Agilent Technologies, Inc. (A) Q3 2023 Earnings Call Transcript - Seeking Alpha

22/03/2024, 14:14 Agilent Technologies, Inc.
(A) Q3 2023 Earnings Call Transcript _ Seeking Alpha
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Agilent Technologies, Inc. (A) Q3 2023 Earnings

Call Transcript
Aug. 15, 2023 8:31 PM ET | Agilent Technologies, Inc. (A) Stock
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Agilent Technologies, Inc. (NYSE:A) Q3 2023 Earnings Conference Call August 15, 2023 4:30
PM ET
Company Participants
Parmeet Ahuja - IR
Mike McMullen - President and CEO
Robert McMahon - SVP and CFO
Padraig McDonnell - President, Agilent CrossLab Group
Sam Raha - President, Agilent Diagnostics & Genomics Group
Jacob Thaysen - President, Agilent Life Science & Applied Markets Group
Conference Call Participants
Matt Sykes - Goldman Sachs

Jack Meehan - Nephron Research
Vijay Kumar - Evercore ISI
Dan Leonard - Credit Suisse
Brandon Couillard - Jefferies
Puneet Souda - Leerink Partners
Rachel Vatnsdal - JPMorgan
Patrick Donnelly - Citi
Derik De Bruin - Bank of America
Josh Waldman - Cleveland Research
Dan Brennan - TD Cowen
Luke Sergott - Barclays
Operator
https://seekingalpha.com/article/4628790-agilent-technologies-inc-q3-2023-earnings-call-transcript 1/32
22/03/2024, 14:14 Agilent Technologies, Inc. (A) Q3 2023 Earnings Call Transcript _ Seeking Alpha
Ladies and gentlemen, welcome to the Agilent Technologies Q3 2023 Earnings Conference
Call. My name is Bo and I will be coordinating your call today. [Operator Instructions]
I will now hand you over to your host, Parmeet Ahuja. Parmeet, please go ahead.
Parmeet Ahuja
Thank you, Bo, 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's Senior Vice President and CFO. Joining in the Q&A after Mike and Bob's comments
will be Jacob Thaysen, President of the Agilent Life Science and Applied Markets Group; Sam
Raha, President of the Agilent Diagnostics and Genomics Group; and Padraig McDonnell,
President of the Agilent CrossLab 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 a 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.
Mike McMullen
Thanks, Parmeet, and thanks, everyone, for joining our call.
In today's call, I'll 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 Agilent
team continues to execute well as we navigate our way through ongoing challenges of the
current market environment. Our Q3 revenue was $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 drive behind our Q3 year-on-year
decline in revenue is our China business.
Excluding China, the rest of Agilent grew 2%, which was better than expected. We knew we're
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, translated 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.
Before turning 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 our performance by business unit. The Life Science
and Applied Markets have 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 benefit of 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 a year-end budget flush or incremental stimulus in China.
As we said before, we are continuing to prioritize invest in innovation. As an example, in June,

Agilent's investment innovation were on full display at the Annual ASMS Conference. The
LSAG team introduced new products and comprehensive workflows to enhance data quality
and productivity for our customers. These include two new LC/MS systems, a new PFAS
workflow solution and an AI software for data analysis, among others. The Agilent CrossLab
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 Diagnostics and Genomics Group
delivered revenues of $349 million, up 3% core. Pathology grew high single digits as demand
for our diagnostic test continues to grow. Our NASD business grew high teens.
This growth was partially offset as we are continuing to see market weakness for our Genomics
and Resolution Bioscience businesses. Regarding resolution Bioscience, the market for kidded
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 a 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 from 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 leverage earnings
growth, use 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 stated 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 at One Agilent team is driving outstanding execution. Bob and I will
provide the details on our results as well as our outlook for the remainder of the year. After Bob
delivers his comments, I will be back to provide some closing remarks.
And now, Bob, over to you.
Robert McMahon
Thanks, Mike, and good afternoon, everyone.
In my remarks today, I will provide some additional details on revenue in the quarter as well as
take you through the income statement and other key financial metrics. I'll then finish up with
our updated guidance for the full year and our fourth quarter outlook. Unless otherwise noted,
my remarks will focus on non-GAAP results.
Q3 revenue was $1.67 billion, a decline of 2.3% core and down 2.7% on a reported basis. This
compares with 13.2% core growth last year. Currency was a 0.5 point headwind while M&A
contribution was minimal. As you may recall, Q3 of last year benefited from roughly $35 million
in revenue deferred from the second quarter as we ramp back up from the Shanghai shutdown
in China. Accounting for this, our Q3 core growth would be roughly flat versus a year ago. As
Mike mentioned, Pharma, our largest end market, declined 8%.
This is in line with our reduced expectations coming out of Q2 with underperformance in China,
offset by better performance in the rest of the world. The Chemicals and Advanced Materials
market was down 3% off a very tough 22% compare, but dollar-wise was flat sequentially.
The academia and government market was up 5% with all regions showing growth except the
Americas, which was flat. Our business in the diagnostics and clinical market grew 3%, driven
by high single-digit growth in pathology, partially offset by genomics weakness. The
environmental and forensics business grew 2%, driven by double-digit growth in the Americas
and Europe.
The growth was generated by the build-out of water infrastructure projects and an expansion of
funding for PFAS-related activities. The food market grew 1% based on strength in Asia outside
of China and mid-single-digit growth in Europe, driven by new food testing regulations. On a
geographic basis, while China underperformed, the Americas and the rest of Asia were better
than expected, while Europe was in line with our expectations. Moving down the P&L. Third
quarter gross margin was 56.3%, down 10 basis points from a year ago.
Like last quarter, this was largely due to the product and services mix, and pricing was slightly
better than our expectations. Below gross margin, the expense reduction actions we initiated in
the second quarter helped strengthen operating margins. We also benefited from a reduction in
variable pay expenses.
As Mike mentioned, margins were 29.3%, up 180 basis points from last year. Below the line,
our interest income was higher than planned, while our tax rate was 13.75% and we had 295
million diluted shares outstanding.
Putting it all together, Q3 earnings per share were $1.43, up 7% from a year ago, a very good
result given declining revenue. Now let me turn to cash flow and the balance sheet. I continue
to be pleased with our cash flow generation this year. Cash flow from operations was $562
million in the quarter, and is $1.3 billion year-to-date. In Q3, we invested $81 million in capital
expenditures, totaling $214 million year-to-date, effectively flat year-on-year as we continue to
optimize our CapEx spending.
Given the strong year-to-date results, we are increasing our free cash flow forecast for the year
to $1.2 billion, comprised of operating cash flow of $1.5 billion and CapEx of $300 million. This
is an increase of $250 million from the midpoint of our previous guidance. Despite the
challenging macroeconomic conditions, our balanced capital allocation strategy is intact.
During the quarter, we returned $401 million to shareholders. $66 million through dividends and
repurchase shares worth $335 million.
This ongoing balanced approach to capital deployment is another example of the confidence
we have in our team and our belief in the long-term strength of our markets. Before getting into
the revised full year outlook, I want to mention we have taken a $291 million pretax charge in
Q3 associated with the decision to shut down the Resolution Bioscience business.
This charge, which is excluded from non-GAAP results, includes an impairment write-down
along with charges associated with the wind-down and exit of the business. We expect the
wind down to continue through Q4 and into early FY '24. Now to the revised outlook for the
year in Q4.
Given the more challenging macroeconomic environment we are seeing, particularly in China,
we now expect full year revenue to be in the range of $6.80 billion to $6.85 billion. This
represents a decline of 0.7% to flat on a reported basis and core growth of 0.8% to 1.5%. This
is a core growth reduction of 260 basis points from the midpoint of our last guide.
Roughly 85% of the change is related to reduced expectations in China while the remainder is
due to some incremental cautiousness from our customers on CapEx spend as well as
softness in genomics and the shutdown of Resolution Bioscience. As Mike said earlier, we are
not assuming any incremental stimulus in China or any material year-end budget flush in these
revised projections.
Given the large change in China, I wanted to provide some additional perspective on how we
are forecasting the rest of the year, recognizing that the market continues to be very dynamic.
To provide some context, in Q3 through June, our business in China was tracking to a mid-
single-digit decline in revenue, which was in line with our expectations.
However, in July, we saw a further deterioration in China, resulting in the 17% decline for the
quarter. And while the Q3 decline in China was centered in pharma, which was down 30%, we
did see weakness in the other end markets as well. We expect the conditions we've seen in
July to persist in China for Q4.
In addition, we are facing our most difficult quarterly compare in China, where we grew 44% in
Q4 of last year. We are now expecting Q4 to decline in the mid-30s year-on-year. For the full
year, we are expecting China to decline mid-single digits versus growing mid-single digits.
With the change in revenue, we now expect full year fiscal 2023 non-GAAP earnings per share
to be between $5.40 and $5.43, representing leveraged earnings growth of 3% to 4% and
roughly 6% to 7% growth net of currency. The change in full year guide results in Q4 revenue
being in the range of $1.655 billion to $1.705 billion.
This represents a decline of 8% to 10.5% on a reported basis and a decline of 9.5% to 12% on
a core basis. The recovery last year in Q4 of the remaining revenue deferred from the
Shanghai Q2 shutdown negatively impacts the year-on-year results by roughly 1 point. In
fourth quarter, non-GAAP earnings per share are expected to be between $1.33 and $1.36.
Thanks for being on the call.
And now I will turn things back over to Mike for some closing comments before taking your
questions. Mike?
Mike McMullen
Thanks, Bob.
While today's macroenvironment is challenged for new instrument purchases, we remain

