On April 25, 2018 Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, reported its financial results for the first quarter ended March 31, 2018 (Press release, Medicines Company, APR 25, 2018, View Source;p=RssLanding&cat=news&id=2344446 [SID1234525674]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
Thermo Fisher Scientific (PRNewsfoto/Thermo Fisher Scientific)
First Quarter 2018 Highlights
First quarter revenue grew 23% to $5.85 billion.
First quarter GAAP diluted earnings per share (EPS) increased 2% to $1.43.
First quarter adjusted EPS increased 20% to $2.50.
Launched new products across our portfolio, including Thermo Scientific Vanquish Duo UHPLC systems for pharma QA/QC, the Thermo Scientific Chromeleon XTR Laboratory Management System and the Ion GeneStudio S5 Series of next-generation sequencing instruments.
Held first China-U.S. Precision Medicine Summit in Beijing, convening more than 400 thought leaders across government, academia and industry to promote global collaboration in the prevention, diagnosis and treatment of disease.
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’re pleased to start the year on a very strong note, with excellent revenue and earnings growth," said Marc N. Casper, president and chief executive officer of Thermo Fisher Scientific. "Our team did a great job meeting customer needs across our end markets and successfully executed our growth strategy to deliver outstanding results.
"On the innovation front, we kicked off 2018 by strengthening our leading technology platforms, including new instruments and software that help our customers to simplify workflows and better manage information in their labs. Geographically, we continued to leverage our industry-leading scale to deliver another great quarter in emerging and high-growth regions, with double-digit growth in China, India and South Korea. We also continued to demonstrate the power of our customer value proposition, especially in pharma and biotech, where we’re making great progress in integrating the capabilities we gained from the Patheon acquisition to make our offering for these customers even stronger."
Casper concluded, "We’re off to a great start in 2018, which positions us to deliver another excellent year."
First Quarter 2018
Revenue for the quarter grew 23% to $5.85 billion in 2018, versus $4.77 billion in 2017. Organic revenue growth was 7%; acquisitions increased revenue by 12% and currency translation increased revenue by 4%.
GAAP Earnings Results
GAAP diluted EPS in the first quarter increased 2% to $1.43, versus $1.40 in the same quarter last year. GAAP operating income for the first quarter of 2018 grew to $0.79 billion, compared with $0.62 billion in the first quarter of 2017. GAAP operating margin increased to 13.4%, compared with 13.0% in the first quarter of 2017.
Non-GAAP Earnings Results
Adjusted EPS in the first quarter of 2018 increased 20% to $2.50, versus $2.08 in the first quarter of 2017. Adjusted operating income for the first quarter of 2018 grew 20% compared with the year-ago quarter. Adjusted operating margin was 22.0%, compared with 22.5% in the first quarter of 2017.
2018 Guidance Update
Thermo Fisher is raising its 2018 revenue and earnings guidance to reflect strong operational performance, a more significant impact from acquisitions and a more favorable foreign exchange environment. The company is raising its revenue guidance to a new range of $23.62 to $23.86 billion versus its previous guidance of $23.42 to $23.72 billion. This would result in 13 to 14% revenue growth over 2017. The company is raising its adjusted EPS guidance to a new range of $10.80 to $10.96, versus its previous guidance of $10.68 to $10.88, for 14 to 15% growth year over year.
Segment Results
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 first quarter of 2018, Life Sciences Solutions Segment revenue grew 10% to $1.50 billion, compared with revenue of $1.36 billion in the first quarter of 2017. Segment adjusted operating margin increased to 34.5%, versus 31.8% in the 2017 quarter.
Analytical Instruments Segment
Analytical Instruments Segment revenue grew 19% to $1.26 billion in the first quarter of 2018, compared with revenue of $1.05 billion in the first quarter of 2017. Segment adjusted operating margin increased to 19.6%, versus 18.2% in the 2017 quarter.
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue grew 9% to $0.95 billion in the first quarter of 2018, compared with revenue of $0.87 billion in the first quarter of 2017. Segment adjusted operating margin was 25.6%, versus 26.9% 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 first quarter of 2018, segment revenue grew 42% to $2.41 billion, compared with revenue of $1.70 billion in the first quarter of 2017. Segment adjusted operating margin was 11.6%, versus 12.7% 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, excluding net capital expenditures, and also excludes operating cash flows from discontinued operations 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.
For example:
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 first quarter of 2018, our adjusted EPS will exclude approximately $3.42 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, excluding net capital expenditures, and also excludes operating cash flows from discontinued operations 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.
Conference Call
Thermo Fisher Scientific will hold its earnings conference call today, April 25, 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, May 11, 2018.