Robert W. McMahon
Senior Vice President and Chief Financial Officer at Agilent Technologies
Thank you, Padraig, and good afternoon, everyone. in my remarks today, I will provide some additional details on fourth-quarter revenue and take you through the income statement and other key financial metrics. I'll then cover our guidance for fiscal year 2025 and the first quarter of 2025. Unless otherwise noted, my remarks will focus on non-GAAP results.
As Padraig said, we are pleased with our Q4 results. Agilent finished the fourth quarter with core growth in line with our expectations while EPS exceeded our expectations as we executed well against a challenging, albeit, improving market. Q4 revenue was $1.701 billion, a decline of 0.3% core but a sequential improvement of over 400 basis-points. On a reported basis, our revenues were up 0.8% as we benefited from 50 basis points of currency and BIOVECTRA contributed 60 basis points.
Looking at our Q4 performance by business unit, the Life Sciences and Applied Markets Group reported $833 million in revenue. That represents a 1% decline as instrument volumes continue to be constrained by conservative customer capex spending, while consumables grew mid-single digits. Having said that, for our Instruments business, our orders grew year-on-year and for the third consecutive quarter our book-to-bill was once again greater than one. We see this as positive evidence of an ongoing, steady instrument recovery.
Moving on to Agilent CrossLab Group, the business delivered revenue of $426 million for the quarter up 5%. ACG grew in every market and in every region except China, where it was flat year over year but up sequentially. The contracts business, including our fast-growing Enterprise Services business, grew double digits again in Q4 as it has every quarter this year. Our largest customers continue to maximize utilization of their assets, right-size their operations and leverage opex budgets to deliver on their productivity goals and outcomes. We recently received a top supplier award from one of our largest strategic customers in the Applied Markets as a recognition of our longstanding and beneficial partnership throughout the years.
The Diagnostics and Genomics Group posted $442 million in revenue, representing a 3% decline that was slightly above expectations. Pathology saw solid growth globally and was offset by expected softness in NASD and cell analysis instruments.
Now looking at our end markets and geographies, our largest end market, Pharma, declined 1%, slightly better than what we expected. Within Pharma, BioPharma declined mid-single digits, while small molecule grew low-single digits. Encouragingly, all regions except for the Americas grew in the quarter. The Americas region was pressured by the expected decline of NASD. We expect both the Americas region and NASD to return to growth in fiscal year 2025.
In Chemicals and Advanced Materials, revenue grew 1%, with our advanced materials submarket growing mid-single digits, driven by our business in the semiconductor market. Our business in the Diagnostics and Clinical end market performed strongly, growing 7%, driven by Pathology and improved performance in Genomics.
In Environmental and Forensics, we declined 6%, although dollars were roughly flat sequentially. All regions grew except for the U.S., related to timing of orders. That being said, we continue to see very strong growth in PFAS solutions with our business growing more than 40% in Q4 across multiple end markets.
Now wrapping up our end markets, Food was down 3% versus last year while our Academia and government market was down 1%. Geographically, Asia ex-China grew high-single digits and Europe grew low single digits in the quarter, while the Americas and China declined as expected. China was down only 3% and exceeded our expectations. We also booked our first China stimulus orders in October, and anticipate much more in fiscal year 2025.
Now let's move to the rest of the P&L. Gross margin was 55.1% in the quarter, down 70 basis points versus last year driven by lower volume and mix. Our operating margin was 27.4% as our productivity initiatives and the cost actions we took earlier in the year were fully recognized this quarter. The annualization of these savings, coupled with the market recovery and the initial returns from the Ignite transformation give us confidence in driving EPS growth in fiscal year 2025.
In addition, we continue to look for ways to drive EPS growth below the line. Our net interest income was in line, while we benefited from a lower tax rate in the quarter and our share count was 287 million diluted shares outstanding. Now putting it all together, Q4 earnings per share was $1.46. That was ahead of our expectations and up 6% from a year ago.
Now let me turn to cash flow and the balance sheet. We continue to enjoy a very strong balance sheet and healthy cash flows. Operating cash flow was $481 million in the quarter, and we invested $93 million in capital expenditures. For the year, we well exceeded our operating cash flow expectations, with operating cash flow of $1.75 billion. During the quarter, we returned over $400 million to shareholders, consisting of $335 million in share repurchases and $68 million in dividends. For the year, we returned over $1.4 billion to shareholders through repurchasing shares and dividends.
