Agilent Technologies, Inc. · NYSE:A
Agilent Technologies — Investor Day (March 2014)
65 slides from Agilent Technologies's investor day presentation, Mar 6, 2014
Slide 1: Agilent Technologies 2014 Analyst Meeting
Agilent Technologies 2014 Analyst Meeting March 6, 2014 Intercontinental Exchange | NYSE New York, NY Page 1
Slide 2: Safe Harbor
Safe Harbor This presentation contains forward-looking statements (including, without limitation, information and future guidance on the company’s goals, priorities, the planned separation of our Electronic Measurement Group, revenues, demand, growth opportunities, customer service and innovation pl
Slide 3: Agenda
Agenda 8:30 a.m. – 8:35 a.m. Alicia Rodriguez: Introduction 8:35 a.m. – 8:45 a.m. Bill Sullivan: Agilent Highlights 8:45 a.m. – 8:55 a.m. Didier Hirsch: Agilent Financials 8:55 a.m. – 9:35 a.m. Ron Nersesian: Keysight Strategic Update 9:35 a.m. – 9:50 a.m. Neil Dougherty: Keysight Financial Update 9
Slide 4: William Sullivan, President & CEO
Agilent Technologies William (Bill) P. Sullivan President & Chief Executive Officer Page 4
Slide 5: The World's Premier Measurement Company
The World’s Premier Measurement Company EM Markets LDA Markets FY13 Revenue $3.9B, Operating Margin(1) 19% Electronic Life Sciences and Chemical Measurement Diagnostics Analysis Group Group Group FY13 Revenue $2.9B FY13 Revenue $2.3B FY13 Revenue $1.6B Operating Margin(1) 19% Operating Margin(1) 16%
Slide 6: The Transformation of Agilent
The Transformation of Agilent FY 2005 – FY 2013 FY 2006 - FY 2013: FY 2005: Building two leading franchises September 2013: The new Agilent LDA: Growth and expansion Agilent announces From diversified technology to separation into two focused measurement company EMG: Transform operating model. compa
Slide 7: Agilent to Split into Two Companies
Agilent to Split into Two Companies Strategic Rationale for Separation • Capitalizing on EMG, Agilent has grown LDA to be a sizeable and highly competitive business • Spin-off to create two companies with greater strategic and management focus, each well positioned for growth in its sector • Distinc
Slide 8: Timeline for Separation
Timeline for Separation • January 7: Keysight Technologies name announced • March 5: Form 10 filed • August 1: Keysight begins operating under its own name (as Agilent subsidiary) in most countries • Mid October: Keysight and Agilent financing complete • Early November: Distribution Date – Keysight
Slide 9: Didier Hirsch, CFO
Agilent Technologies Didier Hirsch Senior Vice President Chief Financial Officer Page 9
Slide 10: A Track Record of Value Creation
A Track Record of Value Creation Operating Margin Operating Margin Incremental FY 2006 FY 2013 FY 2006 - FY 2013 Agilent(1) 12.9% 18.8% 35% Peer Group(2) 15.7% 18.0% 20% (1) Presented on a non-GAAP basis; reconciliation to closest GAAP equivalent provided (2) Peer Group includes Bruker, Danaher, Nat
Slide 11: A Track Record of Returning Value to Shareholders
A Track Record of Returning Value to Shareholders Distribution Type FY 2005 – FY 2013 Share Buybacks $9,607 M Dividends 260 M Total $9,867 M Share Count October 31, 2005 October 31, 2013 503 M 333 M Page 11
Slide 12: Creating Two Strong Companies
Creating Two Strong Companies Operating Model over Market Keysight Agilent Cycles(1) Core Revenue Growth(2) 3% 6% Operating Margin 19-20% 20-22% Effective Tax Rate 17% 20% Free Cash Flow as % of Revenue 15% 15% Dividends (FY15) TBD $130 M Expected Debt Rating Investment Grade Investment Grade (1) No
Slide 13: Ron Nersesian, CEO Keysight Technologies
Agilent Technologies Ron Nersesian President and CEO Keysight Technologies Page 13
Slide 14: Agilent's Keysight Business
Agilent’s Keysight Business Keysight Today • World-class technology with many market-leading platforms • Strong business model delivering 19% operating margin and leading ROIC • Must return to market growth Keysight Transformation • Transform our portfolio to meet the changing needs of the market •
