line with your You're expecting it to decline mid singles again next year. Speaker 900:36:22So I guess just how much of a function is that really due to some of the comps and starting to lap The easier comps late into next year versus, is there anything structurally wrong with that market? And do you expect China to continue to grow on that medium to long term? Speaker 200:36:41You want to take the first part, Bob? I think it's Speaker 300:36:43Yes, yes. So, well, I think from the standpoint of the comps, what we would see is obviously if you looked at what we did In the first half of this year, we had very strong growth and then we're going up against extremely difficult comparisons this year. I mean, As I mentioned, we were down 40 up 44% in Q4 of last year, so down 31% this year. We're still up over the 2 years. And as we think about this similar to the rest of the kind of the guide, We're expecting kind of declines in the mid-20s in Q1 and getting better from there. Speaker 300:37:21And Some of that it will be an easier comp and I'm sure Mike will talk a little bit more about this, but we don't see anything structurally changing in the Chinese Speaker 200:37:32Yes, absolutely, Bob. So I want to pick up from there. So I made a few comments about this in the prepared remarks, but I made my first trip to China since October 2019 when we're there for the BCIA show. And what did I see? First of all, I saw Just to remind how quickly things can happen in China. Speaker 200:37:51Electric vehicles everywhere, a lot more green, digital Adoption was just amazing. I don't think anybody uses cash there anymore. And then you also remind as you travel around the country just how big a country is, how big the economy is and how I think the markets are for life sciences. But to your specific question, here's what I was hearing from customers and my team and what I've seen as well, which was Why do we think this market eventually will return to growth? All the things that have been driving this market of the years, which is primarily The Chinese government's 14 5 year plan, they're still on it. Speaker 200:38:27They're pointing to long term growth, improving the quality of life in China. We're hearing stories of new environmental regs coming from PFAS, the anti corruption impacts that we've seen in the health and pharma. The pharma space looked to me if they have peaked with a lot of the actions occurring, which could ultimately long term lead to more R and D investments because there'll be less money being spent in the SG and A area. But I don't want to be too short term optimistic about this Expansion of growth because the business is bouncing along at a certain level. And that's why we called stabilization in our Prepared remarks. Speaker 200:39:07So what we're seeing, what we're forecasting, what we're hearing is from our teams and our customers, Don't expect any significant near term improvements, but don't expect any significant near term deterioration either. And I think that's why when you look at the year to year numbers in terms of growth rate, Bob, it's probably a comp as compare issue. But we've had a couple of months now The business run at a certain level and that gives us the sense that we'll be I think we used the word potential signs of stabilization. So hope that helps. Speaker 900:39:38Yes. No, that's helpful color. And then I just want to dig a little bit more on your comments around next year. So you mentioned that you expect the first half To be similar to what you're seeing in the back half of this year. So I guess can you just walk us through in a little bit more detail what exactly you mean by that? Speaker 900:39:52Should we be expecting similarities from an organic growth Div, or are you really talking about more from a revenue dollar standpoint? And then same type of question on the trajectory of the rebound on margins and EPS next year, should we expect Kind of that similar ramp given the cost dynamic as well. Speaker 300:40:10Yes. I think if I'll try to Sure. All that in short order, Rachel. As we think about the first half of the year, yes, We think that we as we look at our business and look at that kind of book to bill, we've kind of troughed in Q2. Q3, I think we mentioned actually was a little better. Speaker 300:40:31It was less than still less than 1 and then Q4 continued to improve. And our expectation is that that kind of performance will continue. Now we're going up against difficult comps when we were actually bleeding down our inventory. And that particularly happened in Q1 and Q2 of last as we were talking about it. And so I would expect us to have the trough in Q of 2024 be in Q1, Q2 being a little better and then growing out of that as we benefit from the easier compares. Speaker 300:41:03And I would expect Our P and L and the EPS to look very similar to that. Q1, we are we've taken most of the actions there. They will have All been taken in the Q1, but they won't have a full quarter. And so we'll have full quarters of the cost savings in Q2 through Q4. And so as that business kind of improves as the business improves, We'll get more and more leverage on the bottom line. Operator00:41:42Thank you. Moving on now to Derik de Bruin at Bank of America. Speaker 1000:41:48Hi, good afternoon. Speaker 400:41:49Sure. Good afternoon, Derik. Speaker 1100:41:52Hi. So can we talk a little bit about pharma? That market was up and down all year, Not a lot of visibility. Are you seeing some of the orders that were sort of stuck And the funnel is starting to come loose, right. I mean, how are you sort of looking at the pharma market going forward? Speaker 1100:42:13Yes, Speaker 200:42:14I think the answer is the deal funnel still remain elongated. So Yes, I Speaker 1200:42:19think what we see from our funnels is that They're growing, but the velocity in closing deals from the point of funnel to order is still static on that side Speaker 300:42:34Yes. And hey, Derek, I think if we think about the pharma end market, we're assuming very low single digit growth for next year. And some of that is actually getting past the tougher comps in China. If we looked at actually Our pharma business ex China, we grew in FY2023 and actually our biopharma business grew in total. And we think about small molecule was the area that was dragging the pharma business As you know very well that typically has a replacement cycle. Speaker 300:43:13We are well into that replacement cycle. We were up very high, you kept calling it. And we've seen that be very depressed and our expectation is that will start coming back in earnest in 2024, But probably in the back half of twenty twenty four. Speaker 1000:43:30So this goes to I'm sorry to Speaker 1100:43:32beat this up, but your China you've got going down. Pharma, you just basically said you've got not you don't have a ton of visibility. You hope that things will come back. I'm just not I'm curious why you can put a little bit more cushion in the guide like that. It just feels like it still feels like it's a little bit it still feels like it's a little back end. Speaker 1100:43:50Well, it's not a little it's a lot back end heavy given where we are sort of in on the cycle. Speaker 200:43:56Yes. I think as we said earlier, Derek, there's reason to believe that not only do you have the comps working in our favor for the second half, that's real. And we know that customers want there's interest in the products. And I think they've got to step in by the way, we're not Calling for this miracle snapback in 2024, but we're also saying that small molecules are going to continue to decline 20%, 30% The numbers we're seeing this year, particularly that's where the pressure has been. But we know that biopharma, they need some tools for R and D. Speaker 200:44:31We know that replacement cycles only last can only be held up for so long. So there's a confidence relative to What we see in the funnels, deals aren't coming out of the funnel. And then although we are focusing here on pharma right now in this commentary, There's a lot of other strength in some of the other secular markets and the implied markets in particular, which is a nice diverse location we have on the instrument side as well. And Bob, I don't know if there's any additional thoughts on the pharma story? No. Speaker 200:44:59Yes. Okay. Speaker 1100:45:01And just one final one, just what were bookings? I mean, I know the book to bill was greater than 1, but I'm just curious in terms of bookings. And do you often see a spike in bookings in Q4? Basically, I'm just trying to get the sense of like what you saw as a head fake or you've got where you think you've got real demand here? Speaker 300:45:21Yes. So we don't give the absolute dollars other than to say it was greater than 1. It was 1 roughly 1 for the total company and then instruments were higher. Typically, we do see a Q4 Typically, we do see a Q4 where it is higher. So this particularly because we have October in our results. Speaker 300:45:49And so last year was actually A aberration, so to speak, as we're working down the backlog, and this kind of gets back to our normal process. Speaker 200:46:01Yes. And through the quarter, Derek, we saw our normal seasonality. Yes. So there wasn't anything unusual about the order pattern to kind of say, Is this a head fake or not? So I think that also is one of the reasons why we said okay, early signs of some stabilization here. Speaker 200:46:15Again, Not huge growth, we're saying stabilization. Correct. Great. Thanks. Speaker 400:46:22Sure. Operator00:46:24Thank you. We'll go next now to Jack Meehan at Nephron Research. Speaker 1300:46:30Thank you. Good afternoon. Speaker 800:46:31Good afternoon, Jack. Speaker 1300:46:33So wanted to dig a little bit more into LSAG in the quarter. Can you break down the growth between instruments and consumables? Just any commentary across product lines? Speaker 300:46:47Yes. Everything I would say For the quarter was pressured, although consumables performed better than the instrumentation. Our consumables business was down kind of low single digits and against a very tough comp of Almost 9%, 10%. And if you looked at it ex China, that was largely influenced by China. We grew low single digits in consumables. Speaker 1300:47:18Okay. And so does that imply instruments maybe down over 20% in the quarter? Speaker 1100:47:26They were down. Yes. Speaker 