confident in the long-term growth prospects of our end markets, the diversification of our
business and in our proven ability to grow faster than the market. I'd like to share a few
examples why my confidence remains intact despite near-term challenges.
In Pharma, our largest end market, innovation and advance of medicines continue with new
therapeutics flowing into the market. The demographic drivers of this market are on our side, a
growing global population that expects access to health care and extending life expectancy to
be key priorities from their governments.
Our market-leading solutions are critical to innovation behind new therapeutics and ensuring
the safety and quality of on-market drugs. In the applied markets, growing PFAS testing and
the electrical vehicle transition are here to stay, action in new opportunities for growth.
Everyone wants to have a safer water to drink, food to eat and air to breathe and the search for
and production of more sustainable materials and energy sources remains a global priority.
Agilent is a diversified leader in a unique position to help our customers drive their solutions.
We remain a trusted partner, our customers though they can rely on in both good and
challenging times.
Our combination of leading instrumentation and world-class customer support is a long-term

competitive advantage. At the heart of this long-term competitive advantage is the Agilent team
and the One Agilent culture. You see this reflected in a recent recognition on Glassdoor and in
being named A Great Place to Work in all 27 countries and territories around the world where
we qualify for certification. We have a company mission focused on advancing the quality of
life. To learn more about this, I would encourage you to review the latest addition of the ESG
report that we issued last month.
We have proactively managed the company through the short term, always with an eye
towards our customers and in the long term. We have been proactive in managing our
business to drive leveraged earnings but not at the expense of customer satisfaction and future
growth. Yes, these are challenging times, but we have the team, the strategy and the right
culture that would deliver long-term success. Thank you for joining us today.
And now over to you, Parmeet, to lead the question-and-answer session. Parmeet?
Parmeet Ahuja
Thanks, Mike. Bo, if you could please provide instructions for the Q&A now.
Question-and-Answer Session
Operator
Thank you, Parmeet. [Operator Instructions] We'll go first this afternoon to Matt Sykes at
Goldman Sachs.
Matt Sykes
Hi. Good afternoon. Thanks for taking my questions. I thought maybe I'd start just with China,
sort of a high-level question. You guys talked about sort of the transitory impact of the current
environment. You mentioned pharma. Could you kind of extend those comments to China? Do
you think it's more cyclical versus structural? Are there competitive issues that you're facing or
just your outlook on that region? Thanks.
Mike McMullen
Yes, Matt, thanks for the question. So let me start with the last part of your question. This is a
macro story, not a competitive story. So market shares continue to be very, very strong. I know
there's a lot of discussion about increased local competition, but we've moved pretty
aggressively on our made in China strategy. So we don't see that all as a competitive issue.
Transitory, the comment there is really about the fact that the China market is not going away.
It's going to be a big market for years to come. It clearly is challenged right now. And we're not
-- we're taking a sort of one quarter at a time, actually month by month. And as Bob mentioned
in his comments, I think July, we actually saw the weakest performance within the quarter, and
we're still seeing weakness in the pharmaceutical industry, for example, the level of
manufacturing declined pretty specifically in the month of July. So we think the market is going
to be there, but it's going to take a while for it to get back to growth.
And I guess probably the other thing to point here is - and again, I'm talking specifically around
the instrument side of the China market. As you know, we have a very large, in fact, the largest
installed base of instrumentation in the marketplace. So very positive on the ability to grow the
aftermarket in our diagnostics business.
Probably anything you add to that? Okay.
Matt Sykes
Maybe just for my follow-up, just on ACG. So a good quarter in that business. And I know you
guys talked about a year or two ago about sort of a goal of 30%-plus margins obviously
achieved this quarter. Can you maybe talk about sort of where you see the durability of that
growth is sort of high single, low double, 30%-plus margins, how we should be thinking about
the business? Or were there some one-offs in the quarter that you'd want to call out to kind of
measure expectations there?
Mike McMullen
Yes. We've consistently communicated that we think this is a high single-digit, low double-digit
kind of growth business for us. It's been that way since pretty much most of my tenure as CEO,
and we don't see that changing as we go forward. Of course, there'll be puts and takes by
quarter. But we're continuing to see good growth in our connect rates, which we've talked a lot
about.
And we're also doing very well on winning the enterprise business as well to complement the
other aspects of our portfolio offerings. I would say that the profitability was probably a little bit
higher in Q3 than - but we do think that the high double-digit number you quote about is pretty
manageable for that business, but not at the level we saw in Q3, right, Bob?
Robert McMahon
Yes. Matt, this is Bob. And just maybe to further what Mike is saying, when we think about the
components of that business, the fastest-growing component is actually the contracted
business, which is that connect rate. And it was in the mid-teens this last quarter and continues
to be faster growing than the overall business. And as long as we continue to be able to drive
that increased attach rate, we feel very good about that.
And that comes with - with that growth comes scale and being able to leverage our team with
the work that the digital initiatives that we've had as well. And so as Mike said, don't book, I
think it was 32% going forward because there were some variable pay true-ups. But certainly,
what you've seen quarter in, quarter out is a nice, steady cadence of margin improvement
there.
Matt Sykes
Got it. Thanks guys.
Operator
Thank you. We'll go next now to Jack Meehan at Nephron Research.
Jack Meehan
Thank you. Good afternoon.
Mike McMullen
Good afternoon, Jack.
Jack Meehan
Mike, I was hoping you could talk a little bit more about some of the more cyclical areas of the
business in the CAM segment. Just what are you seeing from some of your chemicals
customers. You've heard some conversation of budget cuts there. Are you starting to see that?
Just how is your visibility into some of these cyclical areas?
Mike McMullen
Yes. So as we've talked earlier - thanks for the questions Jack and all the participants
comments and then have Jacob jump in on this one as well. But we look across the CAM, I'd
say the Advanced Materials segment of that market, which we've communicated is more driven
by secular trends and cyclical trends continues to hold up quite well. And by the way, also, I
just want to point out we had a really tough compare, I think we grew 22% last year in Q3 in
CAM.
If we look at the chemicals and energy side of it, the energy side actually popped up a bit,
particularly driven by the U.S. where we are seeing some weakness is in the chemical side
where customers are looking at the macroeconomic environment and are slowing their capital
investment there. So I'd say that kind of puts and takes. But I think in terms of the quarter, Bob,
I think we came in right about where we thought we'd be in CAM and I'd say it's a mixed story
