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Operator
Good afternoon and welcome to the Agilent Technologies first 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 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. 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.
Ankur Dhingra
Thank you, Jason, and welcome everyone to Agilent's first quarter conference call for fiscal year 2021. 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, Sam Raha, President of Agilent's Diagnostics and Genomics Group, and Poreg McDonald, President of Agilent CrossLab Group. This presentation is being webcast live. The news release, investor presentation, and information to supplement today's discussion, along with the recording of this webcast, are made available on our website at investors.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 references to revenue growth are on a 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 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.
Jason
Thanks, Ankur, and thank you to everyone for joining us today on our call. I'm very pleased to be on the call with you today. We are off to an excellent start to our fiscal year. The Agilent team delivered outstanding results in the first quarter. The momentum in our business continues. Revenues for the quarter are $1.55 billion. This is up 14% on a reported basis and 11% core, exceeding our mid-January revised expectations. Also, as expected, COVID-19 tailwinds added roughly 2.5 points to our overall growth. Operating margins are healthy, 25.5%. EPS of $0.06 is up 31% year over year. Overall, a very impressive start to 2021. Our growth is broad-based. All three of our business groups delivered double-digit growth. All regions grew, with the two largest leading the way. China grew 25%, and the Americas posted 13% growth. We continue to see strength in most of our end markets, led by pharma growing 20%. These results are a testament to our build-and-buy growth strategy and the Agilent team's relentless customer focus. Demand remains strong for the full breadth of our offerings. We have been gaining market share in key areas. We are clearly keeping our foot on the gas. Now, let's take a look at our performance by business group. The Life Sciences Applied Markets Group generated $722 million in revenue, up 13% on a reported basis, and up 11% core. LSAG's growth is broad-based across end markets and geographies. We are particularly pleased with our cell analysis business. Cell analysis grew in the high teens, led by biotech, which grew 26%. Growth is also strong at liquid chromatography and mass spec product lines, with both growing in the teens. Overall, our LSAG business saw very strong demand, as many customers utilized their end-of-year CapEx budgets, and our market share gains continued. From an end-market perspective, food and pharma led the way for LSAG. Continued by our pharma investment focus, we introduced new updates to our mass-funded LCMS software. This new software enables data integrity, consists with important regulatory requirements for our biopharma customers. As we continue to build our digital lab, we introduced the Agilent 7850 ICP-MS system, which provides new smart digital tools to improve workflows. LSAG's broad and continually strengthening portfolio is well positioned and continues to outperform the industry. The Agilent cross-type group posted revenues of $532 million This is up a report of 13% and up 10% core. ACG's growth is also broad-based across end markets and geographies. Growth is strong in both services and consumables. Our digital investments in scale are adding significant value. We continue to drive improved attach rates to Agilent's large installed base of instruments. Annual service contract renewal rates and growth were strong in the quarter, as we continue to build a more resilient and higher-growth business. The Diagnostic Genomics Group revenues are $294 million, up 18% reported, and up 15% core. Growth is broad-based, led by our NASD Oligo business. Our genomics product portfolio grew double-digit, aided by COVID-19-related QPCR demand. We also achieved strong growth in our core NGS sample prep business, As mentioned earlier, overall company growth is broad-based across most of our end markets. The pharmaceutical and food businesses led the way, both growing strong double digits. We also posed a 10% growth in the environmental and forensics market. Chemical energy grew 2%, and we've seen increased business activity in the C&E space. The academic end market is down 1%, with many university labs still operating in a constrained environment. We are also continuing our efforts in the battle against COVID-19. We have completed our development and clinical validation for a serology assay to detect COVID-19 antibodies. We plan to submit to the U.S. FDA for emergency use authorization within the next month. In addition, we're making progress on our acute PCR-based test for COVID-19 detection and plan to launch in Europe in the next couple of months and submit for emergency use authorization in the U.S. within the same timeframe. I'm also pleased to share that Barron is again recently named Agilent, one of America's most sustainable companies. This marks the third year in a row we've been included among the top three companies in this ranking. We've also been the leader in our industry all four years that Barron's List has been published. We're very proud of this honor. Sustainability is a key priority for our company. You know, when I look back on the uncertainty we faced at this time last year, I'm so proud of what the Agile team accomplished. All-time high customer satisfaction ratings, building momentum in all our businesses, and delivering excellent results. Our first quarter results are another compelling proof point that we are building an even stronger company and market position during the pandemic. As we discussed at our December investor event, our diverse, industry-leading product portfolio has never been stronger. Our building and buying growth strategy, with a focus on high-growth markets, continues to deliver. Our M&A funnel is robust and remains focused on growth that created M&A opportunities. We are targeting companies and markets where we see potential for significant long-term growth and Aslin is a strong position to win. As we look ahead, we have a sense of realistic optimism. We have solid momentum. We're winning in the market, and we have the right team to continue to succeed. As a result, we are raising our core growth guidance range to 6.5% to 8% for the year. As you may recall, we recently got it to a long-term core growth rate of between 5% and 7%. So we are certainly off to a good start in 2021, and we have no intention of slowing down. We are also raising our earnings guidance for the year. In December, I shared ATSA's long-range plan of margin expansion at 50 to 100 basis points a year. We are now guiding towards the top end of that range for 2021. Bob will share more details on this in his remarks. I couldn't be more pleased with how we have started the year. We have momentum. Our team is strong and energized. We are gaining market share in key areas, and we have an even more promising outlook for the full year. Thanks for being on the call today. I look forward to your questions. I will now hand the call off to Bob. Bob?