1300:47:30Okay. Yes. And I guess Maybe just to follow-up on Derek's question. I think everybody is trying to think about the right way to interpret this book to bill commentary, but just Is there any additional color you can share on the magnitude? Were orders down in the quarter? Speaker 1300:47:47I guess just trying to understand because there was an easy For a difficult comp on revenue like our orders kind of more don't have a similar level of volatility, It should have mathematically been overrun, right? Speaker 300:48:03Yes. So the orders were down year on year, but obviously down not as much as revenue It was down year on year. And so when we look at it, I think that's kind of shows though the stabilization because we had Some pretty significant revenue last year because of the Recovery in the for Shanghai shutdown. So I don't think that that we actually think that this is the best way to kind of look at it on a go Because we don't have the play of the backlog happening much anymore. And so actually as we look at it on a quarterly basis, We've seen a nice steady progression up back to historical numbers. Speaker 300:48:47And Jack, I think it's fair Speaker 200:48:48to say Bob that one of the things we were conscious of was a lot of commentary about How significantly things were getting in terms of being worse. And as you know, we've been out for some time calling for no year end budget flush, Constrained capital environment, we came into the year actually guiding for slower growth in the second half. So what we're trying to intimate in the call today is What we've been saying for the last several quarters is exactly what we're seeing right now. And I thought we thought a proof point was the book to bill, which Listen, it's not great out there in terms of robust growth, but the sky is also not falling either. Speaker 1300:49:22Okay. I appreciate all the color. Thanks guys. Operator00:49:27Thank you. We'll go next to Puneet Souda at Leerink Partners. Speaker 1000:49:32Yes. Hi, Mike, Bob. Thanks for taking the questions. Sure. Yes. Speaker 1000:49:38Phil, good to have you and Steve there. First one on CrossLab. Bob, with the 65% of your business being in service contracts, could you elaborate on what Sort of growth contribution we should expect here for the full year and also I don't know if you provided the LSAG expectation contribution for 2024 as well? Speaker 300:50:02Yes. For ACG, We're expecting kind of mid single digit growth as we are with the contracted services piece being double digit, but then being pressured by the instrumentation. So that will be moderated. And for the LSAG business, Right now, we're looking at kind of low single digit decline, again, with a greater decline in the first half of the year and the return So better performance in the second half of the year. Speaker 1000:50:36Got it. Okay. And then on if I could ask a little bit on am I on shoring that's a point that you're pointing that's not Something we have focused on in prior calls, and I hear you that you're growing on the PFAS side, but Could you elaborate a little bit on both semi on shoring as well as the environmental gains that you're having? And why shouldn't that contribute more to your instrumentation growth in 2024? Speaker 300:51:08Yes, it has the potential to do that. And as we talked about it, we're at the beginning of the year and so we want to be prudent there. But there's nothing out there that doesn't say that that should Continue, given the macroeconomic environment and the incentives that governments are providing to continue to invest. And actually what we're seeing is nice business in Southeast Asia as well as India. And I would expect that to continue. Speaker 300:51:37That's where we're placing incremental investments to continue to drive and capture that demand. I would expect the same thing in the environmental area as well, but we're not going to build all of that in right now at the beginning of Speaker 200:51:53the year. I think we saw some trends too we're starting to see which is PFAS is also now driving some testing in the food marketplace As well as every country that we talk to is in the process of further enhancing their own reg. So we wanted to have some other areas of potential growth for the company beyond the story around pharma. Speaker 1000:52:15Got it. Okay. Thank you, guys. Speaker 300:52:17Mhmm. Operator00:52:20Thank you. We'll go next now to Josh Waldman at Cleveland Research. Speaker 1400:52:26Hey, thanks for taking my questions. Maybe one for Bob and then one for Mike. Speaker 1100:52:31Bob, maybe circling back on Derek's question, I wondered if Speaker 1400:52:34you could provide more context on the forecasting process this round or the puts and takes that went into the organic guide. As you Speaker 1100:52:43take a step back, were there segments in Speaker 1400:52:46the business that were like decelerating or slowing as you went into the guide Or maybe areas where you're still trying to find bottom and if so, how did you reflect that in the guide? Speaker 300:52:59Yes. Obviously, this year has been one for the ages in terms of being able to try to manage the forecasting. And so we've taken a number of different angles at it to look at it. So not only growth rates, which I think is the focus here, but also actually If you looked at it on a sequential basis and looked at the actual dollars, I think that that's probably more instructive, Particularly as we were looking at the bleeding of the inventory. I would say what we've seen over the last couple of quarters Is that signs of stabilization? Speaker 300:53:37There are always puts and takes across the various businesses and We think that we've tried to do that. We've built in feedback based on the fields projections, the funnel that Mike and Porek talked about and then In an assumption around the conversion of those funnels and we haven't seen the funnels Slow down, there's still modest growth and we're starting to see the slowing of the elongation. I'm not saying that it's stopped or accelerated in terms of the purchase, but we are starting to see that slowing and you're actually seeing that In that book to bill and when we look at the orders, on a sequential basis, we're starting to see that kind of Stabilization as well. And so that's kind of how we're looking at continuing to go forward. If you kind of just built that going into next year, You would start seeing challenging first half and then better performance in the second half. Speaker 300:54:39Hopefully, that gives you some flavor. Speaker 1400:54:43Yes, that's helpful. And that was actually going to be my follow-up. Maybe, I don't know, Bob or Mike, if Speaker 1000:54:47you want to take it. Sure. Speaker 1400:54:49I was curious If you could maybe quantify where the funnel stands entering 2024 versus maybe where it typically is Entering a year and just how correlative or how much do you think it is a predictor of near term demand? I mean is that Is better funnel conversion at all kind of part of what drives the improvement Speaker 100:55:09as you progress through the year? Speaker 200:55:12I think we're assuming, Parekh and Bob On the same rates, right? No significant improvement. Speaker 300:55:19Correct. We're going up against the first half of this year actually what you saw was The elongation of those cycle times. And so what we're seeing right now is kind of like I said, it's not necessarily fully stable, but It's not declining or increasing at the rate that we saw at the 1st and second quarters of last year. And so you're starting to see that. And so All things being equal, that conversion is actually improving slightly versus year ago. Speaker 300:55:46It's still not back to historical numbers. And that's what we're trying to handicap here as we look at our forecast going forward. Speaker 100:55:57Okay. All right. Appreciate it guys. Speaker 500:56:00So thanks, Josh. Operator00:56:03Thank you. We'll go next now to Daniel Brennan of Cowen. Speaker 800:56:09Great. Thanks for taking the questions guys. Maybe just on China, I know you mentioned I think in the prepared remarks like month to month pacing had improved in the quarter. Just any more color anything on exit rates in China? And if you could, I'd be interested to get like some more color on maybe end market trends in China. Speaker 800:56:25I know you gave some color What you know, biopharma, but could you discuss pharma overall and any other interesting color from an end market basis? Speaker 200:56:34Sure, Bob. Maybe we'll tag team on this, which was I think The relative to the order book, I think we were slightly above revenue for the quarter. No really unusual pacing through the quarter from China. We've been calling I know a lot of the conversation today has been about pharma, But we've been saying for some quarters overall for China, it's been a broad based slowdown. And that's what the business has been. Speaker 200:57:03That's how we ended the year in terms of the end market performance. I will say that we were Pleased that we were in line with our expectations for the business. So again, we described earlier that The business was moving along at a certain overall level. I think we do have a View of China that we will still be down in terms of the revenue for the year, but reflective of where we are, what we're seeing in the business right now. Speaker 300:57:38Hey, Dan, and to build on Mike's Just a couple of other additional data points. We were down Pretty significantly in all end markets in Q4 as you would expect because we were up 44% in Q4 of 2022. And so that's probably not as relevant because we were catching up relative to some of the catch up of the Shanghai shutdown. Another data point though is if we looked at kind of year on year growth, actually we exited October, The year on year performance, it was still a decline, but it was much better than what we saw at the beginning of the quarter. And so we actually saw Sequential improvement, I think Mike mentioned that in his prepared remarks. Speaker 300:58:25And then if we looked at kind of absolute dollars, they've been pretty steady monthly. Speaker 800:58:33Got it. Thanks for that. And then, chemical and advanced material, it was like a tale of 2 cities. It looks like C and E was down 15% in the quarter you said and you talked a lot about PFAS. And so does any more color like what you're seeing on kind of both sides