Agilent Technologies, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended October 31, 2021. Although the request metadata labels this “2021 Q4,” the filing reports full-year results, not standalone fourth-quarter results. Amounts are in U.S. dollars unless stated otherwise.
Business context
Agilent supplies instruments, software, services and consumables for life sciences, diagnostics, genomics and applied chemical markets. Its three reportable segments are Life Sciences and Applied Markets, Diagnostics and Genomics, and Agilent CrossLab. The company reported approximately 17,000 employees and serves customers globally; no customer represented 10% or more of total revenue.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $6.319 billion | $5.339 billion | +18% |
| Net income | $1.210 billion | $719 million | +$491 million |
| Diluted EPS | $3.94 | $2.30 | +$1.64 |
| Total gross margin | 53.9% | 53.1% | +0.8 percentage points |
| Operating income | $1.347 billion | $846 million | +$501 million |
| Operating margin | 21.3% | 15.8% | +5.5 percentage points |
| Cash from operating activities | $1.485 billion | $921 million | +$564 million |
Products generated $4.756 billion of revenue, up 19%; services and other revenue was $1.563 billion, up 16%. Foreign currency movements contributed approximately 2 percentage points to company revenue growth. Management said the growth was broad-based across segments, geographies and key end markets, with the favorable contribution from COVID-related revenue and the Resolution Bioscience acquisition not material to FY2021 revenue.
Segment revenue
| Segment | FY2021 revenue | Year-over-year growth | FY2021 operating margin |
|---|---|---|---|
| Life Sciences and Applied Markets | $2.823 billion | 18% | 25.6% |
| Diagnostics and Genomics | $1.296 billion | 24% | 21.0% |
| Agilent CrossLab | $2.200 billion | 16% | 28.1% |
Growth was strongest in Diagnostics and Genomics. Management attributed gains to pharmaceutical, chemical and energy, and diagnostics and clinical demand; CrossLab also benefited from broad demand for services and consumables. FY2021 segment operating income totals exclude certain corporate and acquisition-related costs, impairments and other items, so segment margins are not directly comparable to the consolidated operating margin.
Cash flow, liquidity and debt
- Operating cash flow was $1.485 billion. Investing activities used $749 million, including $546 million for the Resolution Bioscience acquisition and $188 million of capital expenditures. Financing activities used $696 million.
- Cash and cash equivalents were $1.484 billion at year-end, compared with $1.441 billion a year earlier; short-term investments were $91 million.
- Long-term debt was $2.729 billion, with no borrowings under the $1.35 billion revolving credit facility or the $1.35 billion commercial paper program at year-end. The company redeemed its remaining $400 million of 2022 notes for approximately $417 million and recorded a $17 million extinguishment loss. It issued $850 million of 2.30% senior notes due 2031.
- Management said available cash, operating cash generation and access to capital markets and credit facilities were expected to meet liquidity requirements for at least the next 12 months. The company reported compliance with credit facility covenants and no material off-balance-sheet arrangements.
- Cash dividends paid were $236 million, or $0.776 per share. The company repurchased 6.1 million shares for $788 million in total during FY2021 across its former and new repurchase programs; $1.577 billion remained authorized under the new program at year-end.
Changes, outlook and notable items
- Revenue growth accelerated from 3% in FY2020 to 18% in FY2021, while net income rose from $719 million to $1.210 billion. FY2020 included a $98 million impairment related primarily to shutting down the sequencer development program; FY2021 recorded $2 million of long-lived asset impairments.
- FY2021 net income benefited from higher sales volume and $98 million in net gains on equity securities. Higher variable compensation, share-based compensation and sales commissions partly offset operating leverage. The effective tax rate was 11.0%, including a $93 million benefit from tax reserve releases and $29 million of excess stock-compensation tax benefits.
- Agilent acquired Resolution Bioscience on April 15, 2021 for $561 million cash, with up to $145 million of potential milestone payments. The year-end fair value of contingent consideration was $89 million.
- Management expressed optimism about long-term growth across end markets but gave no specific FY2022 revenue or earnings guidance in the provided filing text. It warned of continuing supply-chain pressures, longer lead times and limited sources of supply, while noting expected near-term logistical challenges.
- COVID-19 continued to create uncertainty in demand, customer-site access and supply. The filing also highlights risks from competition and product innovation, international operations and currency, customer and government spending, regulatory compliance (including EU IVDR requirements effective May 2022), privacy and cybersecurity, supplier concentration, acquisitions, tax exposures and environmental matters.
- The company reported no pending legal matters it believed reasonably possible of materially affecting its business or financial results. PwC issued unqualified opinions on the financial statements and internal controls; uncertain tax positions were identified as a critical audit matter. Resolution Bioscience was excluded from the internal-control assessment and audit because it was acquired during the year.
- After year-end, Agilent announced a segment reporting realignment, with historical segment figures to be recast beginning in FY2022 reporting.
Important facts for investors to verify
- Whether revenue and margin growth persist after accounting for the prior-year comparison, currency effects and continued supply constraints.
- How much of FY2021 earnings growth is repeatable, given the $98 million equity-securities gain and tax benefits, as well as higher variable compensation and share-based costs.
- Resolution Bioscience’s milestone performance, integration and contribution relative to the $561 million purchase price and $89 million year-end contingent liability.
- Debt maturities and capital allocation plans, including repurchases, dividends and planned FY2022 capital expenditures of approximately $300 million.
- Tax exposure: the filing reports $159 million of unrecognized tax benefits including interest and penalties, with possible changes from audits or statute expirations; the Singapore tax incentive runs through 2027.
- Supply-chain execution, inventory growth to $830 million from $720 million, and the effect of the announced segment realignment on reported comparisons.