Ankur
Thanks, Mike, and good afternoon, everyone. In my remarks today, I'll provide some additional details on Q1 revenue and take you through the first quarter income statement and some other key financial metrics. I'll then finish up with our outlook for 2021 and the second quarter. Unless otherwise noted, my remarks will focus on non-GAAP results. We are very pleased with our first quarter results as we saw strong, broad-based growth exceeding our revised expectations. Revenue for the first quarter was $1.55 billion, reflecting reported growth of 14.1%. Core revenue growth was 11.3%, while currency contributed 2.8 points of growth. Now, before I get into the end markets, Mike's earlier comments bear repeating. All three business groups delivered double-digit growth, core growth, in the quarter. Our superior value proposition continues to resonate with our customers, and our team executed well, capitalizing on recovering demand in our end markets. Pharma, our largest market, was strong across all regions, delivering 20% growth. Growth was led by NASD, which experienced significant growth albeit against the easiest comp of the year. NASD contributed four points to the overall pharma growth rate. We continue to be very pleased about the ramp of the Frederick oligo facility, and the recently announced capacity expansion in Frederick is on track. Small molecule grew mid-teens, while biopharma, excluding NASD, delivered 20% growth, driven in part by strong demand for LC and mass spec instrumentation. We saw strong year-end demand from pharma customers and are also seeing increased business related to the characterization of oligo-based therapies and vaccines. The food market also experienced strong double-digit growth during the quarter, posting a 22% increase in revenue. Our business grew in all geographies, driven by increased demand for food safety and quality testing. China is leading the way, driven by investments in both commercial and government entities. Environmental and forensics grew double digits, coming in at 10% core growth. Broad regional growth reflected strong tech refresh or replacement demand from contract labs. Our diagnostics and clinical revenue grew 9% during the quarter and has benefited from growth in COVID-related applications, primarily in the Americas and Europe. Our pathology business grew slightly as non-COVID testing continues to improve, but has not yet recovered to pre-pandemic levels globally. While our diagnostics and clinical end market in China is still small, it experienced strong growth due to improvements in non-COVID testing and the uptake of our clinical LCMS. The chemical and energy end market continued the recovery we saw last quarter and grew 2% in Q1. we continue to see signs of increased business activity, particularly in specialty chemicals and engineered materials, along with encouraging improvements in the macro environment. And while we are optimistic, we are not yet reflecting a change in our forecast for the rest of the year. And as is expected, the academia and government market recovery has lagged the other end markets, down 1% year on year, as research labs are still not operating at full capacity. we continue to expect a slow but steady recovery throughout 2021. On a geographic basis, all regions grew. China grew 25%, leading all geographies led by the food and pharma markets. The Americas delivered a strong double-digit performance during the quarter with 13% growth, while Europe was up 6%, both also led by pharma and food. Now, turning to the rest of the P&L, The first quarter gross margin was 55.8%, up 10 basis points year on year. Adjusting for the exchange rates, gross margins improved 50 basis points. Our operating margin for the first quarter came in at 25.5%. This is up an impressive 260 basis points from last year, driven by volume and spending discipline. And this result includes the impact of increased strategic investments we started last quarter. Our top-line growth, coupled with our operating leverage, helped deliver EPS of $1.06 per share, up 31% versus last year. Our tax rate was 14.75%, and our share count was 309 million shares, as expected. Now on to the cash flow and the balance sheet. Our operating cash flow continues to be very strong. In Q1, we had operating cash flow of $238 million, a 43% increase over last year after adjusting for last year's one-time tax payment. This performance shows the strength of our business model and provides financial flexibility going forward. We continued the balanced capital deployment strategy we highlighted at our annual investor event in December. In the quarter, we invested $41 million in capital expenditures paid out $59 million in dividends, and repurchased 2.9 million shares for $344 million. And as we announced earlier today, our Board of Directors authorized a new $2 billion share repurchase program, replacing the current program. We ended the quarter in a strong financial position with $1.3 billion in cash and $2.5 billion in debt. Now, moving on to the outlook, we have had a strong start to the year. And while there are still uncertainties in front of us and the business environment remains fluid, we have solid momentum and we see continued recovery in our end markets, albeit at different rates. And as a result, we're increasing our full year projections for both revenue and earnings per share. For revenue, we are increasing our full year to a range of $5.825 to $5.9 billion. up over $200 million at the midpoint and representing reported growth of 9% to 11% and core growth of 6.5% to 8%. This increase reflects strong Q1 results and some improvement in our outlook for the remainder of the year. The increased guide assumes stronger performance in most of our end markets. The academia market continues to track as expected in our initial plans, and while business activity in the chemical and energy has picked up, we have not yet included any improvement in that market in this updated outlook. In addition, we have not included any revenue associated with either the serology or QPCR COVID assay in the outlook. As Mike mentioned, we also feel very good about expanding our margins. During the investor event in December, we provided long-range plan of annual margin expansion in the range of 50 to 100 basis points. Given the volatility in results during 2020, Our margin expansion profile will vary each quarter. However, we feel confident about our full-year margin expansion being towards the top end of that range while also investing for future growth. The higher sales and margin expansion, coupled with maintaining our tax rate at 14.75% and a lower share count of roughly 307 million shares, increases our fiscal 2021 non-GAAP EPS to a range of $3.80 to $3.90 per share. This is growth of 16% to 19% for the year. Now for the second fiscal quarter, we're expecting revenue to range from $1.37 to $1.39 billion, representing reported growth of 11% to 12% and core growth of 7% to 9%. We expect second quarter 2021 non-GAAP earnings to be in the range of $0.78 to $0.80 per share with growth of 10% to 13% as we approach the one-year anniversary of the significant reduction in expenses in Q2 of last year. Now, before opening the call for questions, I want to say I couldn't be more proud of the Agilent team in driving such strong performance. We've gotten off to a great start this year, and I'm personally very excited to know what this company is capable of moving forward. We have very strong momentum, the right approach that leads me to believe that we're on a very solid path for Q2 and the rest of 2021. With that, Ankur, back to you for the Q&A.