in terms of different segments growing at different rates.
Robert McMahon
Yes. Before Jacob, maybe you can jump in. I think the one thing that I think is important is you
really have story in China, which is its own and then the rest of the business. And so if you
think about where Americas and Europe is, it's performed extremely well. And if you actually
look - we mentioned this in the call, sequentially, the dollars actually were very stable. And so
we are expecting a challenging Q4, mainly because we grew 70% in China.
Mike McMullen
43% in Q3.
Robert McMahon
Yes. So it's a compare situation. But this business continues to be very strong.
Mike McMullen
Do you want to make the comments on the Advanced Materials side of the house there,
Jacob?
Jacob Thaysen
Yes, I can say that. And Mike, I think you also started with that saying that we continue to see a
lot of activities in that space, especially in the battery space, where, of course, there are also
compares we are against, but there's still a lot of interest in that space, and we are doing very,
very well. Semicon is also cycling down right now, but we are - we continue to see business in
that space, but not as strong as we did last year.
Jack Meehan
Thanks Jacob. And my follow-up, I wanted to ask about margins. Just how you're thinking
about some of the puts and takes for 2024. I think some of the cost savings you've talked about
should extend to next year, should get some leverage out of NASD. But at the same time,
some of the performance comp comes back and would think some of these top line pressures
extend as well. I don't know, can you just talk about maybe relative to the LRP, how you're
thinking about margins for next year?
Mike McMullen
Bob, do you want to lead that one? Yes. By the way, one thing I'd add to that before Bob's, the
specifics, Jack, is our decision on the Resolution Bioscience business, that also is part of the
story for us next year in terms of margin expansion. So Bob?
Robert McMahon
Yes. I would say that our view of leveraged earnings growth continues into '24. And so while we
do have some things coming back to us, some of the actions that we've taken will continue to
move into a full year for 2024. And quite honestly, that's kind of what we expect our job to be is
to be able to drive that leveraged earnings growth.
Jack Meehan
Thank you, guys.
Mike McMullen
Welcome.
Operator
Thank you. We go next now to Vijay Kumar at Evercore ISI.
Vijay Kumar
Hey, guys. Thanks for taking my question, and good job on the margin execution here, Mike.
Mike, maybe I missed some of the comments here. Can you talk about the phasing in the
quarter here in China? I think I heard when you start off down mid-singles and was July off like
minus 25%, minus 30%, is that the exit rate?
Mike McMullen
Yes. We take a change within the quarter.
Robert McMahon
Yes, Vijay, this is Bob. Your math is in the ballpark. Yes. So we were down mid-single digits
through June. So May and June kind of tracking as we expected, and then we saw incremental
weakness in July, and we ended up for the full quarter down 17%. And what we're assuming
going into Q4 is that, that performance will continue into Q4. And given the tough comp that we
have because I think we grew 44% in Q4 of last year, we're estimating roughly a 35-ish percent
drop in Q4 in China.
Vijay Kumar
Sorry. That's helpful, Bob. And just -- sorry, where I was going with that question was, can you
talk about capital versus recurring? And I think when I look at your Americas in Europe,
America is just flattish. Do you see a similar sort of phasing in ex-China, maybe talk about exit
rates in July?
Robert McMahon
So actually, if you think about the ACG business, actually ACG grew in all regions and all end
markets, inclusive of China. So there wasn't a change there. And I would say both in the
Americas and Europe, we didn't see that same effect.
Mike McMullen
Yes. And overall, outside of China, the geographic performance was better than expected.
Robert McMahon
Correct.
Mike McMullen
We saw no trends like the China trend in our other geographies.
Vijay Kumar
That's helpful, Mike. And Mike, maybe one that you mentioned a couple of times on transitory. I
think that's a new firm that you're using -- what have you heard -
Mike McMullen
I think I move away from prudent to transitory.
Vijay Kumar
Yes. What have you guys heard on the ground on China stimulus, maybe some positive
commentary, but nothing is concrete and why use the word transitory is the implication here
fiscal '24 should be a more normalized year when we look at the comps?
Robert McMahon
Yes. So, a couple of thoughts here, I think relative to the China business, we're hearing similar
things, but nothing really significant and there's not enough to go onto assume we have kind of
material impact on our outlook for the rest of the year. When we talk about transitory, we talked
about the fact that these markets are driven by investments to improve the human condition as
I mentioned. They're not going to go away.
And neither while we're not going to get into the specifics of an actual number, we actually see
a path to growth next year for full year for Agilent. And of course, we have the tough compare
the first half of next year, we did coming off a double-digit print for first half this year, but as we
looked at our business keep in mind, we're - what's behind my thought process here which is -
we're instrument company, yes, we have big instrument business around 60%, we have a 40%
of those in recurring revenue business.
I don't know if you caught it in Mike call script, but our sales funnel for instruments are actually
growing. So that would say that at some point in time those budgets are going to be released
and the orders will close, when I've seen deals come out of - the funnel. We're not seeing order
cancellations, we're not seeing changes to our one loss ratio. And we're encouraged by the
growth we're seeing in biopharma.
On the small molecule side, we know that different rates of replacements during the cycles, but
we think this will follow historical cycle. I think the real wildcard for us, we look forward into '24,
is really what do we assume around the China market. We're not assuming any kind of major
further degradation, but at the same point in time, it's the path to return to kind of historic
growth rates. That's the open question right now.
Vijay Kumar
Understood. Thanks, guys.
Operator
We'll go next now to Dan Leonard at Credit Suisse.
Mike McMullen
Hi, Dan.
Dan Leonard
Thank you. Hi, Mike. I wanted to follow-up on that last part. You've seen a lot of cycles in China
over 30 plus years. What would you compare this to and how do we get out of it?
Mike McMullen
I am as old as the dirt and have been working in this marketplace since the mid-90s. I haven't
seen a cycle like this before. And we've not seen a situation where the - there's really seem to
be a lack of confidence right now in the macro economy. Now, look I'm not sharing - anything
that the audience here doesn't fully understand already. So, the way we get out of this, I think is
China led by the government.
We'll get back to focusing on its long-term goals of making China an innovation driven
economy, which will require continued investments in R&D. It's going to also get back to
focusing on improving the health of - the population, addressing some of environment issue, so
we think it's getting back to fundamentals. Yes, we think that eventually will occur, but there's a
lot of issues that we may be work through within the China right now.
But - it's a very large market, the market is not going to disappear. And I think there'll be
investments. I think there's also needs to be a level of confidence in the private sector in China,
that it's a good time to reinvest and maybe I shouldn't wait on the sidelines hope for its
stimulus, but get back to work and get my business going. So there's a lot of dynamics. I really