Slide 15: Keysight Technologies Overview
Keysight Technologies Overview Unlocking measurement insights for 75 years FY13 Financial Metrics • Orders $2.9B Communications Aerospace Industrial, • Revenues $2.9B Defense Computers, Semiconductors • Operating Margin(1) 18.9% • ROIC(1) 31% • Global electronic measurement technology and market lea
Slide 16: Keysight Market Profile
Keysight Market Profile Evolving market segments present opportunities Market Size(1): $12B Long Term Market Growth(1): 3-4% Industrial, Computers, Communications (3) Aerospace Defense Semiconductors Revenue Mix (2) 34% 23% 43% Market Size (1) $4B $3B $5B 3-Year Market Growth(1) 4-6% Flat 3-5% Explo
Slide 17: Market Leadership in Core Platforms
Market Leadership in Core Platforms Strong foundation is the key to portfolio transformation Market Core Platforms Leadership Position Position Electronic Highest performance design software used by 2/3 of Design #1 the world’s RF/Microwave designers Automation Network Highest performance, broadest
Slide 18: Transforming Product Portfolio: Wireless Platforms
Transforming Product Portfolio New wireless communications R&D and manufacturing platforms Multi Format Tester Growth Opportunity Explosive mobile data growth and evolving wireless standards drive investment in emerging networking technologies R&D Platform Designed for R&D and conformance; How Keysi
Slide 19: Transforming Product Portfolio: Modular Solutions
Transforming Product Portfolio Modular Solutions Growth Opportunity Increasing demand for flexibility and form factor options. Modular solutions are growing faster than overall EM market Keysight’s Fast-Growing Modular Portfolio How Keysight will Win Leveraging industry-leading feature-rich instrume
Slide 20: Transforming Product Portfolio: Software Solutions
Transforming Product Portfolio Value migration to software solutions Growth Opportunity • As measurement science evolves to software, software grows faster than the electronic measurement market • Extend instrument life and investment with new software measurement capability and functionality How Ke
Slide 21: Proven Ability and Commitment to Manage Cyclical Business
Proven Ability and Commitment to Manage Cyclical Business Superior and stable financial performance throughout cycle Keysight Cycle Transformation • Product portfolio transformation enables 6.0 30% Keysight to continue delivering strong 5.0 23% 20% 14% 13% 19% financial performance into the future 4
Slide 22: Agilent's Keysight Business
Agilent’s Keysight Business Keysight Today • World-class technology with many market-leading platforms • Strong business model delivering 19% operating margin and leading ROIC • Must return to market growth Keysight Transformation • Transform our portfolio to meet the changing needs of the market •
Slide 23: Neil Dougherty, CFO Keysight Technologies
Agilent Technologies Neil Dougherty CFO Keysight Technologies
Slide 24: Keysight Operating Model
Keysight Operating Model Superior and sustainable financial performance throughout the cycle Committed to the principles of our current business model: 40% operating profit incremental on the upturn (above 3% growth), and operating margin in the mid-teens in the trough • Disciplined expense and capi
Slide 25: Keysight FY13-14 Financials & Market-growth Model
Keysight Technologies FY13-14 Financials & Market-growth Model FY13 FY14(1) Market-Growth Actual Guidance Model Revenue $2.9B $2.9B Core Revenue -12% 2% 3% Growth(2)(3) Operating Margin(3) 18.9% 18.7% 19-20% YoY OM Incremental NA NA 40% ROIC(3) 31% 32% 30%+ (1) Reflects midpoint of guidance as of Fe
Slide 26: Keysight Technologies Financials