Ankur Dhingra
Thanks, Bob. Jason, if you can provide the instructions for Q&A, please.
Operator
Absolutely. At this time, as a reminder, if you would like to ask a question, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Tycho Peterson from JP Morgan. Your line is open.
Tycho Peterson
Hey, thanks. Congrats on getting your own pre-announcement. On that note, Mike, actually, I'm wondering if you could talk a little bit about, you know, what drove the Delta to the pre-announcement. And then importantly, on sustainability, it sounds like you're not really calling out any kind of pull forward here. Curious, you know, as we think about it, and particularly that biopharma strength and the mid-teens, you know, growth, you flagged in LCMMS. How are you thinking about the sustainability there?
Jason
Well, first of all, Tycho, thanks for the recognition. Really proud of the performance to even top our earlier revised expectations for the quarter. And I'd say that as we got into January, business in January was stronger than we had anticipated. And I think it was, on a geographic perspective, you saw the strength in China. Obviously, that was higher than we were thinking, as long as very strength, really good strength in the Americas. led by pharma and the food market. I'm sure we'll dial in today in a call about the food market, which is both growth in China as well as in America. And then a no-pull forward. So it was a clean quarter with, you know, January being stronger than we had anticipated when we already had announced an increase in our revenue outlook for the quarter. Bob, I don't know if I missed anything on the... Oh, you got it. Okay. You got it.
Tycho Peterson
And on the LCMF strength, you know, up mid-teens, certainly better numbers than we're seeing from a lot of your peers. Can you just talk to that?
Jason
Yeah, I think that it's a continuation of the story that's been underway for several quarters. We've continued to innovate and provide value to the customers, really seeing our offerings, coupled with our approach to our field engagement and really maintaining our field force when our customers need us most. We're getting the business, and it's very clear that not only is it a whether we saw particularly in some of the pharma and non-COVID areas where they were basically making sure that they spent the capital they had allocated for 2020. We got all that business, but it was more than that. It was a market share gain story as well for us. So I think it was a combination of a backdrop of investment by the pharma world, but also ability to gain share. And Bob, I know you've taken a close look at this.
Ankur
Yeah, I think, Tycho, to Mike's point, I think one of the things we feel really good about is just the our portfolio and our offerings to our customers. And I think one of the things that we've seen is our responsiveness continues to improve, and that's been evidenced by the increased customer satisfaction that we've seen. And as Mike said, as the year-end CapEx spending happened, we were there, and I think we took more than our fair share. And we do think that this is an area that we continue to invest behind, you know, Mike talked about the investment in the MassHunter software, which I think is going to really help continue this momentum that we have going forward from a compliance standpoint. And it's an area of focus, and we're very excited about the biopharma business going forward.
Jason
Yeah, and there's a real holistic story here as well. You know the story already, Taika, with our ACG business complementing on the services of consumers, complementing what we can do on leading innovative instrument solutions.
Tycho Peterson
And before I hop off, just one on ACG. You grew mid-20s in China off of low-teens comps, so it's not like the bar was low. Are you doing anything there, you know, structurally to kind of drive that acceleration?
Jason
You know what? I'm going to let Porek talk a little bit about that. Porek, why don't you share your thoughts on that?
spk00
Yeah, thanks, Mike. I think it's a combination of our scale on our service business in China and our connection with customers. And also we've been investing in a number of years in our digital capabilities in China, which is really – seeing a lot of pull through from the customers in all markets, so really driving the business forward. And we see it sustaining over the next period.
Ankur
Yeah, Taiko, just to build on what Porig is saying, I mean, this is an area where we've also increased our investments in people on the street. And as we think about, Mike mentioned this in his script, actually our focus on actually turning ongoing revenue into service contracts. This is an area where we've had a specific focus in China there, and it's really helped us. And so we're, you know, that productivity aspect continues to play out in China.
Tycho Peterson
Great.
Operator
Thanks, guys. Your next question comes from the line of Brandon Couillard from Jefferies. Your line is open.
Brandon
Hey, thanks. Good afternoon. Good afternoon, Brandon. Maybe, Mike, could you elaborate on your comments as far as, you know, beginning to see some improved activity in the CME market? And maybe, Bob, could you give us some color on instruments versus aftermarket growth in the first quarter?
Jason
Yeah, we're really talking about water activity, right? So we're seeing a lot of discussion with our field teams, particularly in the area of what I would call high-value chemicals, specialty chemicals. there's a lot more discussion going on with our field teams right now and i think our customers are feeling more confident about the the economic outlook and the end market demand that they can anticipate in the in the coming quarters and as you know this is against the backdrop of a lot of kind of demand where investments have been deferred um and we're seeing um uh you know continue to see strong pmis um But as you heard me share the story before, Brandon, I'm always reluctant to call the turn until we actually see a couple quarters. So while we're optimistic about what we're seeing so far, we're not ready yet to put it into the formal guide for the year.
Ankur
Yeah, and just on the second part of your question, Brandon, our instrumentation was roughly flat, and ACG was up mid-single digits. Thanks, Bob. Then one follow-up for you, Bob.
Brandon
Gross margins in the first quarter a little better than we expected. Are you still thinking that the four years is still relatively flat to down, and any chance you could quantify the impact of the NASD capacity built on gross margin in the first quarter?