have to say though, I don't know if I have a comparable situation that we've been through for
this long.
I think Bob and I were talking earlier today. The change in the food ministry, a number of years
ago is - was the biggest thing we've seen or 24 plus seven some of the biggest things we've
seen a change, but this is much more of a macro economic issue in China, which is different
than what we've seen before. Obviously, we have an impact on life sciences tool, but it's a
much bigger macro story is really driving the softness right now in our markets.
Robert McMahon
Yes. The only thing I would say, Dan to build on what Mike was saying is, as he mentioned, the
demographics are with us when you think about the aging population, the need to actually
access healthcare more important therapeutics, and the importance of ensuring the water and
food supply. They are the world's leaders today in electric and clean energy. It's hard to believe
when everyone thinks about that.
But they are the leader, and they have more electric cars than any other region. And so, I think
that investment is going to be key as Mike talking about from the government, but unless they
changed their strategic priorities, I think that's the benefit for life sciences in general.
Dan Leonard
I appreciate all that perspective. And just a follow-up. I was hoping you could elaborate on your
decision to shut down Res Bio. I was surprised by that, given that you acquired the company
only a couple of years ago?
Mike McMullen
Yes, sure Dan. Happy to do so. So obviously, a very difficult decision, then I'll have Sam jump
in on this conversation, but our fundamental belief was that our differentiation will be all around
what we called the kitted strategy to have a distributed on market companion diagnostics for
our pharma partners, and that market really hasn't developed as we had anticipated. Sam?
Sam Raha
Yes, Mike. Building on what you said, while NGS and cancer diagnostics is here and we serve
that market in a number of ways, right, for just to be clear, too. We absolutely continue to serve
cancer research translational research and diagnostic, test developer customers. But our core
to our thesis, our differentiation is really the ability to develop and distribute these kitted tests in
the market, the pharma market and the testing market just as evolve that way.
And we also looked at our recent analysis and concluded that even with more additional
investment, this is going to be a business that's going to be undergoing significant losses for
some foreseeable future, so. It was a difficult, as Mike said, that the right decision to make this
move now. But again to be clear, we continue to serve cancer research and diagnostics in a
number of ways.
Mike McMullen
Yes. I think - Sam, when we've talked about this in the past. So, we think we're still going be
able to participate in what we believe the strong growth of liquid biopsy market. But to really
providing a lot of the - if you will, ingredients for the test developers for themselves.
Sam Raha
Here and Mike. I'm going to take this opportunity to also just to say beyond our core SureSelect
Target Enrichment portfolio which is used broadly for liquid biopsy testing today. Early next
year, we'll be launching solutions from Avida BioMed, an acquisition that we announced earlier
this year, which we think is really going to be a differentiated way to look at methylation, as well
as classic mutation analysis.
Robert McMahon
Yes. Maybe just one add, Dan, is obviously a difficult decision for us, but I also think it also
looks - it shows the discipline that we have in terms of our portfolio rationalization, and we felt
we had better returns in other places to invest in so.
Dan Leonard
Understood. Thanks for the time.
Mike McMullen
You're welcome.
Operator
We'll go next now to Brandon Couillard at Jefferies.
Brandon Couillard
Hi, guys. Good afternoon.
Mike McMullen
Good afternoon, Brandon.
Brandon Couillard
Mike would you just find packing mass spec versus LC trends in the quarter? And then based
on your revised guide, what is the four-year CAGR from 2019 for LSAG instruments exiting the
year? How does that compare to historical average over the cycle?
Mike McMullen
Hi Brandon, I'm going to start with the response to your question. I'll let Bob dig through his
notes to find the actual number. But first of all, I just started to say, is that we believe what
we're dealing with here in our core instrument portfolio, inclusive of LC and LCMS continues to
be a macro market story. Our market shares are holding up really well. We're seeing in our one
loss data.
We're seeing it in the external reports from order. And I think when we look at our performance
in those core platforms versus our peers, we're reporting some numbers and kind of adjust for
the timing of when we report. I think we're putting up similar kind of numbers. And Jacob, I
know you looked at this thing pretty closely and I'm trying to buy some time for Bob to check
down the...
Jacob Thaysen
We're trying to find the CAGR the last three years, which I don't have in front of me here, but
you're right Mike, we follow this very accurately. And we're doing - we continue to do very well
in this marketplace. We continue to innovate into it. And we have seen - actually, we have
taken share over the last period of time. And if you actually compare our calendar two versus
competition, would actually see that we are approximately flat in the LC, LCMS space. And I
think that stacks up very well versus competition.
Robert McMahon
Yes, hi Brandon, we can get that to you afterwards.
Brandon Couillard
Okay.
Robert McMahon
I can tell you though, if you looked at the LSAG business over the last three years, it's been
averaging 5% CAGR, despite being forecasted to be down this year. And obviously, those are
two large businesses.
Brandon Couillard
Okay. And then I guess, two housekeeping questions for you, Bob. You talked about NASD
growth in the third quarter? I imagine it might have been up sequentially with Train B coming
online and on the CapEx line. You pushed out $200 million you spend in that. Just roll into '24?
There are some projects maybe you decided to defer from the time being - the environment?
Robert McMahon
Yes, it's a great question. So NASD, we continue to be very pleased with that. We had our first
revenue in Q3 from Train B, the first of many more revenues to come from that standpoint, and
expect it to continue, and we're still on track for the numbers that we've been talking about
through 50-plus for the full year. And in terms of the CapEx, some of that will roll forward, but
it's not - we're not going to spend that $200 million in '24 as well.
This would be - we have deferred projects being very rational, really focused on revenue-
generating programs. And so, I do expect some of that will flow into '24, but I don't expect '24 to
have an incremental $200 million show up in the forecast.
Brandon Couillard
Got it. Thank you.
Operator
We'll go next now to Puneet Souda at Leerink Partners.
Puneet Souda
Hi Mike, Bob. Thanks for taking the questions.
Mike McMullen
Sure.
Puneet Souda
The first one, thanks. So maybe, Bob, could you elaborate a bit on pricing here? I know pricing
was a meaningful contributor initially this year. We're seeing China, obviously, you talked quite
a bit about it, and we're seeing the headline for China deflation. So wondering if you are
expecting pricing to maintain there, or do you expect pricing pressure in China continuing? And
also, we're seeing some of the peer sort of bioprocessing companies talking about local
competition rising on the less high tech product. And so wondering if you're seeing that on any
of - sort of your product lines as well?
Robert McMahon
Yes. Let me take the second question first. We can compete against the Chinese local
competitors each and every day. And nothing has changed from that standpoint. We continue
to feel very good about our portfolio, and continue to drive that growth. In regards to pricing