Keysight Technologies Financials Position, sources, and use of cash Projected capital structure at spin • $1.1B of debt and $700M of cash, including $500M off-shore • Investment grade credit rating Sources of cash • Free cash flow expected to be approximately15% of revenue • Expect to open a new uns
Slide 27: Q&A Keysight
Q&A Ron Nersesian Neil Dougherty Guy Séné Gooi Soon Chai CEO CFO Senior Vice Senior Vice President, President, Measurement Order Fulfillment Solutions and & Infrastructure Worldwide Sales Page 27
Slide 28: Break
Agilent Technologies 15 Minute Break Page 28
Slide 29: William Sullivan, President & CEO
Agilent Technologies William (Bill) P. Sullivan President & Chief Executive Officer Page 29
Slide 30: New Agilent (LDA) Overview
New Agilent (LDA) Overview Leveraging leading technology platforms across end markets • Global leader in Life Sciences, FY13 Financial Metrics and Headcount Diagnostics, and Applied markets • Orders: $4.0B, +10% y/y (+5% core)(1) • Attractive recurring revenue base • Revenues: $3.9B, +10% y/y (+5% c
Slide 31: New Agilent: Market Profile
New Agilent: Market Profile Targeting multiple markets with strong growth dynamics Market Size(1): $41B Long Term Market Growth(1): 4-6% Long Term Market Market End Markets Market Growth Drivers Revenue Mix(2) Size(1) Growth(1) Position(1) by End Market • Shift to new biological Pharma & $11B 4-6% #
Slide 32: New Agilent: Revenue Profile by Product Type
New Agilent: Revenue Profile by Product Type Leveraging core lab strength in the clinical and diagnostics settings Agilent FY 13 Revenue $3.9B Agilent Key Agilent Market Revenue Position / Growth Mix by Product Type(1) Products(2) Growth(3) Opportunity Position(3) FY10-FY13 Clinical & Dx Separations
Slide 33: New Agilent: Strategy to Win
New Agilent: Strategy to Win Creating shareholder value Increase organic growth rate Continue to expand installed instrument base across the entire portfolio Take advantage of greenfield opportunities in developed markets (clinical instrumentation, integrated biology, sample preparation) Lev
Slide 34: Fred Strohmeier, President, Life Sciences and Diagnostics Group
Agilent Technologies Fred Strohmeier President, Life Sciences and Diagnostics Group Page 34
Slide 35: Life Sciences and Diagnostics Group Overview
Life Sciences and Diagnostics Group Overview Targeting needs of multiple markets undergoing fundamental change Market Size(1): $28B FY13 Financial Metrics Long Term Market Growth(1): 5-7% New Global Trends • Revenues: $2.3B, +16% y/y (+5% core)(2)(3) • Pharma shift from new chemical entities (NCEs)
Slide 36: The New LDG: Strategic Focus
The New LDG: Strategic Focus Today Market evolution • Agilent is well established in classic Pharma • Complexity and specificity of New Biological Entities (NBEs) require more sophisticated • Solid inroads in Life Sciences Research tools • With the addition of Dako, Agilent has a significant • Multi
Slide 37: Win by Connecting Research and Clinic
Win by Connecting Research and Clinic Research Lab Routine Clinical LC, LC-MS Dako Full solutions for Omnis Versatile, leading- advanced diagnostics edge research tools • H&E Staining NMR • Separations Spectrometer • Advanced Staining • Spectroscopy • FISH probes • Mass • More to come… Spectrometry
Slide 38: Our Customer Strategy
Our Customer Strategy Addressing needs in instrumentation, automation, software, consumables and services Life Sciences Research Biopharma Clinical & Diagnostics • Enable discoveries and • Provide workflow solutions • Expand on strong accelerate their transition to enable discovery, foundation in pa
Slide 39: Mike McMullen, President, Chemical Analysis Group
Agilent Technologies Mike McMullen President, Chemical Analysis Group Page 39
Slide 40: Chemical Analysis Group and Market Overview
