Agilent Technologies, Inc.

Please stand by. We're about to begin. Ladies and gentlemen, welcome to the Agilent Technologies Q3 2023 Earnings Conference Call. My name is Beau, and I will be coordinating your call today. If you would like to ask a question following the presentation, you may do so by pressing star 1 on your telephone. I will now hand you over to your host, Parmeet Bahooja. Parmeet, please go ahead.

Thank you, Beau, and welcome, everyone, to Agilent's conference call for the third quarter of fiscal year 2023. With me are Mike McMullen, Agilent President and CEO, and Bob McMahon, Agilent Senior Vice President and CFO. Joining in the Q&A after Mike and Bob's comments will be Jacob Tyson, President of the Agilent Life Science and Applied Markets Group, Sam Raha, President of the Agilent Diagnostics and Genomics Group, and Porek McDonald, President of the Agilent Cross Lab Group. This presentation is being webcast live. The news release for our third quarter 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. 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 any acquisitions and divestitures completed within the past 12 months. Guidance is based on forecasted currency exchange rates. During this call, 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'd like to turn the call over to Mike.

Thanks, Parmeet, and thanks, everyone, for joining our call. In today's call, I will walk you through our Q3 results, share what we're now seeing in the market, and provide context for our revised full-year outlook. I'll then turn things over to Bob for more detail on the quarter and outlook before returning for some brief closing comments. The Agile team continues to execute well as we navigate our way through the ongoing challenges of the current market environment. Our Q3 revenue is $1.67 billion at the top end of our expectations. This is a decline of 2% on a core basis against a tough compare of 13% in Q3 of last year. We continue to be proactive and are taking steps to help us deliver on our leveraged earnings model. Operating margins are 29.3%, up 180 basis points. Quarterly earnings per share of $1.43 are up 7% and above our expectations. The major driver behind our Q3 year-on-year declining revenue is our China business. Excluding China, the rest of Agile grew 2%, which was better than expected. We knew we were up against a difficult compare in China and had previously guided for lower China revenues in Q3. However, the economy in China continued to weaken during the quarter, translating into a more challenging market environment than we had anticipated. With the softer market conditions in China and continued global macroeconomic challenges, we have lower growth expectations for the remainder of the fiscal year. We now expect core growth for the full year to be around 1%, down from our previous guide. Based on what we're seeing at this time, we're not assuming any improvement in the China market for the remainder of the year. We, however, view the near-term challenges we're experiencing as transitory and remain confident about the long-term growth prospects of our end markets. Returning now to our third quarter results, I'd like to touch on our two largest end markets. Our total pharma business is down 8%, driven by the pharma market in China being down 30%. Within pharma, our biopharma business grew 5%, while small molecule was down 16%. the chemical advanced materials market declined 3% versus a 22% increase last year. While we did see the chemical energy space being weighed down by macro concerns, slowing growth in advanced materials was more a function of a difficult compare as the volumes have remained steady and robust. Looking at performance by business unit, the life science and applied markets group delivered revenues of $927 million. This was a decline of 9% of a very tough compare of 18% growth. Last year's growth was helped by the benefits of the recovery from the Q2 2022 Shanghai shutdown. LSAG's performance continues to be affected by the market environment in China across all end markets and pharma globally. Our sales funnel remains healthy and are up year on year, but deal velocity continues to slow as customers remain cautious in making capital purchases. We expect this market environment for new instrument purchases to continue for the rest of the year. At this time, we are not assuming any benefit from the year-end budget flush or incremental stimulus in China. As we said before, we are continuing to prioritize investment innovation. As an example, in June, AdSense Investment Innovation were on full display at the annual ASMS Conference. The LSG team introduced new products and comprehensive workflows to enhance data quality and productivity for our customers. These include two new LCMS systems, a new PFAS workflow solution, and an AI software for data analysis, among others. The Agilent Cross App Group posted revenues of $396 million. This is up an impressive 11% core with growth in all regions and end markets as customers continue to embrace our value proposition. We continue to see strong demand for our services as we help customers drive productivity in the lab. The diagnostic and genomics group delivered revenues of $349 million, up 3% core. Pathology grew high single digits as demand for our diagnostic tests continues to grow. Our NASD business grew to high teens. This growth was partially offset as we continue to see market weakness for our genomics and resolution bioscience businesses. Regarding resolution bioscience, the market for KIDIT, NGS-based companion diagnostics, has not developed as we expected. Furthermore, we don't see a realistic path to profitability. As a result, we've made the difficult decision to shut down the business. However, our investments in future growth continue. For example, we achieved an important milestone during the quarter. when our NASD business generated the first revenues for our Train B investment in Frederick, Colorado. Now looking forward for the company, as we navigate this challenging macroeconomic environment, we remain confident in the Agilent team and our ability to continue driving leveraged earnings growth using our Agile-Agilent framework. We faced challenges before and we're taking actions now that will make us stronger and position us well for the future. As we've made the last quarter, we are doubling down on delivering cost efficiencies and increasing productivity. The goal is to generate additional cost savings so we can continue to invest in innovative new solutions and support for our customers as we enable future profitable growth. We are on track to achieve the cost savings we've targeted for the second half of this year. We are in attractive markets that will produce long-term growth. Our innovation engine remains strong. and the battle test of one Agile team is driving outstanding execution. Bob and I will provide the details and our results, as well as our outlook for the remainder of the year. After Bob delivers his comments, I'll be back to provide some closing remarks. And now, Bob, over to you.