Business context and reporting period
This filing is PerkinElmer, Inc.’s unaudited Form 10-Q for the three months ended March 31, 2019; the prior-year comparison ended April 1, 2018. The filing identifies the registrant as PerkinElmer (NYSE: PKI), not Revvity, Inc.—verify that this is the intended filing.
PerkinElmer operated through Discovery & Analytical Solutions, serving life sciences and applied markets, and Diagnostics. The company’s fiscal 2019 comprised 52 weeks.
Financial performance
| Metric | Q1 2019 | Prior-year quarter |
|---|---|---|
| Revenue | $648.7 million | $644.0 million |
| Operating income | $53.3 million | $39.9 million |
| Operating margin | 8.2% | 6.2% |
| Income from continuing operations | $35.5 million | $26.0 million |
| Net income | $35.4 million | $26.0 million |
| Diluted EPS | $0.32 | $0.23 |
| Net cash used in operating activities | $5.3 million | $14.6 million |
Gross margin was 47.4%, up 2.1 percentage points from 45.4%. Cost of revenue declined 3% to $340.9 million. Interest and other expense increased to $16.6 million from $11.4 million. The effective tax rate on continuing operations was 3.6%, versus 8.7%, including $4.0 million of discrete tax benefits.
Revenue was nearly flat overall: product revenue declined 2% to $438.7 million, while service revenue rose 7% to $210.0 million. Discovery & Analytical Solutions revenue fell 2% to $388.8 million and operating income edged up to $36.9 million. Diagnostics revenue grew 5% to $259.9 million and operating income rose 71% to $31.5 million.
Balance sheet, liquidity and capital
At March 31, 2019, cash and cash equivalents were $134.3 million, total current assets $1.25 billion and current liabilities $742.3 million. Current debt was $13.3 million and long-term debt $1.85 billion; reported debt less cash was approximately $1.73 billion. The company had $543.6 million of additional borrowing capacity on its $1.0 billion revolving facility, with $445.0 million drawn. The revolver’s effective rate was 3.60% at quarter-end.
Operating cash flow was negative despite positive earnings, reflecting working-capital and other liability outflows, including a $38.4 million inventory build. Capital expenditures were $19.9 million; investing cash outflow was $29.2 million. Cash, cash equivalents and restricted cash decreased $28.9 million to $137.5 million. The quarterly dividend was $0.07 per share. The company repurchased $5.3 million of shares for employee tax withholding, but made no purchases under its separate repurchase program, which had $197.8 million remaining.
Material changes, outlook and risks
- Management attributed the 2.1-point gross-margin improvement mainly to Diagnostics productivity and favorable product mix, partly offset by higher amortization. Operating-margin improvement also reflected operating-expense leverage.
- Management cited unfavorable foreign exchange, which reduced consolidated revenue by approximately 4%, and the U.S. government shutdown and timing of services as factors weighing on Discovery & Analytical Solutions. Diagnostics growth was broad-based across reproductive health, immunodiagnostics and applied genomics.
- After quarter-end, the company completed its acquisition of Cisbio Bioassays for $219.8 million in cash, net of cash acquired. This was a subsequent event, not a Q1 operating result.
- The company adopted the new lease standard on December 31, 2018. At March 31 it reported $191.3 million of operating lease right-of-use assets and $205.8 million of operating lease liabilities, including current lease liabilities classified within accrued expenses.
- A Q1 restructuring plan covered 105 employees and recorded $7.5 million of severance charges. Management did not expect further charges for the listed plans, though payments under older plans could continue through 2022.
- Management expected internally generated funds to cover ordinary operating expenses, capital expenditures, smaller acquisitions, interest and dividends; it anticipated external funding for larger acquisitions and debt obligations. No specific revenue or earnings guidance was provided in the supplied filing text.
- Key disclosed risks include currency movements (about 70% of business conducted outside the U.S.), market and government-funding uncertainty, debt and variable-rate exposure, acquisition integration, regulation, supply continuity and potential impairment of goodwill and other intangibles. Environmental remediation accruals were $8.4 million; management said legal and other contingencies were not expected to have a material adverse effect, while noting outcomes remain uncertain.
Most important facts for investors to verify
- Confirm the issuer and ticker: this source is PerkinElmer, Inc. (PKI), despite the request metadata naming Revvity, Inc.
- Assess whether Diagnostics growth and margin gains are sustainable, and whether Discovery & Analytical Solutions recovers from currency, government-shutdown and timing impacts.
- Review post-quarter Cisbio acquisition funding, integration and expected contribution; the filing gives purchase consideration but no quantified outlook for its impact.
- Monitor operating cash conversion, seasonal inventory levels, debt maturities and available revolver capacity.
- Consider the effects of foreign exchange, contingent acquisition payments, lease obligations and the company’s significant goodwill and intangible-asset balances.