of the coin there? Speaker 800:58:48What's kind of baked in on the core chemical and energy side for the year and just anything on trends there? And then obviously, it sounds like you guys still remain really constructive on the Applied Material side or the Advanced Material Speaker 200:59:01side, excuse me. So how about I'll just lead here with a few comments and then I've been dying to pull Phil in on here as well and maybe talk about some of the things he's seen on the Advanced Materials side, which is A real area of expertise for himself. But I think you're aware of tale of 2 cities is really quite appropriate both in terms of Breakout by segment also by geography. Beau, I think we posted 70% growth, if I remember correctly, in China last year. So I mean that's a tough comp. Speaker 200:59:30I don't care who you are. But we're seeing continued slowness On the C and E side, our major customers here are really conservative in terms of their deployment of capital. Many of our largest customers are on cost control. So that's been that's what you're seeing reflected in the numbers and that's why we expect a constrained outlook on that side Well, the business, wow. The different story on the Advanced Materials and I think Bob you pointed to good growth geographically globally outside of China. Speaker 201:00:02And then Phil, I know you and the team got a whole bunch of initiatives around the applied markets, particularly not only PFAS, but Advanced Materials. And I thought Good opportunity for me to introduce you to the audience and have you share your perspective on what we're doing on the Applied on the Advanced Materials side. Speaker 1201:00:20Yes. Thanks, Mike. And yes, certainly, we've mentioned that you've talked around the activity within labs being ex China at least being reasonably robust. But on the applied market side and certainly around Advanced Materials, We're certainly relatively strong in those markets and we're seeing good really good generation around the batteries market. And of course, we've spoken about the onshore process around there in the Advanced Materials area. Speaker 1201:00:54So Globally, that also obviously comes into the onshoring and globally we're in strong positions in those markets and have been historically and Continue to innovate strongly around those markets and stay close to those customers. Thanks. Speaker 201:01:10Thanks, Phil and welcome. Operator01:01:18Thank you. We go next now to Dan Leonard at UBS. Speaker 1501:01:23Thank you. I wanted to circle back for a moment on the Q1 guide. You spoke about a challenging year on year A couple of times. But as you're thinking about the Q4 to Q1 sequential ramp in dollars, how much of that decline forecasted Is what you chalk up to seasonality versus prudent, if you could give us a flavor? Speaker 301:01:48Great question, Bob. Yes, Dan, that's a great question. If you looked at last year and Our revenue went down roughly $90,000,000 $90,000,000 $95,000,000 from an Extremely strong Q4 to also a very strong Q1. If you look at the midpoint of the guide, it's a little over 100 $105,000,000 $110,000,000 So there is an element of looking at what we did last year, again, not assuming a strong budget. I don't want to kind of parse it out to give you a percent, but that kind of at least gives you kind of how we were thinking about the Q1 Got it relative to what we saw in Q1 of last year. Speaker 1501:02:35Appreciate that. And then as a follow-up, Can you remind me in 2024, when do we lap the headwinds on the genomics side? And what is your appetite For continued investment in genomics as part of the DGG portfolio? Speaker 301:02:50Yes, I would expect us to we will have a difficult Q1 And then starting to get better from Q2 and beyond, not dissimilar from the rest of some of the businesses. And then I'll let Mike talk about Speaker 201:03:05the kind of the investment. Yes, I think first of all just to remind the audience when we talk about the Genomex business, what are we talking about? Got a $500,000,000 business, probably 50% of it's in QAQC instrumentation where we are the undisputed leader here, A lot of appetite to invest here. Our tape station product, particularly the consumables business is on fire right now. Capital side is constrained as we've seen across the marketplace. Speaker 201:03:30And then, I think we all believe in the view that NGS will continue to be a growth market for us And for the industry, I think that people are dying on back their expectations about how robust it is for a period of time and I think we're seeing that in our business. So Why do we make some of the structure changes we made on the portfolio because we want to ensure that we've got the ability to Have a healthy P and L, while at the same point in time investing in growth. So there's a reallocation of R and D dollars happening as a result of some of the changes we've made that we talked about Also, answer the story is we have a lot of appetite for focused investments in areas where we think we can win in genomics. Speaker 301:04:11Thank you. Operator01:04:17Thank And ladies and gentlemen, that is all the time we have for questions this afternoon. I'd like to turn things back to you, Mr. Ahuja, for any closing comments. Speaker 101:04:25Thanks, Beau, and thanks everyone for joining the call today. With that, we would like to end the call. Have a good day everyone. Operator01:04:33Thank you. Again, ladies and gentlemen, that will conclude the Agilent Technologies Q4 2023 earnings call. Again, thanks for joining us and we wish you all a great evening. Goodbye.Read moreRemove AdsPowered by Conference Call Audio Live Call not available Earnings Conference CallAgilent Technologies Q4 202300:00 / 00:00Speed:1x1.25x1.5x2xRemove Ads Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) Agilent Technologies Earnings HeadlinesAgilent to Announce Second-Quarter Fiscal Year 2025 Financial Results on May 28April 16 at 5:42 PM | gurufocus.comRep. Jefferson Shreve Sells Off Shares of Agilent Technologies, Inc. (NYSE:A)April 16 at 2:03 AM | americanbankingnews.com$2 Trillion Disappears Because of Fed's Secretive New Move$2 trillion has disappeared from the US government's books. 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Email Address About Agilent TechnologiesAgilent Technologies (NYSE:A) provides application focused solutions to the life sciences, diagnostics, and applied chemical markets worldwide. The company operates in three segments: Life Sciences and Applied Markets, Diagnostics and Genomics, and Agilent CrossLab. The Life Sciences and Applied Markets segment offers liquid chromatography systems and components; liquid chromatography mass spectrometry systems; gas chromatography systems and components; gas chromatography mass spectrometry systems; inductively coupled plasma mass spectrometry instruments; atomic absorption instruments; microwave plasma-atomic emission spectrometry instruments; inductively coupled plasma optical emission spectrometry instruments; raman spectroscopy; cell analysis plate based assays; flow cytometer; real-time cell analyzer; cell imaging systems; microplate reader; laboratory software; information management and analytics; laboratory automation and robotic systems; dissolution testing; and vacuum pumps, and measurement technologies. The Diagnostics and Genomics segment focuses on genomics, nucleic acid contract manufacturing and research and development, pathology, companion diagnostics, reagent partnership, and biomolecular analysis businesses. The Agilent CrossLab segment provides GC and LC columns, sample preparation products, custom chemistries, and laboratory instrument supplies; and offers services portfolio, including repairs, parts, maintenance, installations, training, compliance support, software as a service, asset management, and consulting services. The company markets its products through direct sales, distributors, resellers, manufacturer's representatives, and electronic commerce. 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There are 16 speakers on the call. Operator00:00:00Welcome to the Agilent Technologies Q4 2023 Earnings Conference Call. My name is Beau and I will be coordinating your call today. I will now hand you over to your host, Parmit Ahuja, Vice President, Investor Relations. Please go ahead, sir. Speaker 100:00:21Thank you, Beau, and welcome everyone to Acheron's conference call for the 4th quarter of fiscal year 2023. With me are Mike McMullen, Agilent's President and CEO and Bob McMahon, Agilent's Senior Vice President and CFO. This presentation is being webcast live. The news release for our Q4 financial results, Investor presentation and information to supplement today's discussion along with the recording of this webcast are available on our website at www.investor. Agilent.com. Speaker 100:00:58Today's comments by Mike and Bob will refer to non GAAP Financial measures. You will find the most directly comparable GAAP financial metrics and reconciliations on our website. Unless otherwise noted, all references to increases or decreases in financial metrics are year over year and references to revenue growth are on a core basis. Core revenue growth excludes the impact of currency and any acquisitions and divestitures completed within the past 12 months. Guidance is based on forecasted exchange rates. Speaker 100:01:34We will also make forward looking statements about the financial performance of the company. These statements are subject to risks and uncertainties and are only valid as of today. The company assumes no obligation to update them. Please look at the company's recent SEC filings for a more complete picture of our risks and other factors. And now, I'd like to turn the call over to Mike. Speaker 200:02:00Thanks, Parmit, and thanks, everyone, for joining our call today. Before we get into discussing our results and outlook, I want to mention that we're joined today by Pura McDonald, President of the Agilent CrossLab Group And Sam Raha, President of the Agilent Diagnostics and Genomics Group. We're also joined this call for the first time by Phil Binns, President of the Agilent Life Sciences and Applied Markets Group. Phil's name may be new to some of you, but he's well known at Agilent and in the industry. Phil has been with us for more than 13 years, coming over the Verint acquisition and overseeing our market leading spectroscopy