Agilent Technologies, Inc.

Good afternoon and welcome to the Allegiant Technologies third quarter 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'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd 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.

Thank you, Robert, and welcome everyone to Agilent's conference call for the third quarter of fiscal year 2020. I hope that all of you and your families are safe and healthy. On the webcast today are Mike McMullen, Agilent's President and CEO, and Bob McMahon, Agilent's Senior Vice President and CFO. Joining for the Q&A after Bob's comments will be Jacob Tyson, President of Agilent's Life Science and Applied Markets Group, Sam Raha, President of Agilent's Diagnostics and Genomics Group, and Poreg McDonnell, President of Agilent CrossLab Group. 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 and revenue growth will be referred to on a core basis. Core revenue growth excludes the impact of currency and the acquisitions and divestitures completed within the past 12 months. 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 us on our call today. The Agilent team delivered excellent results in the third quarter in the midst of a historic global pandemic. Against this backdrop, Agilent's performance once again highlights the strength and resiliency of our team and our business. Agilent's Q3 revenues are $1.26 billion. Our revenues are down just 1% on a reported basis despite COVID-19 headwinds. in what we expect to be the year's most challenging quarter. On a quarter basis, revenues are down 3%. These results demonstrate the strong resilience we have built into our business over the past several years. EPS is 78 cents per share. This is a 3% year-over-year increase. Operating margins improved 90 basis points over last year to 23.7%. Our Q3 results are further evidence of the success of our profitable build and buy growth strategy. We continue to build a more resilient, growth-oriented business. Last quarter, I talked to you about the four key priorities we're focused on during the COVID-19 pandemic. Protecting our people, being open for business for our customers, taking decisive action to preserve our P&L and balance sheet, and unwavering commitment to growth. Staying focused on these priorities has helped us navigate through the COVID-19 effects on our team, customers, and business. Our customers continue to respond very favorably to our team's engagement in our enhanced digital capabilities. In fact, Q3 customer satisfaction rankings are at all-time highs. In all regions, we're seeing improvements in lab access for our customers and increased non-COVID-19 testing volumes. There are, however, regional and end-market differences in the pacing of improvement. Lab access improved through the quarter, although still not at pre-COVID-19 levels. Globally, lab access remains limited in academia, non-COVID-19 research, and testing labs. We're also seeing continued limited access to some private sector research labs in Europe and the United States. Similarly, non-COVID-19 diagnostic testing volumes improved throughout the quarter, but remain down from prior year levels. Hospital access in Europe and the U.S. is improving, although disrupted at times by virus flare-ups. While there are indications of improvement in economic growth at varying degrees across the globe, caution remains in customer capital expenditure decisions. Consistent with our thinking coming into the quarter, the pace of recovery varied by region. As expected, China led the way for us and exceeded our expectations with revenues up 11%. China's growth in the quarter is broad-based across all end markets and for all business groups. While improving, the rate of recovery in Europe and the Americas lags China, given the timing when these regions first felt the brunt of the pandemic. European revenues are down 5%. America's market conditions trail both China and Europe, with revenues declining 10%. However, as we exit the quarter, we are seeing signs of improvement in service activity, consumables, and diagnostic testing volumes. On a total company basis, we exit July with modest growth across all major markets. Now, let's talk about our performance by business groups. Our life science and applied markets grew 2% on a reported basis and declined 4%. Our team is focused and determined to gain market share despite a constrained capital environment. The strength of our portfolio coupled with an energized and stable sales team is paying dividends. I'm also very proud of the contributions our cell analysis technologies are making in COVID-19 virus research. Our M&A strategy is working and making a difference in the pandemic fight. Our CrossLab group revenues grew 1%. Increase in customer activity led to increased sales of consumables and an uptake of on-demand services. The CrossLab team continues to win large multi-year contracts for enterprise laboratory management that will benefit us moving forward. We're continually increasing our competitiveness in this space. Our diagnostic and genomics group revenues declined 8%. While our overall pathology and genomics businesses are down for the quarter, we did see gradual improvement in diagnostic testing volumes and non-COVID-19 lab openings. Partially offsetting this, our nucleic acid solutions business delivered another strong quarter, growing almost 25%. We are very excited about the future of our NASD business, As we announced earlier today, we plan to more than double oligo manufacturing capacity at our new Frederick, Colorado site. This expansion helps us meet significantly increasing customer demand. We are growing double-digit and expect to continue this rate of growth in the coming years. We continue to invest in our portfolio across all our businesses, highlights during the quarter LSAG launching two new LC-MS products, the Agilent 6470B Triple Quad and the Agilent RapidFire 400 systems. Both products are aimed at high-throughput labs driving productivity and superior resolution. We launched our CrossLab Asset Monitoring Service, which is a new subscription service using instrument-centered technologies to provide data-driven usage insights. This helps drive improved customer economics and lab productivity. While early, we are seeing strong interest from customers in this service. During the quarter, our PD-L1 assay was approved by the FDA for expanded use in non-small cell lung cancer, helping guide physicians in selecting treatments using specific immunotherapies. Our team is very proud of the role their company is playing in the global COVID-19 fight. We are supporting COVID-19 research, testing, and therapeutic and vaccine development. Our efforts in the global fight against the virus delivered two percentage points of reported growth. We are accelerating efforts to make a difference in the battle against COVID-19 and have mobilized across Agilent teams to maximize customer support. Let me close with a few comments on our outlook in the coming quarter. While there's still significant uncertainty regarding the continued pace of recovery, we expect the July trend of gradual improvement in our business to continue into Q4. By region, China will continue to be a positive story for us and lead the return to growth. Europe is starting to trend upward. The Americas are also expected to improve at a lower rate than China and Europe. Globally, improved lab access, increasing non-COVID-19 testing, and a slowly recovering global economy are all positive signs. I remain absolutely convinced Agilent will emerge from this pandemic with a stronger position in the marketplace. Our continued focus action on our four priorities protect the team, support our customers, preserve our P&L balance sheet, and our unwavering investment in growth are delivering. Entering Q4, we are operating from a position of strength and with momentum. Yes, this pandemic remains unpredictable. However, I am cautiously optimistic about our continued gradual recovery and return to growth. Before I hand the call over to Bob, I'd like to pause and share my hope that you and your loved ones are staying safe and healthy. Thank you for being on the call. I look forward to taking your question after Bob's remarks. And now, Bob, over to you.