Chemical Analysis Group and Market Overview CHEMICAL ANALYSIS GROUP OVERALL MARKET FY13 Financial Metrics Market Size(3) $13B Revenues: $1.6B, +2%y/y (4% core)(1)(2) Operating Margin: 22.3% of revenue(2) Long-Term Market Growth(3) 4-5% Markets and Market Position(3) Global Trends Fueling Growth • Ne
Slide 41: Expanding Presence in Analytical Lab Operations
Expanding Presence in Analytical Lab Operations Impacting results where they matter most to Chemical and Life Sciences customers Reaching the world’s 265,000 labs Instrument portfolio that Universally compatible covers all application needs software increases productivity Global scale, local presenc
Slide 42: Agilent's Strategy to Win the Lab
Agilent’s Strategy to Win the Lab Optimizing the performance of any analytical laboratory Instrumentation Introducing “world firsts,” strengthening Expanding portfolio built on chromatography, mass spectrometry and technology leadership, superior quality spectroscopy market position Consumables Inve
Slide 43: Henrik Ancher-Jensen, President, Agilent Order Fulfillment
Agilent Technologies Henrik Ancher-Jensen President, Agilent Order Fulfillment Page 43
Slide 44: Outstanding Customer Experience
Outstanding Customer Experience Agilent delivers increased customer satisfaction year over year • Commitment to quality • Continued improvement in on-time delivery/fast response time • Delivering superior value through superior products, technology, and solutions Agilent Customer Loyalty(1) Agilent
Slide 45: Value Engineering Excellence
Value Engineering Excellence Supply Chain and Value Engineering Technology SUPPLY CHAIN VALUE ENGINEERING Supplier Design Specialized Materials Materials Design Common R&D Technology Standards Technology Engineering Building Blocks Partnerships Commodity Technology & Common Materials & Supplier Capa
Slide 46: Operational Excellence
Operational Excellence Continuous footprint optimization • Currently 24 manufacturing sites worldwide • 11 product line consolidations completed; 5 in progress • Agilent key manufacturing hubs • Capacity to meet demand without major new investments Supply chain streamlining • Movement of supplier ba
Slide 47: Didier Hirsch, CFO
Agilent Technologies Didier Hirsch Senior Vice President Chief Financial Officer Page 47
Slide 48: FY14 Pre-Separation Costs and FY15 Dis-Synergies
FY14 Pre-Separation Costs and FY15 Dis-Synergies • FY14 Estimated Pro Forma Pre-Separation Costs: $140M (original projection: $100M) • Higher spend on Keysight branding • Acceleration of timeline for operational autonomy • FY15 Estimated New Agilent Dis-Synergies: $40M (original FY15 projection: $30
Slide 49: New Agilent Financial Projections - Midpoint
New Agilent Financial Projections - Midpoint Actual Guidance Projected Projected FY 2013 FY 2014(1) FY 2015(2) FY 2016(2) Revenue $3,894 M $4,080 M $4,300 M $4,550 M Core Revenue Growth(3) 4.8% 5.4% 5.8% Gross Margin(4) 53.2% 54.0% 54.8% 55.1% Operating Margin(4) 18.8% 19.5% 19.6% 21.1% Op. Margin I
Slide 50: New Agilent Capital Allocation Projections
New Agilent Capital Allocation Projections • Redeem $1,100M of notes • $600M September 2014 • $500M September 2015 • Reach Debt / EBITDA below 2.0 by end of FY15, maintain investment grade rating • Reduce interest expense and offset dis-synergies • $30M reduction in FY15 offsets most of $40M of dis-
Slide 51: New Agilent - Shareholder Friendly Capital Strategy
New Agilent - Shareholder Friendly Capital Strategy • In line with history, but more predictable • Target return of 45% of free cash flow over a 3 year period • Grow dividend in excess of earnings growth • Base line of anti-dilutive basic share count repurchases • Continue opportunistic repurchases
Slide 52: New Agilent Q&A
New Agilent Q&A Bill Sullivan Didier Hirsch Fred Strohmeier Mike McMullen Henrik Ancher- President & Senior Vice LDG President CAG President Jensen, CEO President & President CFO Agilent Order Fulfillment Page 52