business. Speaker 200:02:38We're extremely pleased to have some of Phil's knowledge, experience and proven leadership strength heading up our LSHE business. In his short time in the role, we've already seen Phil add tremendous value as a member of our senior leadership team. Welcome, Phil. Now, on to our Q4 results. The Agilent team once again continued to perform well under challenging market conditions. Speaker 200:03:03Revenue of $1,690,000,000 declined 9.7% core after increasing 17.5% last year. This is at the high end of our guidance. Our proactive approach to manage our cost structure in this market environment helped us deliver healthy 4th quarter operating margins of 27.8%. Q4 earnings per share of $1.38 exceeded our guidance. While this was a decline of 10%, it comes against a tough compare last year when EPS grew 26%. Speaker 200:03:36While the market continues to be challenging, we believe we're starting to see signs of stabilization. As an encouraging data point for the quarter, Our book to bill ratio is 1 for the company and greater than 1 for our LSAG instruments. Let's now take a close look at our Q4 Starting with our regional results. During the quarter, while down year on year, we delivered sequential growth except for China as expected. In China, our business declined 31% year on year, after growing 44% in Q4 last year. Speaker 200:04:08While China was down sequentially, these results are very much in line with our expectations. In the year on year, monthly performance improved slightly as the quarter progressed. In addition, orders were slightly higher than revenue for the quarter. While it is too early to call these two data points a trend, We see this as a current sign of potential stabilization. In late September, I traveled to China for the first time since the COVID outbreak To meet with the Agilent team, key customers and government officials, I was reminded of both the sheer size of the Chinese economy and our market there. Speaker 200:04:42I saw firsthand the work being done to bolster economic activity in the near term and create an environment that will support continued growth into the future. I remain convinced China will continue to play an important role in life sciences and I'm confident that the China market will return to growth. And looking at our largest end market, pharma declined 14%, driven by continued caution among customers on capital expenditures for new instruments. Within pharma, biopharma formed better than small molecule. Geographically, our biopharma business outside China grew high single digits. Speaker 200:05:20Looking at performance by business unit, the Life Science and Applied Markets Group delivered revenue of $928,000,000 down 18% core Versus a tough compare last year above 22%. Customers continue to hold off on capital expenditures, particularly in the pharma segment of LSAG's business, which declined in the high 20% range. This is against growth in the low 20s last year. On the other hand, We continue to see strong customer demand and growth in our PeakVast solutions as well as continued strength in the Advanced Materials segment. These are 2 secular trends we've highlighted before and we remain optimistic about future growth in these market segments. Speaker 200:06:02While the market environment remains challenged, we continue to innovate and provide unique solutions for our customers. The new products we launched in June at ASMS, In particular, the 6,595 LC Triple Quad, which is focused on key applications like PFAS, Continue to generate positive customer interest and new orders. We are also bringing innovative new solutions for customers across the biopharma value chain. We saw a number of our online PLC systems with large biopharma companies. The systems are easy to use, Reliable and delivers significant value by providing fully automated analysis of critical quality attributes, allowing real time decision making outside the lab. Speaker 200:06:46The Agilent Cross Site Group posted revenue of $404,000,000 up 4% core and 6% on a reported basis. ACG delivered growth across all end markets and in all regions except China. The contract services business was up double digits, offset by the services associated with new instrument placements. Our strategy of increasing the connect rate continues to pay off. In the quarter, the contract services business represented 65% of ACG revenue, a number that has grown nicely over the years. Speaker 200:07:21The Diagnostics and Genomics Group delivered revenue of $356,000,000 flat on a core basis and up 1% reported. DDG's results led by the pathology and NASD businesses, which both delivered low double digit growth. These strong results were offset by the continued market challenge in genomics for both consumables and instruments. Our NASDAQ portfolio and capacity expansion are continuing as planned. We're confident in the long term growth prospects for the markets we serve. Speaker 200:07:51Before I finish covering DGG, I want to thank Sam Raha for his contributions over the years Help us to build a strong foundation for the DGG business. Speaker 300:08:00I wish Sam well. In addition Speaker 200:08:03to these business group highlights during the quarter, We will recognize for our commitment to sustainability. Agile's near long term targets for reaching net 0 greenhouse gas emissions have been improved by the highly regarded Science Based Targets Initiative. A year ago, we entered 2023 sharing a view of economic and industry uncertainty as we guided for moderating growth in the second half of twenty twenty three. We had not anticipated, however, The significance of the market headwinds the industry eventually faced, particularly in the pharma market in China. Despite the challenging market conditions, we delivered full year revenue of $6,830,000,000 growing 1.5% core. Speaker 200:08:48While our full year growth was lower than initially expected, we met or exceeded every quarterly guidance range we provided, A solid testament to the team's execution ability. Included in FY 'twenty three results, our 4 year compound annual growth rate is 7%. This is at the high end of our long term growth guidance. In FY 'twenty three, we delivered operating margins of 27.4%. This is up 30 basis points this year and up more than 400 basis points over the last 4 years. Speaker 200:09:20Earnings per share of $5.44 were up 4%, delivering leverage earnings growth for the year. Our full year compound annual growth rate for EPS is 15%. Looking back, 2023 was a challenging year. What I'm particularly proud of is the Agilent team's ability to quickly pivot and take action to adjust these challenges while staying relentlessly focused on our customers. While we work to significantly reduce expenses, Aflac's customer satisfaction ratings remain on all time highs. Speaker 200:09:53At the same time, Our employee engagement continues to be excellent as we achieved a number of best employer awards over the last year. All this helped us deliver another year to leverage earnings in an extremely difficult market environment. Before turning it over to Bob for more detail, I want to provide some high level perspective on FY 'twenty four and beyond. For 2024, we anticipate a slow but steady recovery throughout the year. In our initial outlook, at the height of our guidance, we expect revenues to return to growth. Speaker 200:10:26At the same time, our range for EPS in the year ahead Our end markets are powered by investments in improving the human condition. The pace of science, Innovation and discovery continues to increase, which will fuel further growth. We remain focused on winning in the marketplace, Our differentiated product services and most importantly, our One Agilent team are all essential to the success of our customers. We are well positioned for long term growth. Bob will now share more detail on the quarter and the year, along with more specifics on our initial view for 2024 and Q1. Speaker 200:11:16Thank you for joining us today. And now, Bob, over to you. Speaker 300:11:20Thanks, Mike, and good afternoon, everyone. In my remarks today, I'll 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 Q1. Unless otherwise noted, my remarks will focus on non GAAP results. Agilent finished the 4th quarter with core growth at the top end of guidance and EPS exceeding our expectations as we executed well against challenging macroeconomic conditions. Speaker 300:11:55Q4 revenue was $1,690,000,000 Down 9.7% core and 8.7% on a reported basis. This is after growing 17.5% in Q4 of last year when we benefited from the recovery from the Shanghai shutdown in Q2 of last year. This created an estimated one 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. Speaker 300:12:33Revenue in our largest market pharma declined 14% Versus 20% growth in Q4 of 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. On outside China, small molecule was up sequentially in the quarter. Speaker 300:13:04Chemicals and Advanced Materials declined 11% versus growth of 27% last year, while flat sequentially. Our Chemicals and Energy sub segments 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. Speaker 300:13:46We 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 to 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. Speaker 300:14:30The 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 and L, I'd like to quickly summarize some full year highlights by end market and geography. Speaker 300:15:11From 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 and L for the quarter. Despite the revenue declines, our team continues to execute at a very high level. 4th 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. Speaker 300:15:47Below the line, we benefited from stronger than expected cash flow generating incremental interest income in the quarter. Our tax rate was 13.75 percent and we had 293,000,000 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% or on the top line, 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. Speaker 300:16:39Turning to cash flow and the balance sheet. I'm incredibly proud of the Agilent team as Q4 continued to string a very strong quarterly cash flow results. In Q4, We generated operating cash flow of $516,000,000 well over 100% of adjusted net income and invested $84,000,000 in capital expenditures. CapEx spending is driven by our ongoing NASD capacity expansion, which remains on track. For the year, we delivered $1,500,000,000 in free cash flow, An increase of 44% over last year. Speaker 300:17:19Our 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 $66,000,000 in dividends and spent $80,000,000 to repurchase shares. And for the year, we returned $840,000,000 to shareholders through $265,000,000 in dividends $575,000,000 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. Speaker 300:18:05It's worth noting that we've 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 Q1. 