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Thermo Fisher Scientific Reports Second Quarter 2020 Results
WALTHAM, Mass. (July 22, 2020) – Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported its financial results for the second quarter ended June 27, 2020.
Second Quarter 2020 Highlights
•Second quarter revenue increased 10% to $6.92 billion.
•Second quarter GAAP diluted earnings per share (EPS) increased 5% to $2.90.
•Second quarter adjusted EPS increased 28% to $3.89.
•Leveraged our industry-leading scale and expertise to meet strong global demand for COVID-19 products and services. Highlights in the second quarter included:
–Generated approximately $1.3 billion of COVID-related revenue
–Received expansion of emergency use authorization (EUA) to run our PCR test on additional instruments and consumables for greater workflow flexibility
–Designed and built a new facility in Lenexa, Kansas, to manufacture highly specialized viral transport media (VTM) for sample collection under a U.S. government contract
–Formed a collaboration with WuXi Diagnostics and Mayo Clinic to develop a total antibodies serology test
–Secured a multi-year pharma services contract with the U.S. Biomedical Advanced Research and Development Authority (BARDA) to support accelerated vaccine development and production.
•Continued to increase our global pharma services capacity to meet strong customer demand, announcing a strategic partnership with CSL Limited to provide our entire portfolio of pharma services and operate their new biologics facility in Lengnau, Switzerland, and beginning construction of a new site in Plainville, Massachusetts, that will double our viral vector manufacturing capacity.
•Launched innovative products and services across our businesses, including two new-generation Exploris mass spectrometers that extend our Orbitrap platform, a digital service offering for increased remote instrument support and a cell culture medium that enhances bioproduction efficiency.
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 delivered an extraordinary quarter,” said Marc N. Casper, chairman, president and chief executive officer of Thermo Fisher Scientific. “We quickly mobilized our resources to support the global COVID-19 response and made a significant contribution to our customers and society while effectively managing the company through the current economic environment.
“Our teams worked with relentless intensity to establish Thermo Fisher as a global leader in COVID-19 testing and leverage our pharma services leadership to support the development and production of therapeutics and vaccines. At the same time, we continued to execute our growth strategy, developing new products and capabilities across our businesses that will position us well for years to come.”
Casper added, “I’m very proud of what we’ve accomplished so far this year. Our performance demonstrates the strength of our company, the talent and sheer determination of our teams, and the scale of our role in helping customers and governments navigate these unprecedented times.”
Second Quarter 2020
Revenue for the quarter grew 10% to $6.92 billion in 2020, versus $6.32 billion in 2019. Organic revenue growth was 11% and currency translation decreased revenue by 1%.
GAAP Earnings Results
GAAP diluted EPS in the second quarter of 2020 increased 5% to $2.90, versus $2.77 in the same quarter last year. GAAP operating income for the second quarter of 2020 was $1.39 billion, compared with $1.50 billion in the year-ago quarter. GAAP operating margin was 20.1%, compared with 23.7% in the second quarter of 2019. GAAP results for the second quarter of 2019 reflect a gain on the sale of the company’s Anatomical Pathology business in June 2019.
Non-GAAP Earnings Results
Adjusted EPS in the second quarter of 2020 increased 28% to $3.89, versus $3.04 in the second quarter of 2019. Adjusted operating income for the second quarter of 2020 grew 26% compared with the year-ago quarter. Adjusted operating margin increased to 27.0%, compared with 23.5% in the second quarter of 2019.
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 second quarter of 2020, Life Sciences Solutions Segment revenue was $2.60 billion, compared with revenue of $1.71 billion in the second quarter of 2019. Segment adjusted operating margin was 47.4%, versus 35.6% in the 2019 quarter.
Analytical Instruments Segment
Analytical Instruments Segment revenue was $1.05 billion in the second quarter of 2020, compared with revenue of $1.32 billion in the second quarter of 2019. Segment adjusted operating margin was 12.9%, versus 21.6% in the 2019 quarter.
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue was $0.99 billion in the second quarter of 2020, compared with revenue of $0.94 billion in the second quarter of 2019. Segment adjusted operating margin was 21.6%, versus 25.7% in the 2019 quarter. The company sold its Anatomical Pathology business at the end of June 2019.
Laboratory Products and Services Segment
In the second quarter of 2020, Laboratory Products and Services Segment revenue was $2.79 billion, compared with revenue of $2.63 billion in the second quarter of 2019. Segment adjusted operating margin was 10.1%, versus 13.1% in the 2019 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, and the impact of significant tax audits or events. 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, excluding 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. Based on acquisitions closed through the end of the second quarter of 2020, adjusted EPS for full-year 2020 will exclude approximately $3.23 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 and the early retirement of debt.
We also report free cash flow, which is operating cash flow, excluding 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, July 22, 2020, at 8:30 a.m. Eastern time. To listen, dial (877) 273-7122 within the U.S. or (647) 689-5496 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, August 28, 2020.
About Thermo Fisher Scientific
Thermo Fisher Scientific Inc. is the world leader in serving science, with annual revenue exceeding
$25 billion. Our Mission is to enable our customers to make the world healthier, cleaner and safer. Whether our customers are accelerating life sciences research, solving complex analytical challenges, improving patient diagnostics and therapies or increasing productivity in their laboratories, we are here to support them. Our global team of more than 75,000 colleagues delivers an unrivaled combination of innovative technologies, purchasing convenience and pharmaceutical services through our industry-leading brands, including Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific, Unity Lab Services and Patheon. 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, including statements about expected revenue growth and long-term impacts of the COVID-19 pandemic. Important factors that could cause actual results to differ materially from those indicated by forward-looking statements include risks and uncertainties relating to: the duration and severity of the COVID-19 pandemic; 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 economic and political conditions and 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, including our pending acquisition of QIAGEN N.V., 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 March 28, 2020, 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, July 22, 2020 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.