Slide 53: William Sullivan, President & CEO
Agilent Technologies William (Bill) P. Sullivan President & Chief Executive Officer Page 53
Slide 54: Agilent Technologies 2014 Analyst Meeting
Agilent Technologies 2014 Analyst Meeting March 6, 2014 Intercontinental Exchange | NYSE New York, NY Page 54
Slide 55: Reconciliations
Agilent Technologies Reconciliations Page 55
Slide 56: Life Sciences and Diagnostics Segment
AGILENT TECHNOLOGIES, INC. LIFE SCIENCES AND DIAGNOSTICS SEGMENT (Unaudited) PRELIMINARY (In millions, except margins data) FY 2013 Q1 Q2 Q3 Q4 Total Orders $ 562 $ 579 $ 536 $ 642 $ 2,319 Net revenue $ 564 $ 571 $ 564 $ 601 $ 2,300 Gross margin % 54.3% 54.3% 53.6% 55.1% 54.3% Income from operations
Slide 57: Chemical Analysis Segment
AGILENT TECHNOLOGIES, INC. CHEMICAL ANALYSIS SEGMENT (Unaudited) PRELIMINARY (In millions, except margins data) FY 2013 Q1 Q2 Q3 Q4 Total Orders $ 399 $ 408 $ 390 $ 445 $ 1,642 Net revenue $ 394 $ 401 $ 387 $ 412 $ 1,594 Gross margin % 51.2% 51.4% 51.0% 52.9% 51.7% Income from operations $ 81 $ 89 $
Slide 58: Life Sciences, Diagnostics and Applied Markets (LDA)
AGILENT TECHNOLOGIES, INC. LIFE SCIENCES, DIAGNOSTICS AND APPLIED MARKETS (LDA) (Unaudited) PRELIMINARY (In millions, except margins data) FY 2013 Q1 Q2 Q3 Q4 Total Orders $ 961 $ 987 $ 926 $ 1,087 $ 3,961 Net revenue $ 958 $ 972 $ 951 $ 1,013 $ 3,894 Gross margin % 53.1% 53.1% 52.5% 54.2% 53.2% Inc
Slide 59: Electronic Measurement Segment
AGILENT TECHNOLOGIES, INC. ELECTRONIC MEASUREMENT SEGMENT (Unaudited) PRELIMINARY (In millions, except margins data) FY 2013 Q1 Q2 Q3 Q4 Total Orders $ 749 $ 701 $ 674 $ 742 $ 2,866 Net revenue $ 722 $ 760 $ 701 $ 705 $ 2,888 Gross margin % 57.4% 57.1% 56.6% 56.4% 56.9% Income from operations $ 125
Slide 60: Reconciliation of Income from Operations
AGILENT TECHNOLOGIES, INC. RECONCILIATION OF INCOME FROM OPERATIONS TO REPORTABLE SEGMENT INCOME FROM OPERATIONS AND OPERATING MARGINS (In millions, except margin data) (Unaudited) PRELIMINARY Fiscal Year Operating 2013 Margin % Revenue: Life Sciences and Diagnostics Group $ 2,300 Chemical Analysis
Slide 61: Reconciliation of Income from Operations
AGILENT TECHNOLOGIES, INC. RECONCILIATION OF INCOME FROM OPERATIONS AND OPERATING MARGINS (In millions, except margin data) (Unaudited) PRELIMINARY Fiscal Year Operating 2006 Margin % Total Agilent Revenue $ 4,973 Income from operations: GAAP Income from operations $ 464 Restructuring and asset impa
Slide 62: Reconciliations of GAAP Revenue by Segment
AGILENT TECHNOLOGIES, INC. RECONCILIATIONS OF GAAP REVENUE BY SEGMENT AND ORGANIC REVENUE BY SEGMENT EXCLUDING THE IMPACT OF CURRENCY ADJUSTMENTS (in millions) (Unaudited) PRELIMINARY Year-over-Year Currency GAAP Adjustments (a) Currency-Adjusted Year-over-Year Year-over-Year GAAP Revenue by Segment
Slide 63: Reconciliation from GAAP to Non-GAAP
AGILENT TECHNOLOGIES, INC. RECONCILIATION FROM GAAP TO NON-GAAP YEAR ENDED OCTOBER 31, 2013 (Unaudited) PRELIMINARY NON-GAAP ADJUSTMENTS Acceleration of Share-based Restructuring Acquisition & Compensation and Other Asset Intangible Transformational Integration Pre-Separation Expense Related to Adju
Slide 64: Reconciliation of Incremental Revenue Dollar to Bottom Line
AGILENT TECHNOLOGIES, INC. RECONCILIATION OF INCREMENTAL REVENUE DOLLAR TO BOTTOM LINE (IN MILLIONS) PRELIMINARY Year over Year FY 2013 FY 2006 $ Change Incremental AGILENT GAAP Revenue $ 6,782 $ 4,973 $ 1,809 Income from Operations $ 951 $ 464 $ 487 27% AGILENT Non-GAAP Revenue $ 6,782 $ 4,973 $ 1,
Slide 65: Reconciliation of ROIC
AGILENT TECHNOLOGIES, INC. RECONCILIATION OF ROIC (In millions) (Unaudited) PRELIMINARY EMG LDA Agilent (Keysight) (New Agilent) Numerator: FY'13 FY'13 FY'13 Non-GAAP income from operations $ 1,276 $ 544 $ 732 Less: Taxes and Other (income)/expense 197 84 113 (a) 1,079 460 619 Segment return annuali