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. Speaker 300:18:39Given the expected slower market conditions, We've taken additional steps to adjust our cost structure. Incorporated into our guidance is roughly $175,000,000 of cost savings. Given the significance, I want to provide a little more detail on these actions. Roughly 30% of the savings or related to portfolio optimization decisions we've 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. Speaker 300:19:23Along with these actions, we've taken a $46,000,000 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 leverage earnings growth in FY 2024 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're going to be prudent in our initial guidance. Speaker 300:20:10For the full year guide, we expect revenue in the range of $7,100,000,000 to $6,810,000,000 This represents a core growth range from a slight decline of 0.5% at the low end to one point of growth at the high end. Currency is a headwind of 1.2 points, while M and 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. Speaker 300:20:57From 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 twenty twenty four to look similar to the second half of FY twenty twenty three 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 percent and 293,000,000 shares outstanding. Fiscal 2024 non GAAP EPS is expected to be in a range of $5.44 to $5.55 This range represents flat to 2% growth versus FY2023. Speaker 300:21:48From a cash flow perspective, we expect another robust year. We are expecting roughly $1,600,000,000 in operating cash flow and $400,000,000 in CapEx as spending increases on NASD's trained C and D expansions. Looking to Q1, 2024, We expect revenue in the range of $1,555,000,000 to $1,605,000,000 This represents a core decline of 11.3% to 8.5% with currency and M and 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. Speaker 300:22:40Q1 2024 non GAAP earnings per share expected to be between $1.20 $1.23 as the cost savings fully ramped 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 growth 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 Parmit for your questions. Parmit? Speaker 100:23:13Thanks, Bob. Beau, if you could please provide instructions for the Q and A now. Operator00:23:19Thank you, Mr. When prepared to ask your question, please ensure your phone is unmuted locally. We'll go first this afternoon to Vijay Kumar at Evercore ISI. Speaker 400:23:43Hi, guys. Thanks for taking my question. Good morning, Gabe. And some helpful comments here. My Maybe starting with those book to bill comments here, overall company one turn, LSAG instrumentation looks like its turn. Speaker 400:23:58Curious what does book to bill numbers for ex China? And if instrumentation has turned, That Q1 guidance, comps get easier. Why is Q1 assuming no benefit from the Stern and Instrumentation? Speaker 300:24:14Yes. Hey, Vijay, let me take that. I think if you look at the book to bill ratio, It's for LSAG Instruments, it's actually very similar both including China and excluding China. China was actually slightly Positive as well. So that's a good sign. Speaker 300:24:33And as we mentioned in the prepared remarks, we're taking a prudent approach to our Q1. And certainly, we see this as a positive. We did have some we typically do have Seasonality from our Q4 to Q1, but we're taking it kind of 1 quarter at a time. Speaker 200:24:55I think part of the big story too, Vijay, is the 10% comp from last year as well. But as we said in the call, we were It was encouraging to see some initial signs of stabilization with that kind of book to bill on the instrument side. Speaker 400:25:12Understood. I'm glad to hear prudency and right off Speaker 300:25:15the bat Speaker 200:25:16here. We got that into the script, Vijay. Speaker 400:25:22Just one more layer on guidance here. What are you assuming for NAST in China for fiscal 2024? Speaker 300:25:31Yes. So for China, we are thinking mid single digit decline for the full year, so very similar to this year. And then for NESD, right now we're expecting low single digit mid single digit growth. Speaker 400:25:49Yes. Fantastic. Thanks guys. Sure. Operator00:25:54Thank you. We go next now to Patrick Donnelly at Citi. Speaker 500:25:59Hey guys, thanks for taking the questions. Hey, Mike. Maybe kind of a follow-up on the 1Q guide. It seems like again the orders encouraging, maybe a little bit prudent on the guide as you said. I guess when you think about just the implication for the ramp 2Q to 4Q, Is it optimism in the market based on some of those order trends? Speaker 500:26:23Is it obviously the comps get easier in And can you just talk about the visibility into the recovery and kind of what gives you the confidence in the ramp as the year progresses here? Speaker 200:26:33Yes, sure Patrick. How about if I lead off Bob and then you can add any additional comments you'd like to make here. But when we think about this conference around what we described as a Gradual recovery and growth. I think it's first of all important to remind the audience that we do expect the first half of the year to be very much like what we saw in the half of 2023. But looking forward, why do we think that things are going to be different in the second half, which is, though it's initial and still early, There are some early signs of potential stabilization that you see in our order book. Speaker 200:27:05The fact that book to bill for the company was above 1, the fact that we had the same result in our instrument business, It's been the most pressured part of the company. And listen, while it's too early for customers to be confirming their 2024 budgets with us, Let's go back to the sales funnel, which is a predictor of potential growth, right? So our sales funnels continue to show a lot of interest from customers And we know that at some point in time, those things will start to release. The funnels remain healthy. And listen, in an environment like this, we've seen these things before, which was healthy capital spending has been constrained. Speaker 200:27:41So some release can be expected. And we hear I don't want to get too far down my skis on this, but we hear customers talk about some new focused investments. I think We're not calling for a big broad based market recovery, but certain segments of the market are going to be better. We're talking about some investments in R and D tools, what's going to PFAS testing capacity expansion plan we're hearing from our customers, Advanced Materials. And then as you mentioned earlier, Patrick, there is an easier compare in second half twenty twenty four as well. Speaker 200:28:12So we do expect this return to growth and I think it's not simply the hope. We've got Some information to kind of back up our thinking there. Again, we'll know a lot better about how things look when we get to the budgeting phase with our customers in early 2024. Again, right now, the markets for capital instruments still remain quite challenged. And as I mentioned earlier, we are seeing encouraging signs of potential stabilization. Speaker 200:28:38It's going to be a journey for our return into growth and I think our guide reflects that. And again, I think we've got High degree of confidence this is what the back half of the year will look like. Speaker 300:28:49Yes. Hey, and Patrick, you asked about Q1. As I mentioned in the prepared remarks, I think we're more taking a prudent approach here. But we're also going up against last year where we did have a budget flush. It happened earlier in the year, but for delivery in November December and we're assuming that we're not seeing that or building that into our estimates. Speaker 300:29:13So if that happens then that would be a nice thing for all of us. Speaker 200:29:17Yes, absolutely Bob. Speaker 500:29:19That's helpful. Yes, I appreciate that Bob. And maybe Bob just on the margin side, helpful to hear you talk through a few of the different Moving pieces, it sounds like some cost savings in DGG among others. I guess can you just give a bit more color on kind of the moving pieces where you're pulling some levers, the ability to take out Some additional costs to hit these margin numbers, obviously you talked about margins being up a bit. I think there are some headwinds like incentive comp things like that. Speaker 500:29:45So maybe just talk about The gives and takes there and confidence in terms of some of the cost outs. Speaker 300:29:50Yes, that's a great insight there, Patrick. Yes, Because we do have some add backs, I would say that so don't take that $175,000,000 and drop it to the bottom line because we have some resets. I would say Roughly half of that is kind of a reset between our sales comp and variable pay. If we think about it, it's really across the P and L. The biggest piece actually is in DGG with the exit of the res bio business, but we've also taken some tough decisions in other product lines to streamline The portfolio there and I would say roughly a little over 30% of that is associated with that. Speaker 300:30:28The other 25% is really within our COGS. Our OFS team has done a phenomenal job of really kind of leaning into reducing our costs around logistics and material costs. And then I talked about the site consolidation as well, which will show up and down the P and L. So we've taken a look at our real estate footprint and have actually closed several smaller sites between around the world really. And then the final piece is really kind of infrastructure which would be discretionary spend, but then also headcount reductions that would be focused on areas where we've right sized it to the demand. Speaker 200:31:15And Patrick, this is Mike. Yes, sorry about the confidence about the growth recovery. I think when it comes to hitting the 175 High degree of confidence, we control this 100% and we'll deliver on this. Speaker 500:31:29Very helpful. Thanks Mike and