across the board, we were slightly better than what we had expected. It was roughly over - a
little over 4% for the quarter. And that was driven across all three of the groups.
So we continue to drive - positive price across not only our DGG and ACG business, but also
our instrumentation and that's globally. And we expect to be able to continue to demonstrate
the value of our instrumentation across the globe. Obviously, in a deflationary environment,
that will put a little more pressure on the instrumentation business, particularly in China but
we've incorporated that into, our forecast and are still on track for positive price contributions,
for the full year in excess of 3%.
Mike McMullen
Hi Bob, maybe Bob or Padraig and also going to maybe comment on some discounting trends
he may have been seeing?
Padraig McDonnell
Yes. No, I think - no, I think it's the pricing holds discounts has really held stable as well. We
haven't seen any - increase in that rate of it, and we continue to monitor that, but it's been very
stable, Mike.
Puneet Souda
Got it. Thanks for that. And then if I could ask an academic and government here, smaller
segment for you, but it did solid in the quarter. Maybe could you talk a little bit about what
you're seeing across the globe in different geographies for academic and government and your
expectations here going forward? Thank you.
Mike McMullen
Yes, Bob, I think this is an end market that is holding up reasonably well. I mean we're seeing
that on a global basis, in most cases, with the exception being China, where the funding is
there, the funding is stable. And it's been a positive surprise for us so far through this year. And
I don't...
Robert McMahon
No, it's really across many of our instrument platforms as well as the service business. And
from what we're seeing, Puneet, is funding continue to be available, and it's flowing from
governments. I think they're seeing the strategic nature of many of the investments that they're
making. And our expectation is that, that funding will continue.
Puneet Souda
Got it. Super. Thank you.
Mike McMullen
You're welcome.
Operator
We'll go next now to Rachel Vatnsdal at JPMorgan.
Rachel Vatnsdal
Good afternoon. And thank you for taking the question. So first off, one of your peers have
flagged that they were actually seeing some early signs of pharma spending recovery I
appreciate that most of the incremental this quarter, is really related to the China weakness. So
maybe ex-China, can you walk us through if you're seeing any signs of recovery of spending
with biopharma customers. And then you've previously flagged for us that historically, when
pharma spending slows down, like we're seeing today that it can take 12 to 24 months to
recover. So how are you thinking about the timing, and recovery given the incremental
weakness this quarter?
Mike McMullen
Sure, Rachel. So while we saw signs of stabilization in our European and U.S. business
stabilization relative to expectations. We're not hearing anything along those lines yet in terms
of recovery or desire to increase spending, the fact we're hearing the exact opposite right now
from our large major pharma companies. So, I hope that commentary from others in this space
is correct.
And there's going to be a big recovery here from year-end, but we're not seeing any kind of
indications of that. If it does happen, great. It would be upside relative to our current outlook,
and we know we do well in these markets. But Padraig, I don't think we're seeing and hearing
anything like along those lines.
Padraig McDonnell
No, I think it's spot on, Mike.
Robert McMahon
The only thing I would say, Rachel, is if we look at our funnels, they continue to be growing. So
it's a question of when, not if, and particularly in pharma. And as Mike and Padraig just
mentioned, we're not assuming a budget flush into our Q4. And if it happens, that would likely
happen in our Q1 in any event, from a revenue perspective. But what we see at least from our
funnels, is they continue to be helping.
And let me just answer Brandon's question from a couple of times ago. If I look at LC and
LCMS on a three-year CAGR, they're between 7% and 9%, so higher than the overall LSAG
average.
Mike McMullen
Right. Thanks for that and Bob. And Rachel, I think the second question relative to - I think
you're referring to the small molecule replacement cycle. And as you know, coming probably at
least for the last 12 to 18 months, we had been indicating that we were expecting to see a
slowdown in the rate of replacement. And in fact, we've seen that occur this year. Actually,
given the weakness in China even beyond our expectations with a minus 16% number overall
in the quarter.
That being said, we do stay with our view that these tend to be 18 to 24 months, 12 to 18-
month cycles, and we'd expect that they'll start to see movement back towards a higher growth
rate. And that's one of the reasons as we look into '24, we're saying some of these markets will
start to turn as - the base cycle gets back to more of a growth phase in that cycle. And as we've
mentioned earlier, we see that particularly in liquid chromatography is probably about a five
percentage kind of growth market long-term.
Rachel Vatnsdal
Great. Thank you for all that color. Maybe just following up on your small molecule comments
there. So small molecule declined 16% this quarter. So can you talk to us about how much of
your China exposure is really tied to those small molecule workflows? And then what else is
really driving incremental weakness on the small molecule side? We've heard of IRA
pressuring some pharma decisions and potentially leading to them reprioritizing the pipeline.
So is there any risk that you won't see a recovery? Or could the growth rate for small molecule
really be reset in? What are your conversations with customers on that trend? Thank you.
Mike McMullen
Okay. So you got it. So relative to China, I would say it's probably the same ratio as the global
business, right? That's probably what 60%, 65%?
Robert McMahon
Yes.
Mike McMullen
Is probably related to a small molecule. And relative to what's happened in large pharma, what
we're seeing is in medium-sized pharma is, again, a continuation of this cautious about
deferring capital. I'm sure they're thinking through implications of iRNA also other expenses are
running hotter in their P&Ls where they need to make some offsets with capital purchases.
That being said, if you believe, and I know pharma believes the importance of having safe on-
market drugs. You have to have the instrumentation QA/QC environment to support that.
That requires you to have modern liquid chromatography fleets. So, I don't think it's a question
that they can - that this market is going to go away and won't be an area that the pharma will
need to invest in. You can defer for a period of time, but then only last for so long.
Operator
Thank you. We'll go next now to Patrick Donnelly at Citi.
Patrick Donnelly
Hi guys. Thanks for taking the questions. Mike, maybe just given that commentary around the
instrument cycle, you're not really seeing much improvement yet. Obviously, the China piece
transitory, but certainly seems like it's going to linger. You only a couple of months in '24 for you
guys here. How do you think about some of these impacts lingering in? I think you said there's
still plans for growth next year, but it certainly sounds like some of the headwinds at least will
linger into the first half, given some of those costs. I just wanted to talk through that top line
setup given some of these headwinds lingering into next year?
Mike McMullen
Yes. We still have a few more months so we finish off the fiscal year, and we'll give you our
guide in November. And I think we'll know a lot more by then. But I do think we know that we'll
be able to grow this company in '24. That said, I was very careful in my comments to make
sure that there's a full year growth rate.
