Revvity, Inc. — FY2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023 (52 weeks), compared with fiscal 2022 (52 weeks). Revvity changed its name from PerkinElmer, Inc. in April 2023 and reports two continuing segments: Life Sciences and Diagnostics. The Applied, Food and Enterprise Services businesses were sold in March 2023 and are presented as discontinued operations.
Key financial results
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue from continuing operations | $2,750.6 million | $3,311.8 million |
| Gross margin | 56% | 60% |
| Operating income from continuing operations | $300.6 million | $742.7 million |
| Operating margin from continuing operations | 10.9% | 22.4% |
| Income from continuing operations | $179.5 million | $512.7 million |
| Net income, including discontinued operations | $693.1 million | $569.2 million |
| Diluted EPS, continuing operations | $1.44 | $4.06 |
| Cash from continuing operating activities | $279.4 million | $672.5 million |
- Revenue by segment: Life Sciences was $1,292.3 million, down less than 1%; Diagnostics was $1,459.1 million, down 28%. Diagnostics’ decline reflected lower COVID-19-related demand, partly offset by growth in core immunodiagnostics. In Life Sciences, reagent growth was offset by lower instruments and software revenue.
- Margins and earnings: Gross margin fell 411 basis points and operating margin fell 1,150 basis points. Lower COVID-19 sales and an unfavorable product mix were primary drivers; pricing and cost controls provided partial offsets. Interest and other expense rose to $117.6 million from $90.9 million.
- Cash flow: Continuing operating cash flow declined $393.1 million, reflecting lower profitability and increased working-capital use. Continuing investing activities used $761.2 million, including $1,221.6 million of U.S. Treasury purchases, partly offset by maturities. Continuing financing activities used $947.1 million, including debt payments and share repurchases.
- Balance sheet and liquidity: Cash and cash equivalents were $913.2 million, with $689.9 million of current U.S. Treasury securities intended to repay 2024 notes. Debt carrying value was $3.90 billion, versus $4.39 billion a year earlier. The company had $1.49 billion available under its revolving credit facility and $721.9 million of current debt, principally notes due in 2024.
Material changes and unusual items
- The sale of the discontinued businesses generated approximately $2.13 billion in cash proceeds. FY2023 discontinued-operations income was $513.6 million, including an $811.5 million pre-tax gain on sale and related tax expense. Total net income therefore does not represent earnings from continuing operations alone.
- Revvity recorded a 1.9% effective tax rate on continuing operations, versus 21.3% in FY2022; management states the unusually low FY2023 rate is not expected to repeat in FY2024.
- The company recorded $69.2 million of acquisition- and divestiture-related costs in SG&A, including $34.3 million of rebranding expenses. Restructuring costs were $26.6 million.
- Share repurchases totaled $388.9 million during FY2023; dividends paid were $35.0 million. The quarterly dividend was $0.07 per share, and $355.4 million remained under the share repurchase authorization at year-end.
Outlook, risks and contingencies
- Management expects FY2024 capital expenditures to be similar to FY2023’s $81.4 million. It expects internal cash generation to fund ordinary operating needs, capital expenditures, smaller acquisitions, interest and dividends; external funding may be needed for debt maturities, larger acquisitions and certain long-term obligations.
- Management expects the $75 million brand-related sale consideration to be paid in installments through the first half of 2025. A further amount of up to $150 million depends on a future sale or other capital event for the divested business. A $160.2 million receivable for sale-related post-closing adjustments was expected to be settled in FY2024; the final amount may change.
- Key risks include continued weakness in COVID-19-related demand, pharmaceutical and biotech market headwinds, customer funding and order volatility, competition and product-development execution, foreign exchange exposure, and reliance on some limited or single-source suppliers. Regulatory, privacy, cybersecurity and international operating risks are also discussed.
- Net goodwill and intangible assets totaled approximately $9.56 billion. The FY2024 impairment assessment identified the Tulip and Life Sciences reporting units as having fair values less than 20% above carrying values; management cites higher discount rates, competition and macroeconomic conditions as relevant sensitivities.
- Environmental remediation accruals were $14.1 million. Management states that ordinary-course legal proceedings are not expected to have a material adverse effect, while noting outcomes remain uncertain. The filing reports no known cybersecurity threats assessed as materially affecting or reasonably likely to materially affect the company.
- The filing provides no numerical FY2024 revenue or earnings guidance. The financial statements received an unqualified audit opinion, and management and the auditor concluded internal control over financial reporting was effective as of year-end.
Important facts for investors to verify
- Underlying continuing-business demand and margin trends, particularly Diagnostics performance after the sharp decline in COVID-19-related sales.
- Cash conversion and working-capital movements, including the timing and final settlement of the $160.2 million divestiture receivable.
- Repayment of the 2024 notes and use of the Treasury securities designated for that purpose, alongside the company’s remaining debt and repurchase plans.
- The ultimate value and timing of the contingent divestiture consideration, and whether FY2024 tax expense returns to a more typical level.
- Impairment assumptions and performance for the Life Sciences and Tulip reporting units, given their relatively limited fair-value headroom.