Bob. Appreciate it. Operator00:31:35Thank you. We'll go next now to Matt Sykes at Goldman Sachs. Speaker 600:31:39Hey, good afternoon. Thanks for taking my questions. Sure, Matt. Maybe just on NASD, I know it's just over the past call it year and a half, we've We've gone from high double digits to low double digits and next year mid single digits, which is probably just some level of normalization as you ramp capacity. But just given the step up in CapEx you're guiding to next year, is there some wiggle room in terms of how you guys lay that capacity out? Speaker 600:32:05Or is the confidence in that End market growth enough to keep investing in that area next year? Speaker 200:32:14Yes, I'll jump right in on that one. So I tried to make that come out in the script, but our plans to continue to invest for the Long term growth of this business remains high. We're going full steam ahead on the capital expansions and they're Tracking according to plan. In fact, I think we'll probably do a little bit better on the cost side when all said and done relative to The CapEx that's involved. And Bob, maybe you can talk a little bit about some of the things we're seeing relative and I think we've commented on this before, but what are we seeing in the marketplace relative to 2024 relative to NASD. Speaker 300:32:48Yes, I think, Matt, it's a great question. And so if we look at the details of kind of the mix, Actually, I would say we have the most healthy mix of portfolio in NASD in 24 than we've had. So a significant increase in the number of programs that we are going to have being going through. Now it's a bigger component of clinical volume versus commercial volume, Which I actually think bodes very well for the future going forward. We have seen some, I would say some pausing of certain customers as they associated with IRA, but we think that that's transitory. Speaker 300:33:27So as Mike said, We're not at all concerned about the long term growth prospects of this market. And in fact, many of the programs that we're seeing come into our Portfolio are actually as what we had talked about in previous calls, much larger targeted patient populations, Which really speaks well to the volume. And then as Mike mentioned, we're actually expanding our portfolio, our And so it's not just siRNA, but we're having the ability to continue to grow our CRISPR GMP grade CRISPR business as well as antisense. So we're continuing to do that as well. Speaker 200:34:06Hey, and Sam, I know This will be your last call, but I thought it might be interesting for you to jump in here for a second. As part of your transition, you've been talking to a lot of our key customers. And I think We're hearing the same story from them about long term growth between investment here. Speaker 700:34:20Yes, absolutely. Mike, I'll just add a couple of things to your and Bob's comments. 1, we are now on contract with more major pharma than we ever have been. And it's very promising. If you look at publicly the percentage of their overall R and D budgets that they're now spending on therapeutic oligos and we are in the driver's seat to win those opportunities. Speaker 700:34:43And just in the last couple of weeks alone, I've spoken with a number of our lead pharma partners and Dave reaffirmed, so there's a slight Navigation through the IRA, as Bob mentioned, the conviction on their end of the market potential remains unchanged and we are in the leadership position to pursue that. Thanks, Speaker 800:35:02Sam. Got it. That's great Speaker 600:35:04amount of detail. Thank you. Maybe just Bob for you, just on pricing, Kind of what's embedded for next year as you think about pricing and how is pricing kind of trended over the course of this year? Are we back to sort of Normalized levels of pricing that you guys have historically achieved or is there still some pricing gains to see sort of as we move into next year in certain areas of your business? Speaker 300:35:26Yes. Hey, Matt, that's a great question. And we ended the Q4 at just a little under 3% and For the full year was greater than that. So it actually continues to be hold up very well. What we're building into our plan for next year It's roughly 2 percentage points of price, which as you know is greater than our historical kind of pre COVID levels. Speaker 300:35:49And so what we've been able to do I think is Really speaks to the value of the value proposition that we have as well as the emerging mix of our businesses as well. Speaker 400:36:01Thank you. Operator00:36:04Thank you. We go next now to Rachel Battenstall at JPMorgan. Speaker 900:36:10Great. Good afternoon and thanks for taking the questions. So first up, I just want to ask on China. You mentioned that the region was down 30% this quarter. That was in line with your You're expecting it to decline mid singles again next year. Speaker 900:36:22So I guess just how much of a function is that really due to some of the comps and starting to lap The easier comps late into next year versus, is there anything structurally wrong with that market? And do you expect China to continue to grow on that medium to long term? Speaker 200:36:41You want to take the first part, Bob? I think it's Speaker 300:36:43Yes, yes. So, well, I think from the standpoint of the comps, what we would see is obviously if you looked at what we did In the first half of this year, we had very strong growth and then we're going up against extremely difficult comparisons this year. I mean, As I mentioned, we were down 40 up 44% in Q4 of last year, so down 31% this year. We're still up over the 2 years. And as we think about this similar to the rest of the kind of the guide, We're expecting kind of declines in the mid-20s in Q1 and getting better from there. Speaker 300:37:21And Some of that it will be an easier comp and I'm sure Mike will talk a little bit more about this, but we don't see anything structurally changing in the Chinese Speaker 200:37:32Yes, absolutely, Bob. So I want to pick up from there. So I made a few comments about this in the prepared remarks, but I made my first trip to China since October 2019 when we're there for the BCIA show. And what did I see? First of all, I saw Just to remind how quickly things can happen in China. Speaker 200:37:51Electric vehicles everywhere, a lot more green, digital Adoption was just amazing. I don't think anybody uses cash there anymore. And then you also remind as you travel around the country just how big a country is, how big the economy is and how I think the markets are for life sciences. But to your specific question, here's what I was hearing from customers and my team and what I've seen as well, which was Why do we think this market eventually will return to growth? All the things that have been driving this market of the years, which is primarily The Chinese government's 14 5 year plan, they're still on it. Speaker 200:38:27They're pointing to long term growth, improving the quality of life in China. We're hearing stories of new environmental regs coming from PFAS, the anti corruption impacts that we've seen in the health and pharma. The pharma space looked to me if they have peaked with a lot of the actions occurring, which could ultimately long term lead to more R and D investments because there'll be less money being spent in the SG and A area. But I don't want to be too short term optimistic about this Expansion of growth because the business is bouncing along at a certain level. And that's why we called stabilization in our Prepared remarks. Speaker 200:39:07So what we're seeing, what we're forecasting, what we're hearing is from our teams and our customers, Don't expect any significant near term improvements, but don't expect any significant near term deterioration either. And I think that's why when you look at the year to year numbers in terms of growth rate, Bob, it's probably a comp as compare issue. But we've had a couple of months now The business run at a certain level and that gives us the sense that we'll be I think we used the word potential signs of stabilization. So hope that helps. Speaker 900:39:38Yes. No, that's helpful color. And then I just want to dig a little bit more on your comments around next year. So you mentioned that you expect the first half To be similar to what you're seeing in the back half of this year. So I guess can you just walk us through in a little bit more detail what exactly you mean by that? Speaker 900:39:52Should we be expecting similarities from an organic growth Div, or are you really talking about more from a revenue dollar standpoint? And then same type of question on the trajectory of the rebound on margins and EPS next year, should we expect Kind of that similar ramp given the cost dynamic as well. Speaker 300:40:10Yes. I think if I'll try to Sure. All that in short order, Rachel. As we think about the first half of the year, yes, We think that we as we look at our business and look at that kind of book to bill, we've kind of troughed in Q2. Q3, I think we mentioned actually was a little better. Speaker 300:40:31It was less than still less than 1 and then Q4 continued to improve. And our expectation is that that kind of performance will continue. Now we're going up against difficult comps when we were actually bleeding down our inventory. And that particularly happened in Q1 and Q2 of last as we were talking about it. And so I would expect us to have the trough in Q of 2024 be in Q1, Q2 being a little better and then growing out of that as we benefit from the easier compares. Speaker 300:41:03And I would expect Our P and L and the EPS to look very similar to that. Q1, we are we've taken most of the actions there. They will have All been taken in the Q1, but they won't have a full quarter. And so we'll have full quarters of the cost savings in Q2 through Q4. And so as that business kind of improves as the business improves, We'll get more and more leverage on the bottom line. Operator00:41:42Thank you. Moving on now to Derik de Bruin at Bank of America. Speaker 1000:41:48Hi, good afternoon. Speaker 400:41:49Sure. Good afternoon, Derik. Speaker 1100:41:52Hi. So can we talk a little bit about pharma? That market was up and down all year, Not a lot of visibility. Are you seeing some of the orders that were sort of stuck And the funnel is starting to come loose, right. I mean, how are you sort of looking at the pharma market going forward? Speaker 