We do expect the first half of the year to be a challenging year just from a comp standpoint to
begin with, but also some of the things that we've been talking about today in the call, we don't
expect a quick snapback to be occurring in the next quarter or 2.
Patrick Donnelly
Okay. That's helpful. And then I know you mentioned budget flush is still a little bit away from
that at the calendar year event for pharma and other areas. Do you have any view at this
point? It sounds like you guys are expecting to be a more subdued budget flush, but whatever
you're hearing from customers would be helpful just to pull back a little bit more on that.
Mike McMullen
Yes, sure, Patrick, happy to do so, and then I'll invite Padraig to this conversation. I know he's
been talking a lot to his team about this. But as I mentioned earlier, we're not really seeing any
kind of indication of customers saying, hey, listen, I'm going to have money. I'm planning to
spend it this way. In fact, we've seen the opposite where sometimes orders that we thought
were closed to actually keep deferring and require more purchases. In fact, I think one story we
heard was we probably 3x.
Fondo CFO, approved it on the third go-around and the CEO overruled it. So we know
eventually going to get that business. But this is kind of dynamics ever seen. So we're not
seeing a lot of indications of a strong year-end budget flush. Again, we'd love to see the
opposite happen, but we're not going to indication of that.
And I don't if you have something to add there.
Padraig McDonnell
What we're hearing from the customers is that we're not planning on a budget flow through the
end of the year, but we're - we will take the upside of corsa.com. I think I think one thing is
really clear that the funnels are very strong, and it's there, but we're not seeing them to be
released through a big push at the end of the year.
Mike McMullen
I think this comment, Patrick, on the funnel being strong and these funnels are actually growing
is really important because this is one of the reasons why we think about full year outlook in
'24. We know the business is there. It's just a question of when it's going to get -
Padraig McDonnell
Yes. We watch very closely our win loss rates. And we haven't - we've seen them very, very
stable -- we had a strong funnel, which is very positive over time.
Patrick Donnelly
Understood. Thank you, guys.
Operator
We'll go next now to Derik De Bruin at Bank of America.
Derik De Bruin
Hi. Good afternoon.
Mike McMullen
Good afternoon, Derik.
Derik De Bruin
A lot of what I wanted to ask has been asked, so I've got some cleanups here. Just did you
give a specific instrument core growth number in consumables growth or number for 3Q and
then sort of your all-in number for this year, what you're expecting?
Robert McMahon
Yes. We didn't. LSAG for Q3 was down roughly 9% core. Consumables was up slightly.
Derik De Bruin
Got it. Thank you. So what's the revenue contribution for Res Bio in 4Q? And what do we need
to pull out for 2024?
Robert McMahon
Yes. So we've got a minimal number in Q4 as we wind down the business. And I would say it
was roughly 1 point to a little over 1 point to the headwind to DGG going forward in FY '24.
Derik De Bruin
Got it. Okay. And so staying on the topic of M&A. I mean, you've done a couple of genomics
deals, which haven't gone your way. And I'm just sort of wondering what's your thinking about
deployment going forward? I mean valuations have obviously come in, industry is
consolidating, you would say, but we have -- it's been relatively quiet across the space for the
last 18 months. And so like how are you sort of thinking about capital deployment? And at what
point do you decide you maybe want to buy -- start maybe doing even with the share prices,
maybe doing some share buybacks. You sort of talk about your general capital deployment
strategy at this moment?
Mike McMullen
Yes. I think Bob alluded to it a bit in his prepared remarks, but we still are staying with our
balanced capital allocation strategy, and you saw us in the market opportunistically on share
repurchases given where we saw the share price setting that.
In terms of our - an appetite for M&A, it remains unchanged given - despite the Resolution
Bioscience decision. We knew that was a higher risk acquisition for us, early-stage company in
hot area based on a really differentiating strategy that didn't want this to play out. But we've
had some success in other aspects of our genomics acquisitions, including the AAT acquisition
on the instrumentation side.
So we're still out there looking. But as Bob mentioned, we take a disciplined approach to not
only to how we view our internal choices and our internal business performance in terms of
what's in the portfolio, but we'll also take that same lens, if you will, on how we look at M&A.
So really, nothing has changed beyond the fact that this is more of a buyer's market. And
companies with a strong balance sheet like Agilent, I think they're in a good favorable position
to work on opportunities, but we're going to stay disciplined and not get caught up in what once
was a value of a company, either in the private or public space.
Derik De Bruin
Just one more follow-up, if I may. What are your orders in liquid chromatography? How is your
order book? Are you seeing orders increasing?
Robert McMahon
Our order book was down, largely a function of China, but they were down year-on-year.
Derik De Bruin
Thanks.
Operator
Thank you. We'll go next now to Josh Waldman at Cleveland Research.
Josh Waldman
Hi. Thanks for taking my questions. A couple for you. First, Bob, can you provide more context
on the puts and takes within the fourth quarter core organic growth guide? I guess maybe the
assumptions by business unit. And then curious what areas or in markets outside of China
seem to be like slowing real time that you're trying to reflect in the guide versus areas that
maybe have stabilized or improving over the last few days.
Robert McMahon
Yes. So Josh, just real quick. When we think about kind of the Q4 implied guide, the big driver
is China. As I mentioned, down roughly mid-30s and that really impacts a number of markets
you can imagine, both AR and chemical and energy, which are - or chemical and advanced
materials, which are the two largest markets in China.
I would also say that the diagnostics and clinical is also down. We've seen that softness in
genomics. And then obviously, the shutdown of Res Bio also impacts that business, and that's
primarily a U.S. phenomenon. So we did see an impact in U.S. on that side. And then there's
some puts and takes in other places, but those are the two big pieces for Q4.
Mike McMullen
But as I recall, I think 85% of the change was really China driven and bleeds over into pharma
in CAM.
Josh Waldman
Got it. Okay. Then Mike, I guess, staying on China and a follow-up there. Can you unpack a bit
more of what you're seeing by end market? I mean, like where demand is holding in versus like
areas that you've seen come in lighter as the quarter progressed again. I guess, outside of
China - sorry, outside of pharma. And then I guess, a follow-up on Dan's question. I believe it
was earlier. What are the variables within China, Mike that you're trying to account for as you
forecast the medium term? I mean, maybe beyond just the next couple of months. And I guess
any risk that we need to kind of rethink, the underlying growth rate in the industry if China
remains light here in the medium term?
Mike McMullen
Yes. So let me start with the view by end market. I think the academia and government market
was - grew for us in the third quarter. But everything else was pretty much down. The big
change really were in the pharma space. And as Bob commented earlier about how we exited
the quarter, the July performance. Some weakness in chemicals, but I'd say the down there
was really just a byproduct of - we're going off of 43% compared last year.