Ankur
Yeah, it was a little lower than we would expect that to be higher in the back half of the year as we continue to ramp up. So it didn't really have a material impact on the first quarter. If you recall, we talked about that being roughly about 20 basis points for the full year, and that really didn't have an impact in the first quarter. And in terms of the overall year, I would say we're slightly more optimistic, kind of given where certainly the first quarter came in, and that's part of the – increasing our top end, I would say, of the margin expansion. It's a combination of a little more in gross margin, but most of it actually will be in operating expenses. Great.
Matt Sykes
Thank you.
Jason
You're quite welcome.
Operator
Your next question comes from the line of Vijay Kumar from Evercore ISI. Your line is open.
Vijay Kumar
and a really solid start to the year. And thanks for taking my question. I guess for my first one, Mike, the guidance here, I guess Q2, your comps are pretty easy. You just did 11 in Q1. Could you perhaps comment on the Q2, why that should step down? And when you look at the annual from an end market perspective, If C&E didn't change, I guess, is this bioforma that's changing for the annual outlook?
Ankur
Yeah, let me take a shot at it and then I'll turn it over to Mike, Vijay. Thanks for the acknowledgement. Yeah, I'll take the second question first and then get back to the second quarter. If we think about where the full year is, it's mainly in that pharma and food markets across all of the regions that we see the uptake. And we are optimistic about chemical and energy, but we're not yet putting it into the forecast. It's still at the end of the quarter. As Mike said, We're seeing a lot of business activity. We're seeing the order funnel build and so forth. But we want to actually see those translate into orders and then ultimately into revenue. So everything there is moving in the right direction. And we would expect that to continue to play out throughout the course of the year. If I look at Q2, you know, we did have a higher-than-expected budget, year-end budget dynamic that helped, obviously, the 11%. That doesn't repeat itself in Q2. But if you looked at, we feel very confident about the continued momentum of the business going forward.
Jason
And that was probably a couple points of growth, maybe?
Ankur
Yeah. It's hard to estimate, but that's the best guess that we have, yeah.
Vijay Kumar
understood and then um i i guess um you said for my follow-up um is the guide assuming um you know those kobe calvins that you mentioned 200 base points in q1 is that going to sustain and i'm curious uh you know what what what is driving the margin strength here i guess uh rather quickly your prior guide yeah so i'll take the first one yeah so we're we're still in that two two percentage kind of uh revenue range for covid so that's a good number to lock into
Ankur
yeah and i think the the the growth on the um on the margin expansion has been just really to strengthen our volume and i think that that when when we have that strong growth um you know you actually see it going to the bottom line you know when you look at last year our spending profile changed pretty dramatically um quarter on quarter as as we um were reflecting the you know the pandemic and so forth if we think about q1 to q2 this year our spending think about it as roughly flat sequentially
Jason
Yeah, and, Vijay, I'm sure you had a chance to look at Jacob's margins for the first quarter, but LSAG had very strong margins. You know, that's when you have double-digit growth in LC, the strength in the cell analysis business. You know, we had indicated when we acquired Biotech that we were buying not only high growth but also a high-margin company, and I think you're seeing it in the numbers, absolutely. Thanks, Mike.
Vijay Kumar
You're welcome. Thank you, Oren.
Oren
your next question comes from the line of who needs soda from svbl your line is open all right great thanks um uh mike uh congrats on the quarter really strong here so my first question
Ankur
First question is on China, which you alluded to a little bit before. Obviously, a strong quarter, but just walk it through. Where do we stand today in China food and where the products are resonating?
Mike Riskin 's
What's your outlook here?
Ankur
Obviously, this has been a market that has been improving for you after some disruptions a while ago, and just want to get a sense of where it stands and how should we think about it going forward?
Jason
First of all, thanks for your kind comments. And I'll make some initial introduction comments here about China food, and I'll invite Jacob into this conversation as his solutions are a big part of the story here. So this is a quick reminder to the audience. You may recall that we saw a slowdown for the better part of over two years in the China food market as a result of the reorganization of the China food ministries. And we always had been pointing to the fact that there had been really deferred investment at the national level. And now that situation has completely changed, which are there's reinvestment going into new technologies at the national level, in addition to the testing volumes continue to grow for the contract testing lab side, picking up that volume. And, Jacob, I think we've got a pretty good position here in the marketplace with our MassPAC portfolio.
Brandon
yeah absolutely mike so you're you're right that we are we're seeing a broadband uh abroad-based interest from our portfolio but particularly what stands out is our triple quad both the lcms and the gcms which is the which is sought after especially for pesticide testing where both technologies are used and and what we have developed here is it's one workflow or one sample prep that can be used for both technologies so that is a very uh much better performance versus many other where you have to have two different kinds of setup. So we see a lot of interest in that. And so the triple card is really paving the way right now.
Jason
And Jacob invested in a China Solution Center as well. So we actually, again, based on these leading technology platforms, able to tailor our solutions for that China food market. So we're really excited about the change in the business volume there, as you can imagine.
Ankur
That's great. And if I could also ask in terms of pharma in China, could you maybe just elaborate your positioning there? You have really strong growth here in terms of both small molecules and biomolecules as well. Maybe just if you could characterize that. Is that biomolecular growth largely coming from NASD? Is that what's driving that part of the component? And the small molecules, you had really strong growth too. So maybe if you could parse that out.
Jason
Yeah, specific to China, there's no NASD volume at all. It's zero in China. So that's purely on what we call the LSS side, which is ACG and LSAG business.
Ankur
Yeah, and I was going to say, Puneet, as we said, if you script out NASD, biopharma in total, so this would be our ACG and LSAG businesses together, along with some contribution of DGG, grew 20%. And that was really broad-based across all regions. Actually, it was faster than that in China. But if you look across, they were all kind of neck and neck in terms of the performance across the regions.
