Agilent Technologies, Inc.

Please stand by. We're about to begin. Ladies and gentlemen, welcome to the Agilent Technologies Q4 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 Ahuja, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Beau. and welcome everyone to Agilent's conference call for the fourth quarter of fiscal year 2023. With me are Mike McMullen, Agilent President and CEO, and Bob McMahon, Agilent Senior Vice President and CFO. This presentation is being webcast live. The news release for our fourth 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'll 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 exchange rates. We will also make forward-looking statements about the financial performance of the company. These statements are subject to risk 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 risk and other factors. And now, I'd like to turn the call over to Mike.

Thanks, Parmeet, and thanks, everyone, for joining our call today. Before we get into discussing our results and outlook, I want to mention that we're joined today by Porter McDonald, President of the Agilent CrossLab Group, and Sam Raha, President of the Agilent Diagnostics and Genomics Group. We're also joining this call for the first time by Phil Binns, President of the Agilent Life Science and Applied Markets Group. Phil's name may be new to some of you, but he's well known at Agilent and in the industry. Phil has been with us for more than 13 years, coming over with the Varian acquisition and overseeing our market-leading spectroscopy business. We're extremely pleased to have some of Phil's knowledge, experience, and proven leadership strength heading up our LSAG business. In a short time in the role, we've already seen Phil add tremendous value as a member of our senior leadership team. Welcome, Phil. Now, on to our fourth quarter results. The Agile team once again continued to perform well under challenging market conditions. Revenue of $1.69 billion declined 9.7% core after increasing 17.5% last year. This is at the high end of our guidance. Our proactive approach to measure our cost structure in this market environment helped us deliver healthy fourth quarter operating margins of 27.8%. Q4 earnings per share of $1.38 exceeded our guidance. While this was a decline of 10%, it comes against a tough compare last year when EPS grew 26%. While the market continues to be challenging, we believe we're starting to see signs of stabilization as an encouraging data point for the quarter Our book-to-bill ratio is one for the company and greater than one for our LSAG instruments. Let's now take a close look at our Q4 performance, starting with our regional results. During the quarter, while down year-on-year, we delivered sequential growth, except for China, as expected. In China, our business declined 31% year-on-year, after going 44% at Q4 last year. While China was down sequentially, these results are very much in line with our expectations. In the year-on-year, monthly performance improved slightly as the quarter progressed. In addition, orders were slightly higher than revenue for the quarter. While it is too early to call these two data points a trend, we see this as a current sign of potential stabilization. In late September, I traveled to China for the first time since the COVID outbreak to meet with the Agilent team, key customers and government officials. I was reminded of both the sheer size of the Chinese economy and our market there. I saw firsthand the work being done to bolster economic activity in the near term and create an environment that will support continued growth into the future. I remain convinced China will continue to play an important role in life sciences, and I'm confident that the China market will return to growth. In looking at the largest end market, pharma declined 14% driven by continued caution among customers on capital expenditures for new instruments. Within pharma, Biopharma formed better than small molecule. Geographically, our biopharma business outside China grew high single digits. Looking at our performance by business unit, the life science and applied markets group delivered revenue of $928 million, down 18% core versus a tough compare last year above 22%. Customers continue to hold off on capital expenditures, particularly in the pharma segment of LSAG's business, which declined in the high 20% range. This is against growth in the low 20s last year. On the other hand, we continue to see strong customer demand and growth in our PFAS solutions, as well as continued strength in the advanced materials segment. These are two secular trends we've highlighted before, and we remain optimistic about future growth in these market segments. While the market environment remains challenged, we continue to innovate and provide unique solutions for our customers. The new products we launched in June at ASMS in particular The 6595 LC triple quad, which is focused on key applications like PFAS, continue to generate positive customer interest and new orders. We're also bringing innovative new solutions for customers across the biopharma value chain. We just saw a number of our online UH PLC systems with large biopharma companies. The systems are easy to use, reliable, and deliver significant value by providing fully automated analysis of critical quality attributes, allowing real-time decision-making outside the lab. The adjunct cross-site group posted revenue of $404 million, up 4% core and 6% on a reported basis. ACG delivered growth across all end markets and in all regions except China. The contract services business was up double digits, offset by the services associated with new instrument placements. Our strategy of increasing the connect rate continues to pay off. In the quarter, the contract services business represented 65% of ACG revenue, a number that has grown nicely over the years. The diagnostic and genomics group delivered revenue of $356 million, flat on a core basis, and up 1% reported. DGG's results were led by the pathology and NASD businesses, which both delivered low double-digit growth. These strong results were offset by the continued market challenge in genomics in both consumables and instruments. Our NASD portfolio and capacity expansion are continuing as planned. We're confident in the long-term growth prospects for the markets we serve. Before I finish covering DGG, I want to thank Sam Raha for his contributions over the years to help us to build a strong foundation for the DGG business. I wish Sam well. In addition to these business group highlights, during the quarter, we will recognize for our commitment to sustainability. as long-term targets for reaching net zero greenhouse gas emissions have been improved by the highly regarded science-based targets initiative. A year ago, we entered 2023 sharing a view of economic and industry uncertainty, as we got it from moderating growth in the second half of 2023. We had not anticipated, however, the significance of the market headwinds the industry eventually faced, particularly in the pharma market in China. Despite the challenging market conditions, we delivered full-year revenue of $6.83 billion, growing 1.5% core. While our full-year growth was lower than initially expected, we met or exceeded every quarterly guidance range we provided, a solid testament to the team's execution ability. Including FY23 results, our four-year compound annual growth rate is 7%. This is at the height of our long-term growth guidance. In FY23, we delivered operating margins of 27.4%. This is up 30 basis points this year and up more than 400 basis points in the last four years. Earnings per share of $5.44 were up 4%, delivering leveraged earnings growth for the year. Our four-year compounded annual growth rate for EPS is 15%. Looking back, 2023 was a challenging year. What I'm particularly proud of is the Agilent team's ability to quickly pivot and take action to address these challenges while staying relentlessly focused on our customers. While we work to significantly reduce expenses, Agilent's customer satisfaction ratings remain at all-time highs. At the same time, our employee engagement continues to be excellent as we achieved a number of best employer awards over the last year. All this helped us deliver another year of leveraged earnings in an extremely difficult market environment. Before turning it over to Bob for more details, I want to provide some high-level perspective on FY24 and beyond. For 2024, we anticipate a slow but steady recovery throughout the year. In our initial outlook, at the height of our guidance, we expect revenues to return to growth. At the same time, our range for EPS in the year ahead has us again delivering leveraged EPS growth. As we look ahead, we remain convinced the market challenges being faced by the industry today are transient. Our end markets are powered by investments in improving the human condition. The pace of science, innovation, and discovery continues to increase, which will fuel further growth. We remain focused on winning in the marketplace, our differentiated product services, and most importantly, our One Ashland team are all essential to the success of our customers. We are well positioned for long-term growth. Bob will now share more detail on the quarter and the year, along with more specifics on our initial view for fiscal 2024 and Q1. Thank you for joining us today. And now, Bob, over to you.