1100:42:13Yes, Speaker 200:42:14I think the answer is the deal funnel still remain elongated. So Yes, I Speaker 1200:42:19think what we see from our funnels is that They're growing, but the velocity in closing deals from the point of funnel to order is still static on that side Speaker 300:42:34Yes. And hey, Derek, I think if we think about the pharma end market, we're assuming very low single digit growth for next year. And some of that is actually getting past the tougher comps in China. If we looked at actually Our pharma business ex China, we grew in FY2023 and actually our biopharma business grew in total. And we think about small molecule was the area that was dragging the pharma business As you know very well that typically has a replacement cycle. Speaker 300:43:13We are well into that replacement cycle. We were up very high, you kept calling it. And we've seen that be very depressed and our expectation is that will start coming back in earnest in 2024, But probably in the back half of twenty twenty four. Speaker 1000:43:30So this goes to I'm sorry to Speaker 1100:43:32beat this up, but your China you've got going down. Pharma, you just basically said you've got not you don't have a ton of visibility. You hope that things will come back. I'm just not I'm curious why you can put a little bit more cushion in the guide like that. It just feels like it still feels like it's a little bit it still feels like it's a little back end. Speaker 1100:43:50Well, it's not a little it's a lot back end heavy given where we are sort of in on the cycle. Speaker 200:43:56Yes. I think as we said earlier, Derek, there's reason to believe that not only do you have the comps working in our favor for the second half, that's real. And we know that customers want there's interest in the products. And I think they've got to step in by the way, we're not Calling for this miracle snapback in 2024, but we're also saying that small molecules are going to continue to decline 20%, 30% The numbers we're seeing this year, particularly that's where the pressure has been. But we know that biopharma, they need some tools for R and D. Speaker 200:44:31We know that replacement cycles only last can only be held up for so long. So there's a confidence relative to What we see in the funnels, deals aren't coming out of the funnel. And then although we are focusing here on pharma right now in this commentary, There's a lot of other strength in some of the other secular markets and the implied markets in particular, which is a nice diverse location we have on the instrument side as well. And Bob, I don't know if there's any additional thoughts on the pharma story? No. Speaker 200:44:59Yes. Okay. Speaker 1100:45:01And just one final one, just what were bookings? I mean, I know the book to bill was greater than 1, but I'm just curious in terms of bookings. And do you often see a spike in bookings in Q4? Basically, I'm just trying to get the sense of like what you saw as a head fake or you've got where you think you've got real demand here? Speaker 300:45:21Yes. So we don't give the absolute dollars other than to say it was greater than 1. It was 1 roughly 1 for the total company and then instruments were higher. Typically, we do see a Q4 Typically, we do see a Q4 where it is higher. So this particularly because we have October in our results. Speaker 300:45:49And so last year was actually A aberration, so to speak, as we're working down the backlog, and this kind of gets back to our normal process. Speaker 200:46:01Yes. And through the quarter, Derek, we saw our normal seasonality. Yes. So there wasn't anything unusual about the order pattern to kind of say, Is this a head fake or not? So I think that also is one of the reasons why we said okay, early signs of some stabilization here. Speaker 200:46:15Again, Not huge growth, we're saying stabilization. Correct. Great. Thanks. Speaker 400:46:22Sure. Operator00:46:24Thank you. We'll go next now to Jack Meehan at Nephron Research. Speaker 1300:46:30Thank you. Good afternoon. Speaker 800:46:31Good afternoon, Jack. Speaker 1300:46:33So wanted to dig a little bit more into LSAG in the quarter. Can you break down the growth between instruments and consumables? Just any commentary across product lines? Speaker 300:46:47Yes. Everything I would say For the quarter was pressured, although consumables performed better than the instrumentation. Our consumables business was down kind of low single digits and against a very tough comp of Almost 9%, 10%. And if you looked at it ex China, that was largely influenced by China. We grew low single digits in consumables. Speaker 1300:47:18Okay. And so does that imply instruments maybe down over 20% in the quarter? Speaker 1100:47:26They were down. Yes. Speaker 1300:47:30Okay. Yes. And I guess Maybe just to follow-up on Derek's question. I think everybody is trying to think about the right way to interpret this book to bill commentary, but just Is there any additional color you can share on the magnitude? Were orders down in the quarter? Speaker 1300:47:47I guess just trying to understand because there was an easy For a difficult comp on revenue like our orders kind of more don't have a similar level of volatility, It should have mathematically been overrun, right? Speaker 300:48:03Yes. So the orders were down year on year, but obviously down not as much as revenue It was down year on year. And so when we look at it, I think that's kind of shows though the stabilization because we had Some pretty significant revenue last year because of the Recovery in the for Shanghai shutdown. So I don't think that that we actually think that this is the best way to kind of look at it on a go Because we don't have the play of the backlog happening much anymore. And so actually as we look at it on a quarterly basis, We've seen a nice steady progression up back to historical numbers. Speaker 300:48:47And Jack, I think it's fair Speaker 200:48:48to say Bob that one of the things we were conscious of was a lot of commentary about How significantly things were getting in terms of being worse. And as you know, we've been out for some time calling for no year end budget flush, Constrained capital environment, we came into the year actually guiding for slower growth in the second half. So what we're trying to intimate in the call today is What we've been saying for the last several quarters is exactly what we're seeing right now. And I thought we thought a proof point was the book to bill, which Listen, it's not great out there in terms of robust growth, but the sky is also not falling either. Speaker 1300:49:22Okay. I appreciate all the color. Thanks guys. Operator00:49:27Thank you. We'll go next to Puneet Souda at Leerink Partners. Speaker 1000:49:32Yes. Hi, Mike, Bob. Thanks for taking the questions. Sure. Yes. Speaker 1000:49:38Phil, good to have you and Steve there. First one on CrossLab. Bob, with the 65% of your business being in service contracts, could you elaborate on what Sort of growth contribution we should expect here for the full year and also I don't know if you provided the LSAG expectation contribution for 2024 as well? Speaker 300:50:02Yes. For ACG, We're expecting kind of mid single digit growth as we are with the contracted services piece being double digit, but then being pressured by the instrumentation. So that will be moderated. And for the LSAG business, Right now, we're looking at kind of low single digit decline, again, with a greater decline in the first half of the year and the return So better performance in the second half of the year. Speaker 1000:50:36Got it. Okay. And then on if I could ask a little bit on am I on shoring that's a point that you're pointing that's not Something we have focused on in prior calls, and I hear you that you're growing on the PFAS side, but Could you elaborate a little bit on both semi on shoring as well as the environmental gains that you're having? And why shouldn't that contribute more to your instrumentation growth in 2024? Speaker 300:51:08Yes, it has the potential to do that. And as we talked about it, we're at the beginning of the year and so we want to be prudent there. But there's nothing out there that doesn't say that that should Continue, given the macroeconomic environment and the incentives that governments are providing to continue to invest. And actually what we're seeing is nice business in Southeast Asia as well as India. And I would expect that to continue. Speaker 300:51:37That's where we're placing incremental investments to continue to drive and capture that demand. I would expect the same thing in the environmental area as well, but we're not going to build all of that in right now at the beginning of Speaker 200:51:53the year. I think we saw some trends too we're starting to see which is PFAS is also now driving some testing in the food marketplace As well as every country that we talk to is in the process of further enhancing their own reg. So we wanted to have some other areas of potential growth for the company beyond the story around pharma. Speaker 1000:52:15Got it. Okay. Thank you, guys. Speaker 300:52:17Mhmm. Operator00:52:20Thank you. We'll go next now to Josh Waldman at Cleveland Research. Speaker 1400:52:26Hey, thanks for taking my questions. Maybe one for Bob and then one for Mike. Speaker 1100:52:31Bob, maybe circling back on Derek's question, I wondered if Speaker 1400:52:34you could provide more context on the forecasting process this round or the puts and takes that went into the organic guide. As you Speaker 1100:52:43take a step back, were there segments in Speaker 1400:52:46the business that were like decelerating or slowing as you went into the guide Or maybe areas where you're still trying to find bottom and if so, how did you reflect that in the guide? Speaker 300:52:59Yes. Obviously, this year has been one for the ages in terms of being able to try to manage the forecasting. And so we've taken a number of different angles at it to look at it. So not only growth rates, which I think is the focus here, but also actually If you looked at it on a sequential basis and looked at the actual dollars, I think that that's probably more instructive, Particularly as we were looking at the bleeding of the inventory. I would say what we've seen over the last couple of quarters Is that signs of stabilization? Speaker 300:53:37There are always puts and takes across