Jason
Hey, Bob, I just have one thing. Although we don't have direct NASD business in China, as Bob highlighted in his script, you know, we're seeing a lot of demand for LCMS-based solutions, for Alago-based R&D research. And the fact that we're in this business ourselves with our own API business and that we have a state-of-the-art facility in our Frederick, Colorado site really helps us be able to sell solutions to our customers doing research in this area as well. So I do think there's a linkage of the oligo business into China, albeit more of a scene on the research side.
Ankur
Yeah, and that small molecule in China was very strong.
Jason
Oh, yeah, sorry about that. I missed that one. Yeah. How could I miss that one? That's great.
Mike Riskin 's
Thanks, guys.
Operator
Your next question comes from the line of Dan Leonard from Wells Fargo. Your line is open.
Dan Leonard
Thank you. So first question, still trying to think of how to interpret your chemical and energy comments. The comps get pretty easy for that end market, and it doesn't sound like the 2% you reported in the quarter reflects what you're currently seeing on the order side. Are you still expecting kind of flattish chemical and energy performance through the balance of the year, or could you help me with that?
Jason
I think the headline here is potential upside to our guide. And then, Bob, maybe you can answer the – Yeah.
Ankur
Mike mentioned the headline quite well. And as we think about the chemical and energy, we've built in, you know, some slight improvement in Q1 and Q2, but have not made any changes to the back half.
Jason
And by the way, Dan, I'm not trying to be coy here or cute. You know, we've just seen, you know, this market can – easily can turn on a dime. And I've had experience where I've called it too soon. So once we feel confident about the book of business we have inside Agilent, we will be sure to give you an updated view of the outlook for the year. I appreciate that.
Brandon
Mike, I think it's worth mentioning again that our competitive positioning is very strong here. And as you know, we have invested very heavily into our portfolio, both from an instrumentation, but also from an informatics point of view. So when the market comes back, we will certainly see a line share of that.
Jason
Yeah, that should have been part two of my headline. When the business is there, we're going to get it.
Dan Leonard
Okay. And appreciate that. And Mike, You know, you've seen a lot of budget cycles. Could you maybe put what we just saw on the quarter in context? You know, you had a strong quarter, and I know ShareGain's part of that. All your peers had a really strong quarter. Are we going to look back at this period a couple of years from the flush, particularly in pharma? Was this one for the history books, or was this just a good flush? Like, how would you characterize that? Yeah.
Jason
I sure hope that it's for the history books because it had the backdrop of a pandemic. And what we saw was some deferred capital investment that had been normally would have maybe been invested in the RQ2, Q3 because of COVID-19 concerns. It's just the fact that customers weren't working and they deferred to capital. But again, I would have to say there's more to the story in our Q1 than just that budget flush. And the
Ankur
Yeah, I was going to say, I would say it certainly was bigger than the last several years. I don't know. But I think as we think about the momentum that we've seen, you know, when you look at where we were in Q4 as well, we started seeing the turnaround, and we saw it continue through Q1, and we're expecting that to continue into the rest of this year as well. So it's not just a one-quarter phenomenon. It certainly was stronger than we anticipated, but – We have higher expectations going forward for growth in pharma.
Dan Leonard
Okay. Thanks for the context.
Jason
You're quite welcome.
Operator
Your next question comes from the line of Doug Schenkel from Callen. Your line is open.
Doug Schenkel
Hey, guys. Thank you for taking my questions. So my first question is, is on share gains. In your prepared remarks, and actually I think even in the press release, you highlighted market share several times in the context of the strong revenue growth you delivered in the fiscal first quarter. I'm curious if you could opine on where you think you're taking the most share and how sustainable this is. So that's the first topic. The second is on M&A. And the balance sheet's clean. You're re-upping on the share buybacks. I'm just wondering how you're thinking about M&A and more specifically the parameters that you are using to evaluate potential acquisitions moving forward. Thanks, guys.
Jason
Yeah, Doug, thanks a lot for that. Happy to opine on both questions. So, yeah, we really wanted to make sure the story came through that we had just a great start to 2021, and it wasn't just about a year in budget flush. There's some really good things that have been going on for several quarters, and it just continues with the first quarter. And we very specifically chose the language in key areas. So we're gaining share in some of our biggest product line areas. I would point to liquid chromatography. I would point to mass spectrometry, both gas phase, liquid phase, and the inorganic side. i've been i point to our services business um and about what else might you add to that i mean i think it's pretty pretty much broad-based yeah and uh in our oligos businesses oh yeah allegos because it always comes in three the allegos mean we had outstanding growth in q1 so we're getting market share gains in in the product lines where they really are collectively needle movers for the entire company um and then relative to the uh m a um Yes, we were in the market, you know, repurchasing shares this quarter, this past quarter, I should say, beyond anti-dilutive. But our priority remains, as we communicated our December Investor and Analyst Day, which is we want to invest in the business, not only in terms of capital expansion, building down NASD, for example, but also growth to creative M&A. And that remains our priority. You may have picked up in my comments, prepared comments, that the discussions with potential targets, the deal activity is picking up. I think, and we've seen a number of other deals announced in our space, but I'd say the volume of discussion is much increased over the last quarter or two. So nothing to announce, but that remains our area of focus for utilization of our strong balance sheet. And Bob, anything else?
Ankur
Yeah, the only thing I would say is, Doug, as we think about the markets that we compete in, you know, our framework really hasn't changed. You know, we're looking at markets that are faster growing than the markets that we are in or subsegments of those markets. We think, you know, The last couple of acquisitions have really borne that out with ASEA as well as biotech in the cell analysis space. And it's really helped continue that shift to higher growth markets. And that's the area that I would think. And there's really opportunities across all of our, you know, both in instrumentation as well as in kind of consumables area or that recurring revenue stream as well.
