FOR IMMEDIATE RELEASE
Media Contact Information:
Investor Contact Information:
Thermo Fisher Scientific Reports Third Quarter 2018 Results
WALTHAM, Mass. (October 24, 2018) - Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported its financial results for the third quarter ended September 29, 2018.
Third Quarter 2018 Highlights
Grew revenue 16% to $5.92 billion.
Increased GAAP diluted earnings per share (EPS) 31% to $1.75.
Increased adjusted EPS 13% to $2.62.
Launched a number of new instruments for life sciences and specialty diagnostics, highlighted by the Invitrogen EVOS M5000 cell imaging system, Thermo Scientific Phenom Pharos benchtop scanning electron microscope, Thermo Scientific ISQ EM mass spectrometer, and the Phadia 200 allergy and autoimmune system in Europe.
Began major expansion of biologics production facility in St. Louis to meet increasing demand for contract development and manufacturing services in North America.
Announced agreement to acquire Advanced Bioprocessing business from Becton Dickinson, which will add complementary cell culture products that expand our bioproduction offering to help customers increase yield during production of biologic drugs.
Adjusted EPS, adjusted operating income, adjusted operating margin and free cash flow are non-GAAP measures that exclude certain items detailed later in this press release under the heading “Use of Non-GAAP Financial Measures.”
“We were pleased to build on our momentum with another quarter of outstanding revenue and earnings growth,” said Marc N. Casper, president and chief executive officer of Thermo Fisher Scientific. “Our team is effectively leveraging our unique customer value proposition and executing well to capitalize on the strength of our global end markets.
“Consistent with our growth strategy, we continued to strengthen our innovation leadership by launching high-impact products across life sciences, clinical and applied markets. Our increasing scale in Asia-Pacific and emerging markets remains a key competitive advantage, and we delivered strong performance in the region, led by China. Last, our pending acquisition of Advanced Bioprocessing will enhance our customer value proposition by adding complementary capabilities to meet increasing demand for biologics.”
Casper added, “With three strong quarters behind us, we’re in a great position to deliver an outstanding year.”
Third Quarter 2018
Revenue for the quarter grew 16% to $5.92 billion in 2018, versus $5.12 billion in 2017. Organic revenue growth was 10%; acquisitions increased revenue by 7% and currency translation decreased revenue by 1%.
GAAP Earnings Results
GAAP diluted EPS in the third quarter increased 31% to $1.75, versus $1.34 in the same quarter last year. GAAP operating income for the third quarter of 2018 grew to $0.91 billion, compared with $0.63 billion in the third quarter of 2017. GAAP operating margin increased to 15.4%, compared with 12.4% in the third quarter of 2017.
Non-GAAP Earnings Results
Adjusted EPS in the third quarter of 2018 increased 13% to $2.62, versus $2.31 in the third quarter of 2017. Adjusted operating income for the third quarter of 2018 grew 12% compared with the year-ago quarter. Adjusted operating margin was 22.1%, compared with 22.9% in the third quarter of 2017.
2018 Guidance Update
Thermo Fisher is raising its 2018 revenue and earnings guidance primarily to reflect strong operational performance, partially offset by less favorable foreign exchange. The company is raising its revenue guidance to a new range of $23.99 to $24.09 billion versus its previous guidance of $23.68 to $23.86 billion, for 15% growth over 2017. The company is also raising its adjusted EPS guidance to a new range of $11.00 to $11.06, versus its previous guidance of $10.89 to $11.01, for 16 to 17% growth year over year.
Management uses adjusted operating results to monitor and evaluate performance of the company’s four business segments, as highlighted below. Since these results are used for this purpose, they are also considered to be prepared in accordance with GAAP.
Life Sciences Solutions Segment
In the third quarter of 2018, Life Sciences Solutions Segment revenue grew 9% to $1.50 billion, compared with revenue of $1.38 billion in the third quarter of 2017. Segment adjusted operating margin increased to 32.9%, versus 32.7% in the 2017 quarter.
Analytical Instruments Segment
Analytical Instruments Segment revenue grew 12% to $1.33 billion in the third quarter of 2018, compared with revenue of $1.19 billion in the third quarter of 2017. Segment adjusted operating margin increased to 22.0%, versus 21.6% in the 2017 quarter.
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue grew 6% to $0.89 billion in the third quarter of 2018, compared with revenue of $0.84 billion in the third quarter of 2017. Segment adjusted operating margin was 25.0%, versus 25.9% in the 2017 quarter.
Laboratory Products and Services Segment
Laboratory Products and Services Segment results reflect the acquisition of Patheon in late August 2017. In the third quarter of 2018, segment revenue grew 28% to $2.47 billion, compared with revenue of $1.93 billion in the third quarter of 2017. Segment adjusted operating margin was 12.1%, versus 12.6% in the 2017 quarter.
Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures, including adjusted EPS, adjusted operating income and adjusted operating margin, which exclude certain acquisition-related costs, including charges for the sale of inventories revalued at the date of acquisition and significant transaction costs; restructuring and other costs/income; and amortization of acquisition-related intangible assets. Adjusted EPS also excludes certain other gains and losses that are either isolated or cannot be expected to occur again with any predictability, tax provisions/benefits related to the previous items, the impact of significant tax audits or events and the results of discontinued operations. We exclude the above items because they are outside of our normal operations and/or, in certain cases, are difficult to forecast accurately for future periods. We also use a non-GAAP measure, free cash flow, which is operating cash flow from continuing operations, less net capital expenditures, to provide a view of the continuing operations’ ability to generate cash for use in acquisitions and other investing and financing activities. We believe that the use of non-GAAP measures helps investors to gain a better understanding of our core operating results and future prospects, consistent with how management measures and forecasts the company’s performance, especially when comparing such results to previous periods or forecasts.
We exclude costs and tax effects associated with restructuring activities, such as reducing overhead and consolidating facilities. We believe that the costs related to these restructuring activities are not indicative of our normal operating costs.
We exclude certain acquisition-related costs, including charges for the sale of inventories revalued at the date of acquisition and significant transaction costs. We exclude these costs because we do not believe they are indicative of our normal operating costs.
We exclude the expense and tax effects associated with the amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives of 3 to 20 years. In 2018, based on acquisitions closed through the end of the third quarter of 2018, our adjusted EPS will exclude approximately $3.30 of expense for the amortization of acquisition-related intangible assets. Exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses and with both acquisitive and non-acquisitive peer companies.
We also exclude certain gains/losses and related tax effects, the impact of significant tax audits or events (such as changes in deferred taxes from enacted tax rate changes or the estimated initial impacts of U.S. tax reform legislation), which are either isolated or cannot be expected to occur again with any predictability and that we believe are not indicative of our normal operating gains and losses. For example, we exclude gains/losses from items such as the sale of a business or real estate, gains or losses on significant litigation-related matters, gains on curtailments of pension plans, the early retirement of debt and discontinued operations.
We also report free cash flow, which is operating cash flow from continuing operations, less net capital expenditures, to provide a view of the continuing operations’ ability to generate cash for use in acquisitions and other investing and financing activities.
Thermo Fisher’s management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring the company’s core operating performance and comparing such performance to that of prior periods and to the performance of our competitors. Such measures are also used by management in their financial and operating decision-making and for compensation purposes.
The non-GAAP financial measures of Thermo Fisher’s results of operations and cash flows included in this press release are not meant to be considered superior to or a substitute for Thermo Fisher’s results of operations prepared in accordance with GAAP. Reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in the accompanying tables. Thermo Fisher does not provide GAAP financial measures on a forward-looking basis because we are unable to predict with reasonable certainty and without unreasonable effort items such as the timing and amount of future restructuring actions and acquisition-related charges as well as gains or losses from sales of real estate and businesses, the early retirement of debt and the outcome of legal proceedings. The timing and amount of these items are uncertain and could be material to Thermo Fisher’s results computed in accordance with GAAP.
Thermo Fisher Scientific will hold its earnings conference call today, October 24, 2018, at 8:30 a.m. Eastern time. To listen, dial (844) 579-6824 within the U.S. or (763) 488-9145 outside the U.S. You may also listen to the call live on our website, www.thermofisher.com, by clicking on “Investors.” You will find this press release, including the accompanying reconciliation of non-GAAP financial measures and related information, in that section of our website under “Financial Results.” An audio archive of the call will be available under “Webcasts and Presentations” through Friday, November 2, 2018.
About Thermo Fisher Scientific
Thermo Fisher Scientific Inc. (NYSE: TMO) is the world leader in serving science, with revenues of more than $20 billion and approximately 70,000 employees globally. Our mission is to enable our customers to make the world healthier, cleaner and safer. We help our customers accelerate life sciences research, solve complex analytical challenges, improve patient diagnostics, deliver medicines to market and increase laboratory productivity. Through our premier brands - Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific and Unity Lab Services - we offer an unmatched combination of innovative technologies, purchasing convenience and comprehensive support. For more information, please visit www.thermofisher.com.
Safe Harbor Statement
The following constitutes a “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements that involve a number of risks and uncertainties. Important factors that could cause actual results to differ materially from those indicated by forward-looking statements include risks and uncertainties relating to: the need to develop new products and adapt to significant technological change; implementation of strategies for improving growth; general economic conditions and related uncertainties; dependence on customers’ capital spending policies and government funding policies; the effect of exchange rate fluctuations on international operations; use and protection of intellectual property; the effect of changes in governmental regulations; and the effect of laws and regulations governing government contracts, as well as the possibility that expected benefits related to recent or pending acquisitions may not materialize as expected. Additional important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which is on file with the SEC and available in the “Investors” section of our website under the heading “SEC Filings.” While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if estimates change and, therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.
The following information was filed by Thermo Fisher Scientific Inc. (TMO) on Wednesday, October 24, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.