Agilent Technologies Q2 2010 Earnings Call Transcript

Agilent Technologies Q2 2010 Earnings Call Transcript
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Agilent Technologies (A)

Q2 2010 Earnings Call

May 17, 2010 4:30 pm ET

Executives

Didier Hirsch - Acting Chief Financial Officer and Vice President

Michael McMullen - Senior Vice President and President of Chemical Analysis Group

Ronald Nersesian - Senior Vice President and President of Electronic Measurement Group

Nicolas Roelofs - Senior Vice President and President of Life Sciences Group

William Sullivan - Chief Executive Officer, President, Executive Director and Member of Executive Committee

Alicia Rodriguez -

Analysts

Jon Wood - Jefferies & Company, Inc.

William Stein - Crédit Suisse

Jonathan Groberg - Macquarie Research

Ajit Pai - Thomas Weisel Partners Equity Research

D. Mark Douglass - Longbow Research LLC

Richard Eastman - Robert W. Baird & Co. Incorporated

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the Second Quarter 2010 Agilent Technologies Inc. Earnings Conference Call. My name is Yvette and I'll be your operator for today. [Operator Instructions] I would now like to turn the call over to Ms. Alicia Rodriguez, Vice President of Investor Relations.

Alicia Rodriguez

Thank you, Yvette, and welcome everyone to Agilent's Second Quarter Conference Call for Fiscal Year 2010. With me are Agilent's President and CEO, Bill Sullivan; as well as Vice President and acting CFO, Didier Hirsch. Joining in our Q&A will be the Presidents of Agilent's Electronic Measurement, Life Sciences and Chemical Analysis Groups, Ron Nersesian, Nick Roelofs and Mike McMullen. After my comments, Bill will give his perspective on the quarter and the overall market environment. Didier will then follow with a review of financial results, and after Didier's comments, we will open the lines and take your questions.

In case you haven't had a chance to review our press release, you can find it on our Web site at www.investor.agilent.com. Please note that we have moved the Business segment financial tables to the schedules accompanying the press release. We are also providing further information to supplement today's discussion. After you log on to our webcast module from our Web site, please click on the link for Supporting Material. There you will find additional information, such as our revenue breakouts and historical financial information for Agilent's continuing operations.

Also in accordance with SEC Regulation G, if during this conference call we use any non-GAAP financial measures, you will find on our Web site the required reconciliation to the most directly comparable GAAP financial metric. Additionally, I'd like to remind you that we may make forward-looking statements about the future financial performance of the company. These involve risks and uncertainties that could cause Agilent's results to differ materially from management's current expectations. As a result, we encourage you to look at the company's most recent filings with the SEC to get a more complete picture of all the factors at work. The forward-looking statements, including our guidance provided today during the call, are only valid as of this date, and the company assumes no obligation to update such statements as we move throughout the current quarter.

Lastly, before I turn the call over to Bill, on Friday, May 14, we announced the successful close of our $1.5 billion acquisition of Varian. While our prepared comments today focus on Agilent's Q2 results, we will be happy to provide more information around the acquisition during the Q&A portion of the call. Now let me turn the call over to Bill for his comments.

William Sullivan

Thanks, Alicia, and hello, everyone. In a few moments, Didier will provide you with an overview of our Q2 financial results. I will provide you with a summary of results, our market perspective and our outlook for the second half of the fiscal year.

Agilent continues to capitalize on the global economic recovery. Q2 orders of $1.35 billion were up 31% year-over-year, while revenues of $1.27 billion were up 16% from a year ago. Non-GAAP earnings were $152 million or $0.43 per share.

Agilent's second quarter earnings combined with solid asset management enabled us to generate $224 million of operating cash flow. We ended the quarter with net cash of $1.4 billion.

All regions grew by double digits year-over-year, led by a 24% increase in Asia Pacific. Growth rates in China have moderated from their record highs but remain in double digits. Overall, Agilent's large and established presence in Asia will continue to serve as a strong competitive differentiator. 41% of Agilent's business resides in Asia, a record high percent.

Europe grew 10% year-over-year while the Americas were up 13% from a year ago. From a market perspective, we saw year-over-year revenue growth in most of our key markets that we serve.

Our Chemical Analysis business had an excellent quarter. Q2 revenues were up 19% year-over-year as demand continued to improve in industrial and applied markets. All key end markets were up double digits year-over-year; petrochemical, plus 30%; food, plus 15%; and environment forensics, plus 27%. Operating margin was 24%.

From a product perspective, our GC/MS, ICP-MS and mid-range GC platforms each grew in double digits. We also had solid double-digit growth in our Consumables and Services, up 21% and 11%, respectively. We expect future growth to be driven by continued focus on food safety, opportunities in emerging markets and expanding Consumables and Mass Spec portfolios.

Our Life Science business had a solid quarter with revenue up 12% over last year, up 15% if we exclude the High Court divestiture from last year's base. Operating margin was 14%. Excluding the High Court divestiture, we experienced modest growth in Pharma and Biotech at 4% year-over-year, academic and government revenues grew 11%, sales of LSG products and services into applied markets were up 25% from a year ago.

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