Jason
So that's the way I would think about it. And, Doug, we continue to look for companies also not only to meet that criteria but also we think are a strong cultural fit that really would be a key part of the overall Agilent family, so to speak, and also business where we think we can make that business even better. Thank you again. You're welcome.
Operator
Your next question comes from the line of Matt Sykes from Goldman Sachs. Your line is open.
Matt Sykes
Great. Thanks for taking my question. Nice, solid quarter, guys. I just wanted to focus on, when you look at the DGG operating margin for the quarter, it was obviously very strong. Just in terms of sustainability for that, what was driving that, and what should we expect as we go forward in 21?
Ankur
Hey, Bob, do you and Sam want to tag team on this? Yeah, I'll start and then turn it over to Sam. You know, you see the strength really was volume-driven here. And when we look at it, and as we ramp up that NASD facility that's generated a very nice incremental growth on the bottom line, as we mentioned in an earlier call, we haven't had the startup costs really start showing up yet there. But I think that and then some of the QPCR activities and related have really helped us drive this. Sam?
Bob
Yeah, Bob, great lead-in. I'll just add, as you said, NASD, that business, we are in a place where we are using more and more of our capacity, and that's a good thing as it relates to margin. You know, on the genomics and pathology side as well, we have, you know, high-value products such as our SureSelect NGS target enrichment platform, which had a It's a good quarter, and we anticipate that continuing to grow. That's high margin. We have leadership and NGS quality control. And it's not just instruments there. There's, you know, ongoing consumables that go along as standards. So we expect the leadership position for that to grow. And, you know, we haven't talked about it in a little while, but, you know, this past quarter we also announced our seventh indication for PDL-1 to go along with Keytruda. for triple negative breast cancer, and that's another place where, you know, we have leadership and drives good margin for us.
Matt Sykes
Great. And just one quick follow-up, just more of a high level. As you continue to grow your ACT franchise, could you talk about how that impacts some of the divisions? And as you expand your reach, does that really help drive the LST division and other types of segments that you have, just given that it just continues your reach within the market and deeper customer penetration?
Jason
Yeah, Matt, you're on the right theme here. So, in fact, when I've talked about this most recently inside Agilent, I've talked about, you know, this is where our LSAG and ACG businesses come together. And there really is a very symbiotic relationship here, which is in both businesses help one another, right? So, you know, I pointed earlier to some of the strength we saw in the pharmaceutical industry in LC, LCMS, in Q1. but it also was tied to the enterprise services story we've been talking about for a number of years. And you start to get yourself into a different relationship with customers. They truly see you as that valued partner. And, for example, when they've had several years of an enterprise service arrangement with you and you show them collectively, or I should say actually objectively, what's been going on in the lab with various different vendors in terms of equipment, you know, it'll point to, in our case, you know, a decision, let's move more of our business to actual management side. Also, I think, as Bob mentioned, we were there on a responsiveness standpoint. You know, on our services, digital capabilities, we were able to respond to customers, even in the midst of the pandemic, And that translates into instrument business when they're doing their next round of capital purchase. So I think there really is a very close symbiotic relationship. And although we run them as, you know, we show the outside world two separate business group results, they work very, very closely together, not only inside the company, but most importantly with customers.
Operator
Your next question comes from the line of Mike Riskin from Bank of America. Your line is open.
Brandon
Hey, thanks. Thanks for taking the question, guys. This is Mike on. Sure, Mike. Sure. Okay. I want to follow up on something you touched on earlier. I mean, we've already hit on LC and just broader pharma markets a little bit. Yeah, the comment of higher growth and pharma expected going forward. I just want to go a little deeper and try to get a sense for, you know, what are the key drivers here? Because there's so many moving pieces. You've got the end-of-year flush, you know, maybe some catch-up in COVID early in the year. NASD obviously doing very well. You know, selling out is becoming a bigger part of the picture. You've got the share gains. So I'm just wondering, as you strip some of those out, are we seeing broader, higher levels of spend in pharma? Are we at the start of another LC replacement cycle? If you take off some of those individual drivers, are we just seeing a better environment in pharma going forward for the next couple of years that would give you confidence that that's a little bit more sustainable? I got a follow up to that.
Jason
Yeah, so maybe just kind of parse out a couple of thoughts here. And then, you know, Bob, welcome your commentary here as well. So some of the things that you mentioned are clearly areas of higher growth today and expect to be higher growth for years to come. And that was part of our story back at the December analyst day where we talked about hey, we think RNA-based therapeutics are an area of very, very strong growth for years to come. And that's why you're seeing this growth in NASD happening right now, as well as our continued investments to capture even more of that future growth. You know, even ecology is an area of major investment right now, and that's why we went after the cell analysis business several years ago. So we expect those segments of the market to be really strong double-digit growers for many years to come. So I think that's part of the story there, which is to really have focused our investments and our portfolio towards those segments of the marketplace, which we expect to have even higher growth in the overall pharma market space. I think in general we expect the biopharma R&D investments to continue, you know, the move to large molecule. When I get the question around LC replacements, the replacement cycle is always going on. But what I do think is going to happen is it's going to be a stable, strong funding environment for pharma. So we're very optimistic about the long-term outlook for pharma. And I think it's a market I know we're betting on right now at Agilent.
Brandon
Okay. That's really helpful. I appreciate that. And then my follow-up on that is, you know, by our math, if you take the magnitude of the 1QB and then also the stronger FX tailwind for the rest of the year, that accounts for roughly $175 million of the raised fiscal year guide. And you do have these other items coming in. You know, you mentioned the COVID test. You've got all your comments on the strength in the corn markets. So where exactly is the downside risk? I mean, especially given the comps over the next couple of quarters, what are the areas we should be keeping our eye on that would keep you from doing something closer to 10% plus core for the year?