And we're looking at a 70% growth compare in the fourth quarter. But I'd say the concerns or
the cost of this in the China marketplace is really across the board. And with varying degrees,
but I think it's really most reflected in the pharma outlook. I think that's a $64,000 question. I
think there's a case to be made that this market will get back to its longer-term growth rates,
but it will take a period of years to get there. It's not going to be a snapback in 12 months.
But again, that's work to be done. The factors that we're looking at, I think are the same factors
that everybody else is staring at, which is what's going to happen to the macro in China.
Storyboard here is a macro story and is bleeding over into life science tools, but we need to
see the China economy get moving again.
We need to see consumer confidence coming back. We need to see investment commerce is
coming back in China. I think those things will take some time. But I do think there are priorities
of the government, and they'll find a way to make that happen. But we're not calling for a quick
snapback here either.
Josh Waldman
Got it. Appreciate guys.
Operator
Thank you. We'll go next now to Dan Brennan at TD Cowen.
Dan Brennan
Great guys. Thanks for taking the questions. Maybe just one on instruments, Bob, I think you
talked earlier, I think to Derik's question maybe you gave the L segment, but I know there's
consumables within that. Could you just break out what the instrument number is? I know
we've got on the Q. Just wondering how instrument did and as we look ahead, I think given
your instrument exposure, it's always a key question, I know there's been various times asked
throughout, but just how would we think about kind of the outlook for instrument, whether it be
fourth quarter, if you want to point to go out a little further?
Robert McMahon
Yes. So to maybe add a little more flavor and clarity to my answer previously, LSAG was down
9% core. It was down 9% in instruments as well. So the consumables business was up
basically a point.
Dan Brennan
And as we look out there, I'm just wondering. I guess it's really depends upon that - the type of
product, which you guys already discussed, it sounds like you're optimistic on LSAG given the
funnel is going to get back towards that excuse me LCMS is going to get back to that 5%
growth. I guess, would you assume instruments as a starting point growth in fiscal '24 for what
you see today?
Mike McMullen
Based on what we see today, yes.
Dan Brennan
Got it. I mean one more, quick one just on - yes…
Robert McMahon
There's no reason to believe when we think about kind of the level of investment over-time.
And the importance of our instruments in the Discovery of new therapeutic areas or food
testing, we think about as Mike was talking about these new areas around Applied Markets,
there's no reason to think that there is something fundamentally has changed, that they don't
need instrumentation.
And so, I think we feel very good about our market-share and our good about our market-
share, and our competitiveness and do expect our LSAG business to be a growth driver for us
going forward. Yes, no completely. No, is this more just on the comp basis, after making…
Dan Brennan
That sounds great. Bob and just one quick one, just on - the applied versus the chemical, you
mentioned some chemical weakening just that were concerned during the quarter, but the
applied obviously powering through. Can you just maybe unpack a little bit more how you're
thinking about like how we exit the year across your different buckets within the chemical and
applied segment?
Robert McMahon
Yes. I mean, I think if you look at Q4, it will be really an impact of China. So we're actually
looking at chemical and advanced materials declining in Q4, because of that 70% increase that
Mike mentioned in Q4 of last year. That was across-the-board. I would say the advanced
materials will be much stronger than that down high or down double-digits. And the chemical
side, probably we will have a bigger impact.
If you recall, the Shanghai shutdown impact was centered in the chemical and advanced
materials market, because that's where our GC manufacturing was and that's a Workhorse for
some of those products. So, we do see it down in Q4, but up for the full-year. I think that's a
really important to make sure that people understand.
Dan Brennan
Great, thank you.
Operator
Thank you. And we have time for one more question this afternoon, we'll take that now from
Luke Sergott at Barclays.
Luke Sergott
Great. Thanks for squeezing me in.
Mike McMullen
Hi Luke.
Luke Sergott
Just real quick on the - thanks. So real quick on NASD. But are you guys seeing any pressure
from the market, seeing any in-sourcing from the market? I know Novartis has talked about
doing some of this as well. And then lastly additionally, with that with the CapEx guide down.
Are you guys still investing in additional lines there for the year? Or is that really on pause is
that have anything to do with that kind of CapEx stepped down?
Mike McMullen
Let me leave it there. And then have Bob jump-in and Sam as well, but from in-sourcing
standpoint. No, we're not seeing any material moves in this direction. And in fact as we head
into '24, we continue to broaden our book of business and we're going to have more customers
overhead in terms of breadth of customers as we go into '24.
And yes, it's called Project Endeavor. So Train B we went live, which we had a different code-
named. And that's live, but we continue to move forward with our expansion plans on the other
front, siRNA front, along with what we like to do on the CRISPR side as well And antisense. So,
we're going to broaden that. So our stated investment plans remain unchanged.
Robert McMahon
Yes, to be very clear, Luke, to add what Mike said, we are not slowing that down at all. That
investment is one of the highest priorities, we've trimmed back spending in another less more
infrastructure kind of oriented projects as opposed to kind of revenue-generating. I think what
you're seeing actually is it's actually coming in better-than-expected, because the pricing is
better-than-expected and you probably have seen that in other places. And so, the availability
of parts and the key materials is better than what we had initially planned as well.
Sam Raha
Yes, I only add to what you guys said that Mike along with having more customers and actually
more diversified set of customers, we're going to be we're contracted to do more programs
next year than in the history of NASD. So it's a yes, all full-speed ahead.
Luke Sergott
Got you. Got you. And then I didn't - hear anybody asked about the ACG margin, maybe they
did I missed it, but you guys had a material step-up there, can you talk about really what went
on there, is that - is there any benefit that you saw from Mike lack of incentive comp just kind of
break-out, where the drivers there and really how we should think about that in Q4, and as a
jump-off point?
Mike McMullen
Yes, we did mention that there was a benefit, Luke, of the variable pay comp, obviously, that's
got a big component of people in it, but it's also a reflection of the scale and - continued growth
of that business. We didn't say take that 32% I believe it was in Q3 and kind of book that as the
new starting point. Because it had outsized growth. But we continue to be pleased and expect
continued margin expansion for ACG going-forward.
Luke Sergott
All right, great. Thank you.
Operator
Thank you. Ladies and gentlemen, at this time I would like to turn things back to Parmeet Ahuja
for any closing comments.
Parmeet Ahuja
Thanks Bo, and thanks everyone for joining the call today. With that, we'd like to end the call.
Have a good day everyone.
Operator
Thank you, Parmeet. Ladies and gentlemen, this does conclude today's call. Thank you for
joining. We wish you all a great day. Goodbye.
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22/03/2024, 14:14 Agilent Technologies, Inc.