the various businesses and We think that we've tried to do that. We've built in feedback based on the fields projections, the funnel that Mike and Porek talked about and then In an assumption around the conversion of those funnels and we haven't seen the funnels Slow down, there's still modest growth and we're starting to see the slowing of the elongation. I'm not saying that it's stopped or accelerated in terms of the purchase, but we are starting to see that slowing and you're actually seeing that In that book to bill and when we look at the orders, on a sequential basis, we're starting to see that kind of Stabilization as well. And so that's kind of how we're looking at continuing to go forward. If you kind of just built that going into next year, You would start seeing challenging first half and then better performance in the second half. Speaker 300:54:39Hopefully, that gives you some flavor. Speaker 1400:54:43Yes, that's helpful. And that was actually going to be my follow-up. Maybe, I don't know, Bob or Mike, if Speaker 1000:54:47you want to take it. Sure. Speaker 1400:54:49I was curious If you could maybe quantify where the funnel stands entering 2024 versus maybe where it typically is Entering a year and just how correlative or how much do you think it is a predictor of near term demand? I mean is that Is better funnel conversion at all kind of part of what drives the improvement Speaker 100:55:09as you progress through the year? Speaker 200:55:12I think we're assuming, Parekh and Bob On the same rates, right? No significant improvement. Speaker 300:55:19Correct. We're going up against the first half of this year actually what you saw was The elongation of those cycle times. And so what we're seeing right now is kind of like I said, it's not necessarily fully stable, but It's not declining or increasing at the rate that we saw at the 1st and second quarters of last year. And so you're starting to see that. And so All things being equal, that conversion is actually improving slightly versus year ago. Speaker 300:55:46It's still not back to historical numbers. And that's what we're trying to handicap here as we look at our forecast going forward. Speaker 100:55:57Okay. All right. Appreciate it guys. Speaker 500:56:00So thanks, Josh. Operator00:56:03Thank you. We'll go next now to Daniel Brennan of Cowen. Speaker 800:56:09Great. Thanks for taking the questions guys. Maybe just on China, I know you mentioned I think in the prepared remarks like month to month pacing had improved in the quarter. Just any more color anything on exit rates in China? And if you could, I'd be interested to get like some more color on maybe end market trends in China. Speaker 800:56:25I know you gave some color What you know, biopharma, but could you discuss pharma overall and any other interesting color from an end market basis? Speaker 200:56:34Sure, Bob. Maybe we'll tag team on this, which was I think The relative to the order book, I think we were slightly above revenue for the quarter. No really unusual pacing through the quarter from China. We've been calling I know a lot of the conversation today has been about pharma, But we've been saying for some quarters overall for China, it's been a broad based slowdown. And that's what the business has been. Speaker 200:57:03That's how we ended the year in terms of the end market performance. I will say that we were Pleased that we were in line with our expectations for the business. So again, we described earlier that The business was moving along at a certain overall level. I think we do have a View of China that we will still be down in terms of the revenue for the year, but reflective of where we are, what we're seeing in the business right now. Speaker 300:57:38Hey, Dan, and to build on Mike's Just a couple of other additional data points. We were down Pretty significantly in all end markets in Q4 as you would expect because we were up 44% in Q4 of 2022. And so that's probably not as relevant because we were catching up relative to some of the catch up of the Shanghai shutdown. Another data point though is if we looked at kind of year on year growth, actually we exited October, The year on year performance, it was still a decline, but it was much better than what we saw at the beginning of the quarter. And so we actually saw Sequential improvement, I think Mike mentioned that in his prepared remarks. Speaker 300:58:25And then if we looked at kind of absolute dollars, they've been pretty steady monthly. Speaker 800:58:33Got it. Thanks for that. And then, chemical and advanced material, it was like a tale of 2 cities. It looks like C and E was down 15% in the quarter you said and you talked a lot about PFAS. And so does any more color like what you're seeing on kind of both sides of the coin there? Speaker 800:58:48What's kind of baked in on the core chemical and energy side for the year and just anything on trends there? And then obviously, it sounds like you guys still remain really constructive on the Applied Material side or the Advanced Material Speaker 200:59:01side, excuse me. So how about I'll just lead here with a few comments and then I've been dying to pull Phil in on here as well and maybe talk about some of the things he's seen on the Advanced Materials side, which is A real area of expertise for himself. But I think you're aware of tale of 2 cities is really quite appropriate both in terms of Breakout by segment also by geography. Beau, I think we posted 70% growth, if I remember correctly, in China last year. So I mean that's a tough comp. Speaker 200:59:30I don't care who you are. But we're seeing continued slowness On the C and E side, our major customers here are really conservative in terms of their deployment of capital. Many of our largest customers are on cost control. So that's been that's what you're seeing reflected in the numbers and that's why we expect a constrained outlook on that side Well, the business, wow. The different story on the Advanced Materials and I think Bob you pointed to good growth geographically globally outside of China. Speaker 201:00:02And then Phil, I know you and the team got a whole bunch of initiatives around the applied markets, particularly not only PFAS, but Advanced Materials. And I thought Good opportunity for me to introduce you to the audience and have you share your perspective on what we're doing on the Applied on the Advanced Materials side. Speaker 1201:00:20Yes. Thanks, Mike. And yes, certainly, we've mentioned that you've talked around the activity within labs being ex China at least being reasonably robust. But on the applied market side and certainly around Advanced Materials, We're certainly relatively strong in those markets and we're seeing good really good generation around the batteries market. And of course, we've spoken about the onshore process around there in the Advanced Materials area. Speaker 1201:00:54So Globally, that also obviously comes into the onshoring and globally we're in strong positions in those markets and have been historically and Continue to innovate strongly around those markets and stay close to those customers. Thanks. Speaker 201:01:10Thanks, Phil and welcome. Operator01:01:18Thank you. We go next now to Dan Leonard at UBS. Speaker 1501:01:23Thank you. I wanted to circle back for a moment on the Q1 guide. You spoke about a challenging year on year A couple of times. But as you're thinking about the Q4 to Q1 sequential ramp in dollars, how much of that decline forecasted Is what you chalk up to seasonality versus prudent, if you could give us a flavor? Speaker 301:01:48Great question, Bob. Yes, Dan, that's a great question. If you looked at last year and Our revenue went down roughly $90,000,000 $90,000,000 $95,000,000 from an Extremely strong Q4 to also a very strong Q1. If you look at the midpoint of the guide, it's a little over 100 $105,000,000 $110,000,000 So there is an element of looking at what we did last year, again, not assuming a strong budget. I don't want to kind of parse it out to give you a percent, but that kind of at least gives you kind of how we were thinking about the Q1 Got it relative to what we saw in Q1 of last year. Speaker 1501:02:35Appreciate that. And then as a follow-up, Can you remind me in 2024, when do we lap the headwinds on the genomics side? And what is your appetite For continued investment in genomics as part of the DGG portfolio? Speaker 301:02:50Yes, I would expect us to we will have a difficult Q1 And then starting to get better from Q2 and beyond, not dissimilar from the rest of some of the businesses. And then I'll let Mike talk about Speaker 201:03:05the kind of the investment. Yes, I think first of all just to remind the audience when we talk about the Genomex business, what are we talking about? Got a $500,000,000 business, probably 50% of it's in QAQC instrumentation where we are the undisputed leader here, A lot of appetite to invest here. Our tape station product, particularly the consumables business is on fire right now. Capital side is constrained as we've seen across the marketplace. Speaker 201:03:30And then, I think we all believe in the view that NGS will continue to be a growth market for us And for the industry, I think that people are dying on back their expectations about how robust it is for a period of time and I think we're seeing that in our business. So Why do we make some of the structure changes we made on the portfolio because we want to ensure that we've got the ability to Have a healthy P and L, while at the same point in time investing in growth. So there's a reallocation of R and D dollars happening as a result of some of the changes we've made that we talked about Also, answer the story is we have a lot of appetite for focused investments in areas where we think we can win in genomics. Speaker 301:04:11Thank you. Operator01:04:17Thank And ladies and gentlemen, that is all the time we have for questions this afternoon. I'd like to turn things back to you, Mr. Ahuja, for any closing comments. Speaker 101:04:25Thanks, Beau, and thanks everyone for joining the call today. With that, we would like to end the call. Have a good day everyone. Operator01:04:33Thank you. Again, ladies and gentlemen, that will conclude the Agilent Technologies Q4 2023 earnings call. Again, thanks for joining us and we wish you all a great evening. 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