Ankur
Yeah, great question. And I think one of the things, we still are in the midst of the pandemic, right? There's still the variants out there. We haven't seen any impact of that to date, but those are some things that we're watching. And we haven't built any of the COVID testing that you just talked about into the numbers. So that would definitely be something that when we get those approved, that would be upside to this. And that's not all within our control. The development and those timings are within our control. But ultimately, that's a bet that both on the serology side as well as the QPCR side that we feel confident um about and that would be on top of these and then as we talked about before the the the variability potentially in the uh c e market is more biased towards the upside um as we think about the forecast going forward um and so we feel good about where we are we're early in the year um and that's one quarter in yeah but um you know we don't expect the momentum uh to to abate okay thanks so much
Jason
You're quite welcome.
Operator
Your next question comes from the line of Daniel Brennan from UBS. Your line is open. Great.
Daniel Brennan
Thank you. Thanks for taking the questions, guys. Hey, Mike. Maybe on China first. I don't know if I missed it. Did you give what number or what growth rate you're assuming for the full year? And then within that, could you just discuss a bit more detail on the components of that, in particular food? Obviously very strong this quarter, but how much more catch-up potentials is there in food, given how weak that business has been?
Ankur
Yeah, I'll take the first one, and then we can jump on. We can tag Team Mike on the second one. Yep, absolutely. You know, China, we had forecasted roughly high single digits at the beginning of the year. It certainly started much stronger than that. So we're expecting it to be double digits for the full year, really driven by both pharma and food. Those would be the two upside drivers to our initial guide. And then I think on food, you know, we've seen, you know, we saw stabilization really in the first half of 2020, saw an improvement in Q4, and that improvement continued here into Q1. You know, we would expect that to continue given kind of the overall environment and sensitivity around food testing and so forth. But we're not quantifying how much is left to catch up, so to speak.
Jason
Yeah, I think also with food, I'm not sure I really would use catch up to describe this because clearly, you know, where you had some of the pharma companies, you know, companies just weren't having the research in and didn't work and deferred investment. I think this has been part of the coming together of the new five-year plan for China, and that's what's really driving this. So we would expect to see, you know, sustained investments, albeit not at this double-digit level. I think It's hard to know, you know, Dan, we've always felt this thing was not a market that was shrinking, wouldn't shrink long-term, which it had been for a few years, but it was more like a high single-digit longer-term, and I think that's probably where we'd land on your question, although I think we'll do double-digit for sure this year in 21.
Ankur
Yeah, Mike, to your point, you know, in our initial guide, we assumed kind of a mid-single-digit as the recovery, and it's probably high single-digit to double-digit for the range for the full year.
Daniel Brennan
Great. And then maybe just one follow-up on the NASB business. What was the dollar contribution this quarter? What's kind of assumed in the full year? I don't know if you've changed that at all. I know you've touched upon this, but in terms of other modalities besides interference, I guess, sounds like it's something that could possibly come, but we're still going to wait to hear from you guys on that. Thank you.
Ankur
Yeah, what I would say, Dan, is we're at our full run rate capacity, which is, you know, as we've talked in the past, you know, $200 million a year. We get that kind of where we expect it to in Q1. Yeah, we're really happy with how that business is ramping. And we're not done yet.
Bob
Hey, Bob, I'd just add to that that, as I mentioned before, RNA-AI interference is our primary focus, but we are doing programs on guide RNA for CRISPR. And, you know, we are at full tilt with that, but we are always looking to be in tune with new modalities. And if they're relevant, if they're sufficiently meaningful, you know, we are definitely apprised of that as well.
Oren
Great. Thanks, Sam. Thank you.
Operator
Your next question comes from Patrick Donnelly from Citi. Your line is open.
Oren
Hey, guys. Thanks for taking the questions. Sure. Mike, maybe one for you just on the chemical and energy side. I certainly appreciate the conservatism baked in here. Can you just talk a little bit? I know in the past you've talked about kind of the shift from insourcing to outsourcing from customers and how that should play nicely into your strengths. Can you just talk about, I guess, where we are in that process and how big of an opportunity that is for you guys? Sure.
Jason
Yeah, I think we're still early days on that. I think that's part of the discussion. I think the investments that are going to happen this year, if they drop, are going to be more tied to uh deferred uh tech refresh but i think it's probably more of a 2023 kind of excuse me 22 event from uh from uh the the uh onshore and insourcing that we've been talking about and you know i think this probably points to this being able to be able to sustain a mid-single digit kind of in market so it's I mean, it points to the fact that, you know, chemical energy with these kind of longer-term outlooks coming from our customers will not be a drag on the overall growth rate to any material extent at all. So I think it's an adder to the thesis that there is growth in the C&E market as well, albeit it can be a little bit – can move a little bit depending on what's happening in the overall economy.
Oren
Okay, now it's going to be on the durability at least. And then maybe just – I like the way you said that. I should have used durability. That was a short way of answering your question. All good. I appreciate that. And then maybe just one on the academic side. Obviously, that's been lingering a little bit on the soft side, not only for you guys but for much of the industry. I guess where do you think we are there in terms of whatever metrics you guys look at, whether it's customers in the labs or whatever it may be? Maybe just kind of dive into that a little bit.
Jason
Yeah, great question. So when we were talking to our team and our customers, Here's our view of it right now. We think about 30% of the research labs are fully operational now. We think about 60% are working at reduced capacity. We think about 10% are closed. And we really think it's going to be all this is really tied to, you know, ability to, you know, get the infection rates down, to get vaccinations out. I think until that changes significantly, we're expecting, you know, kind of a more of the same, I'd say, Bob, you know, until we actually see change in the overall, you know.
