Agilent Technologies, Inc.

Good afternoon and welcome to the Agilent Technologies first quarter 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. And now I'd like to introduce you to the host for today's conference, Ankur Dhingra, Vice President of Investor Relations. Sir, please go ahead. Thanks.

Thank you, Julian. Welcome, everyone, to Agilent's conference call for the first quarter of fiscal year 2020. With me are Mike McMullen, Agilent's president and CEO, and Bob McMahon, Agilent's senior vice president and CFO. Joining in the Q&A after Bob's comments will be Jacob Tyson, president of Agilent's Life Science and Applied Markets Group, and Sam Raha, president of Agilent's Diagnostics and Genomics Group. Due to certain personal engagements, Mark Doak, President of the Agilent CrossLab Group, is unable to join us today. You can find the press release investor presentation and information to supplement today's discussion on our website at investor.agilent.com. Today'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. Revenue growth will be referred to on either reported or core basis. Core revenue growth excludes the impact of currency and the acquisitions and divestitures completed within the past 12 months. Guidance is based on exchange rates as of January 31st. We 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 would like to turn the call over to Mike.

Thanks, Ankur, and thanks, everyone, for joining our call today. I'd like to start today's call with a reminder that Mark Doe ACG Group President will retire on May 1st. While Mark and his wife are currently enjoying a long-planned vacation and he's not able to join us today, I would be remiss in not taking the opportunity to recognize the outstanding accomplishments Mark has made in his stellar 38-year career. His track record of results speak for itself. Thank you, Mark. We have a very strong bench at Agilent, and I've already named Mark's successor, Pork McDonald. Pork knows the business well. He has been on MARC's staff for several years and currently runs our Chemistries and Supplies Division. Porek and Marc are already working on transition activities as Porek prepares to take the helm of the HCD business at the start of fiscal Q3. Marc congratulates both Marc and Porek. And now on to the quarterly results. The Agilent team delivered a strong start to 2020. Q1 revenues are above our expectations as business grew in all regions and markets. Total revenues of $1.36 billion are up 5.7% year-over-year on a reported basis and 2.4% on a core basis. We continue to translate our top-line growth into strong bottom-line earnings. Our EPS of 81 cents is up 7% and is at the high end of our guidance. Before going into business unit and market details of our quarterly results, I want to speak about two specific areas to highlight how our building and buying strategy investing in fast-growing markets continues to deliver growth and help us create a more resilient business. First, I want to talk about our most recent acquisition, biotech. This was the first quarter with the biotech team on board, and the business is off to a very strong start with revenue growth above our expectations. We continue to be very enthusiastic about the cell analysis space. and biotech continues a strong momentum that really got us interested in bringing them into Agilent. The biotech leadership team was just in Santa Clara for a few days of planned meetings, and they are very energized and excited about the future possibilities of making a great business even stronger as part of Agilent. Second, the resiliency of our business model is on full display this quarter, as Agilent delivers strong growth and earnings in the face of a negative Q1 impact from the coronavirus outbreak in China. As this has dominated headlines, let me add a few additional comments regarding the coronavirus and its impact on Agilent. Most importantly, our thoughts go out to all those affected by the coronavirus. On the Agilent front, our team fortunately has not had any direct health impact, and many returned to work last week. We are remotely supporting our customers as a number of them gradually resume operations. We've also restarted our in-country production activities and are shipping products to customers in China and internationally, albeit at a reduced rate. On the business side, given that our first quarter ended January 31st, we are seeing business impact across both fiscal quarters, Q1 and Q2. In Q1, our revenues were running ahead of expectations right up to Lunar New Year holiday. However, the extensive Lunar New Year holiday affected our customers' ability to transact and accept shipments during the last days of the quarter. This reduced our reported revenue by approximately $10 million in total for the quarter, primarily in our LSAG instrument business. We have since recognized the bulk of this revenue now in Q2. Looking ahead, we are projecting that coronavirus will continue to impact our China business throughout Q2. Bob will share additional details, but we are anticipating delays in new equipment purchases and slower uptake of consumables and services. The slower uptake is due to the reduced number of selling days resulting from the