Looking forward, you may have also seen recently we announced a 5% increase in our quarterly dividend, marking another year of increases in advancing our industry-leading dividend yield.
We ended the quarter with a net leverage ratio of 1.1, a very strong number even as we acquired BIOVECTRA in the quarter. Our strong cash flow and healthy balance sheet provide us with plenty of opportunity to invest in the business going forward.
In summary, we performed well and saw steady market improvement in the quarter. We are executing well, staying disciplined, and investing in high-growth opportunities.
Now, let's move on to our outlook for the upcoming fiscal year and first quarter. We expect the recovery that we have seen the past few quarters to continue throughout fiscal 2025. While we expect the market to grow slower than historical rates for the full year, we expect improvement throughout the year with the second half of the year returning to more traditional levels of growth. We expect our results to mirror that cadence of improvement on a core basis.
As Padraig noted earlier, we exited Q4 with a book to bill ratio over one for the company and greater than one for instruments. In addition, Q4 was the first quarter in 2024 that instrument orders grew year on year. While one quarter does not a trend make, it is certainly encouraging. For the full year guide, we expect revenue in the range of $6.79 billion to $6.87 billion. This represents a reported growth range of 4.3% to 5.5%. Currency is a slight headwind of 0.2 points while M&A, related to BIOVECTRA contributes 2% at the low end and 2.2% at the high end. This translates to a core growth of 2.5% to 3.5%. To start the year, we think this is a prudent way to plan given the near-term dynamics in the U.S.
From a geographic perspective, we expect modest growth in the Americas and Europe. While we see funnel activity increasing in China, we are taking a conservative approach on the timing of revenue associated with the stimulus. We expect to see recovery over the course of the year in China, resulting in slightly positive growth for the full year.
From a business group perspective, we expect to return to growth in all three groups, led by ACG. As a note, this statement is true under the new structure as well. As Parmeet mentioned earlier, we will provide recast historical segment information to reflect these changes ahead of our upcoming Investor Day.
In terms of phasing, we expect improvement throughout the year, with more normalized growth expected in the second half of the year. We are projecting roughly 50 to 70 basis points of operating margin expansion for the year. Below the line, we expect net interest expense of $25 million due to the financing of
BIOVECTRA versus the net interest income this year. In addition, we expect a tax rate of 13% and 286 million shares outstanding.
Fiscal 2025 non-GAAP EPS is expected to be in the range of $5.54 to $5.61 and incorporates the planned $0.05 Year One dilution from BIOVECTRA. This range represents a 5% to 6% growth rate and if excluding the BIOVECTRA dilution, a growth rate of 6% to 7% year on year. We expect cash flow to remain strong in fiscal year 2025. We are expecting roughly $1.65 billion in operating cash flow and $450 million in capex as 2025 is the peak spending year for the NASD expansion.
Looking to Q1, we expect revenue in the range of $1.65 billion to $1.68 billion. Our forecast assumes no significant budget flush during the end of this calendar year. This represents a reported decline of 0.5% to growth of 1.3%. Currency is a 30-basis point headwind, while M&A is expected to contribute 1.8 points of growth. We are expecting core growth between a decline of 2% to flat at the upper end. It's important to note that we estimate our projected Q1 year-over-year results will be negatively impacted this year by roughly 2 percentage points due to timing of the Lunar New Year, which occurs in late January versus February of last year. This includes the additional $15 million in revenue pull-forward we communicated in Q1 of last year. Adjusting for the Lunar New Year impact, we are expecting continued sequential growth improvement.
First quarter 2025 non-GAAP earnings per share are expected to be between $1.25 and $1.28, lower than the full year growth rate due to the Lunar New Year timing. Looking into 2025 and beyond, we remain incredibly optimistic about the future of our markets and our long-term prospects. We are confident in our new market-focused approach and the Ignite transformation will propel us to accelerated growth and we will become a stronger company.
With that, I'll turn it back over to Padraig for closing comments. Padraig?