(A) Q3 2023 Earnings Call Transcript _ Seeking Alpha

Agilent Technologies, Inc. (A) Q3 2023 Earnings

Conference Call Participants

Matt Sykes - Goldman Sachs

And now I'd like to turn the call over to Mike.

Thanks, Parmeet, and thanks, everyone, for joining our call.

As we said before, we are continuing to prioritize invest in innovation. As an example, in June,

And now, Bob, over to you.

Thanks, Mike, and good afternoon, everyone.

While today's macroenvironment is challenged for new instrument purchases, we remain

Our combination of leading instrumentation and world-class customer support is a long-term

Probably anything you add to that? Okay.

Got it. Thanks guys.

Thank you. We'll go next now to Jack Meehan at Nephron Research.

Thank you. Good afternoon.

Good afternoon, Jack.

Thank you, guys.

Thank you. We go next now to Vijay Kumar at Evercore ISI.

Yes. We take a change within the quarter.

We saw no trends like the China trend in our other geographies.

I think I move away from prudent to transitory.

Understood. Thanks, guys.

We'll go next now to Dan Leonard at Credit Suisse.

Understood. Thanks for the time.

We'll go next now to Brandon Couillard at Jefferies.

Hi, guys. Good afternoon.

Good afternoon, Brandon.

Yes, hi Brandon, we can get that to you afterwards.

Got it. Thank you.

We'll go next now to Puneet Souda at Leerink Partners.

Hi Mike, Bob. Thanks for taking the questions.

Got it. Super. Thank you.

We'll go next now to Rachel Vatnsdal at JPMorgan.

No, I think it's spot on, Mike.

Thank you. We'll go next now to Patrick Donnelly at Citi.

And I don't if you have something to add there.

Understood. Thank you, guys.

We'll go next now to Derik De Bruin at Bank of America.

Hi. Good afternoon.

Good afternoon, Derik.

Thank you. We'll go next now to Josh Waldman at Cleveland Research.

Got it. Appreciate guys.

Thank you. We'll go next now to Dan Brennan at TD Cowen.

Based on what we see today, yes.

Got it. I mean one more, quick one just on - yes…

Great, thank you.

Great. Thanks for squeezing me in.

All right, great. Thank you.

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