Ankur
Yeah, I think the real catalyst for us, Patrick, to Mike's point, is what's going to happen in the fall semester for classes. Are people, you know, are students going to be back full or is it still going to be at kind of reduced rates and so forth? So we're expecting continued recovery, albeit slow, really, and that's what that's what we're looking at in addition to some of the kind of the macro levels.
Jason
I would say, though, that the conversation with customers is very robust right now. So it's just a matter of things opening up.
Oren
Great. Thanks, Mike and Bob. I appreciate it.
Jason
You're quite welcome.
Operator
Your next question comes from the line of Steve Willoughby from Cleveland Research. Your line is open.
Oren
Hi, good afternoon. Hi. I had a follow-up question to Mike Riskin's question as it relates to guidance, Bob. Maybe try to ask it a different way.
Mike Riskin 's
Have you really changed your organic or core growth assumptions over the remainder of the year? You know, because even in the first quarter here, you back out a couple hundred basis points from sort of end of your budget spending. you know, the first quarter still did, you know, basically twice what you were initially expecting for growth in the first quarter. And just looking through your guidance and doing some math, it looks like you really haven't made too much of a change for the organic growth over the remainder of the year.
Ankur
Is that fair to assume? Yeah, I would say we took Q1. We also upgraded Q2 and made some modest changes to the back half of the year. But again, Most of that would be in the areas that, you know, once we get further into the year, that would be an opportunity to, you know, revisit the forecast going forward. So I think bottom line, you're in the ballpark.
Oren
Okay. And then just a follow-up question on diagnostics. I guess two things to it. One,
Mike Riskin 's
Do you think we return to 2019 or normal levels in your non-COVID diagnostics business this year?
Ankur
And then also, could you just provide a reminder on where you see your PCR test potentially fitting once it does come to market? You want to take the first one and Sam, the second one? Yeah, the short answer is yes, we expect it to get back. But, you know, again, latter half of this year, we're starting to see improvement. If you look at it by region, you know, China's back. Certain pockets in Europe are back. In certain places in the U.S. are back as well. But I think overall, it's probably going to be, you know, a few more months at least before it gets back to pre-COVID levels.
Mike Riskin 's
Very good. Thanks.
Bob
Yeah, with regards to your second question on QPCR, you know, for COVID-19, our master mixes, our instruments are already being leveraged as part of other testing systems by customers around the world. When our own test comes to market, you know, we see the opportunity. There's still a dearth of robust testing solutions that are available. So, you know, we'll have the right performance going after the, you know, the right fragments or looking at the right elements of COVID-19. And it's really about our broad ability to distribute, make it available, and also something that could be automatable on multiple platforms. So we think we will, you know, we'll have a play.
Mike Riskin 's
Perfect.
Jason
Thank you. Thanks, Sam.
Operator
Your final question today comes from the line of Paul Knight from KeyBank. Your line is open.
Jason
Hey, Mike. How are you? All right. Long time no talk. How have you been? Yeah. Oh, yeah.
Mike Riskin 's
I'm good. Obviously, you've got a full array of products in the analytical instrument marketplace. And it goes back to, I think, Doug's question in terms of M&A and opportunity. Where do you think you are in the full solution and sell analysis? Is there a lot to build? Is there a lot to buy in that particular market?
Jason
We think so. In fact, thanks for the question, Paul. You may recall, and Jacob, feel free to jump into this question as well. We teed up a fairly large, although we feel really proud of the business we've built so far. We think we have scale at a $300 million-plus business. We're playing in a much larger SAM, and we think there's both opportunities to further build out but also buy here as well. Jacob, your thoughts there?
Brandon
Yeah, absolutely. We've been very intentional about how we build out our portfolio. First with instrument platforms that we ensure we can get some footprint and a scale in the market. And the next thing that would be the logic next step is to look at content. How do we actually get content on our instrument portfolio? So that's clearly an area we're looking into. But I actually think with the footprint, there's also opportunity to add other technique modalities into that. So we have open eyes. We follow what we call the pearl of strength. String of pearl. And so we're ready to put another pearl on that string. So we keep our eyes open and then see what happens.
Mike Riskin 's
And then the last question would be, you had mentioned your cost-cutting program that had started in the second quarter of last year. Where are you in that process, and what happens to cost-cutting when travel and entertainment might come back post-COVID?
Ankur
Yeah, we're seeing some of that. And, you know, some of that is lapping this quarter because we saw a significant drop. And so you're not seeing the year-over-year changes. We're not seeing, you know, it go back. And our goal is to not have it go back. So we think we're at a new watermark here in terms of spending, particularly in travel and some of these other areas. Now, we are increasing investments in places like digital and some of these other places that are driving demand. as well as some of the capacity that we talked about before. But certainly in those types of things, you know, travel and so forth, we're not looking for that to go back. It will go back some, but certainly not back to the way we have been doing business before. Customers don't want it, and we are not going to let it happen. Absolutely.
Jason
To Bob's point, I spoke the other day to our global field team, and we're talking about embracing our new ways of working. um and of course a lot of people the road warriors will love you back on on the road and but uh not not everybody feels that way and customers certainly don't feel that way because we're much more responsive and attentive to their needs by using digital platforms there is a place for face-to-face but it has to be based on customer need not because we want to we want to be in the road and be out there doing things in a very traditional way so We're keenly aware of the question you posed, Paul, and really challenging ourselves to make sure that we really continue forward with these new ways of working. And this allows us to put money into areas that really do matter to customers. So I'd rather invest there rather than travel and entertainment. Thank you.
Operator
That concludes Q&A, and it also concludes today's Agilent Technologies first quarter 2021 earnings conference call. Thank you, everybody, for joining. You may now disconnect.
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