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Thermo Fisher Scientific Reports Third Quarter 2020 Results
WALTHAM, Mass. (October 21, 2020) – Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported its financial results for the third quarter ended September 26, 2020.
Third Quarter 2020 Highlights
•Third quarter revenue increased 36% to $8.52 billion.
•Third quarter GAAP diluted earnings per share (EPS) increased 157% to $4.84.
•Third quarter adjusted EPS increased 91% to $5.63.
•Generated $2.0 billion of COVID-19 related revenue in the quarter and returned the base business to growth.
•Further expanded our global pandemic response, including launching the Amplitude Solution to automate high-throughput PCR-based testing, adding significant capacity for viral transport media production in Europe and introducing two new COVID-19 antibody tests that are available in the U.S. and Europe.
•Continued to increase our capacity to help governments and biopharma customers globally meet future demand for new therapies and vaccines, most recently partnering with the Economic Development Board of Singapore to build our first pharma services facility there, which will include the only high-speed live virus filling line in Singapore.
•Launched the Just Project to benefit historically black colleges and universities by donating more than $25 million of COVID-19 diagnostic test kits, instruments, supplies and technical assistance to enable the safe return of students and staff, and also established a $20 million Foundation for Science supporting STEM education in underserved communities.
•Expanded our well-established center of excellence in Suzhou, China, by opening a new bioproduction factory for manufacturing single-use technologies to meet demand for biologics in the Asia-Pacific region.
•Launched innovative Thermo Scientific products across our businesses, highlighted by two Selectris imaging filters for cryo-electron microscopes that accelerate research in structural analysis of proteins, and the POROS Oligo (dT)25 Affinity Resin to advance mRNA-based therapies and vaccines.
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 further accelerated our exceptional growth momentum in the third quarter,” said Marc N. Casper, chairman, president and chief executive officer of Thermo Fisher Scientific. “Our teams executed very well to build on our leadership in supporting the global pandemic response and also captured opportunities to grow our base business.
“We’ve continued to meet COVID-related customer demand by launching new products across our company, such as tests and automated workflows to accurately diagnose the virus and enable society’s return to work and school. At the same time, we’re adding new capabilities, including scaling up production of sample collection products and essential laboratory supplies as well as increasing our pharma services capacity to support new therapies and vaccines. The combination of all these activities is creating a strong foundation for future growth.”
Casper added, “The past nine months have been nothing short of incredible for our company, and I’m truly humbled by our colleagues around the world who are making a meaningful and positive impact on society through their work. We’re on track to deliver a record year, and importantly, positioning our company for an even brighter future.”
Third Quarter 2020
Revenue for the quarter grew 36% to $8.52 billion in 2020, versus $6.27 billion in 2019. Organic revenue growth was 34%, currency translation increased revenue by 1% and acquisitions increased revenue by 1%.
GAAP Earnings Results
GAAP diluted EPS in the third quarter of 2020 increased 157% to $4.84, versus $1.88 in the same quarter last year. GAAP operating income for the third quarter of 2020 increased to $2.43 billion, compared with $0.95 billion in the year-ago quarter. GAAP operating margin increased to 28.5%, compared with 15.1% in the third quarter of 2019.
Non-GAAP Earnings Results
Adjusted EPS in the third quarter of 2020 increased 91% to $5.63, versus $2.94 in the third quarter of 2019. Adjusted operating income for the third quarter of 2020 grew 97% compared with the year-ago quarter. Adjusted operating margin increased to 32.9%, compared with 22.7% in the third 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 third quarter of 2020, Life Sciences Solutions Segment revenue grew to $3.42 billion, compared with revenue of $1.70 billion in the third quarter of 2019. Segment adjusted operating margin increased to 54.9%, versus 34.5% in the 2019 quarter.
Analytical Instruments Segment
Analytical Instruments Segment revenue was $1.34 billion in the third quarter of 2020, compared with revenue of $1.36 billion in the third quarter of 2019. Segment adjusted operating margin was 12.8%, versus 23.0% in the 2019 quarter.
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue grew to $1.43 billion in the third quarter of 2020, compared with revenue of $0.88 billion in the third quarter of 2019. Segment adjusted operating margin increased to 27.9%, versus 25.3% in the 2019 quarter.
Laboratory Products and Services Segment
In the third quarter of 2020, Laboratory Products and Services Segment revenue increased to $3.11 billion, compared with revenue of $2.62 billion in the third quarter of 2019. Segment adjusted operating margin was 11.4%, versus 11.6% 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 third quarter of 2020, adjusted EPS for full-year 2020 will exclude approximately $3.25 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, October 21, 2020, at 8:30 a.m. Eastern time. To listen, dial (833) 714-0931 within the U.S. or (778) 560-2662 outside the U.S. The passcode is 1570827. 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 6, 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 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 27, 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, October 21, 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.