extension of the new year, along with customer and logistics operations that are ramping but not yet fully operational. It's important to note, while we're forecasting the impact to our Q2 business, our full-year outlook for total Agilent revenues and EPS remains unchanged. Our business outside of China remains on a solid footing, and we believe a large portion of our China business that is currently being impacted by the coronavirus is not lost, but rather is delayed. As you know, the coronavirus outbreak is unfortunately impacting the health and safety of tens of thousands of people. I'm very proud of how the Agilent team has responded to our part to help. Our Agilent China team is actively supporting those customers doing crucial research into the virus. We have donated instruments and supplies to four clinical and research institutions based in China to support disease research and drug development efforts. We continue to closely monitor events in China and prepare to act quickly to help wherever possible. Now, onto additional details of our quarterly results. Agilent's growth is broad-based as our business grew across all regions and end markets. Regional performance was led by the Americas posting 5% core growth with America coming in with low single-digit results and Asia holding steady. Despite the timing of the Lunar New Year and the coronavirus impact late in the quarter, our China business grew low single digits. While all end markets grew, our results led by strong growth in the biopharma and environmental forensics markets. Now taking a closer look at how the individual business units performed, LSAG revenues grew 5% on a reported basis, driven by strong performance in our biopharma and cell analysis business. On a core basis, LSAG's revenues were down 2% against a tough compare and inclusive of the unexpected Q1 impact from the coronavirus. With the exception of China, all regions and end markets performed in line with expectations. The ACG business continues to deliver strong results, posting 7% core growth even with reduced selling days in China. This growth was broad-based across all major market segments and regions. These results continue to demonstrate the strength of our ACG cross-lab strategy and how we are leading the transformation of the analytical lab. The EGG is also posting 7% growth in the quarter against a difficult 12% growth compare. We are experiencing a continuation of positive trends. winning share in our core pathology business, and seeing strength in our NGS QAQC franchise. We continue to be pleased with the revenue ramp at our new Aligo manufacturing facility in Frederick, Colorado. In addition to driving strong financial results, I want to highlight some other notable events that took place during the quarter. We continue to bring differential new products to the market, gaining strong customer and external recognition. We just introduced the Agilent Source Select XT HS2 DNA Kit. This, along with our recently launched automated sample prep platform, MAGNUS, further strengthens our leadership position in the NGS sample prep market. In addition, two industry publications honor the Ashland Infinity Lab LC-MSD IQ system with 2019 innovation awards. The award-winning mass spectrometer introduced last June incorporates intelligent design and innovation such as embedded sensors that monitor instrument health. And finally, earlier this month, Barron's named Agilent number one in the list of the 2019 most sustainable companies in America. We're very proud of this recognition. Sustainability is a critical topic that is gaining increased interest from customers, employees, and investors. More importantly, we believe focusing on sustainability is simply the right thing to do. Before passing the call on to Bob, I'd like to close with a reminder of Agilent's resilience and our shareholder value creation model. delivering above-market growth, expanding operating margin, and a balanced deployment of capital. We are able to thrive by focusing on platforms with multiple large end markets and long-term growth opportunities. We're also driving growth in the aftermarket, increasing our focus on faster-growing end markets, streamlining on infrastructure and operations, and investing in the future of Agilent, both organically and inorganically. We do all this while maintaining an acute focus on delivering EPS growth with superior quality of earnings and driving shareholder value creation. Despite the temporary business uncertainty created by the coronavirus in China, I remain confident about the longer-term growth prospects of the China market, our China growth strategy, and most importantly, our team. I'm very proud and confident in the strength and resiliency of our China team and their ability to overcome any near-term challenges that come our way. When I look at our global team and our business, our growth prospects and team have never been stronger. We are laser focused on driving revenue and earnings growth. I'm pleased to tell you that all these factors allow us to maintain our growth and earnings outlook for the year. Thank you for being on the call, and I look forward to answering your questions. I will now hand off the call to Bob. Bob?