Agilent FY 3Q15 Earnings Call Notes

Orders accelerated throughout the quarter

“we got off to a slow start in the third quarter in incoming orders after finishing so strong in Q2. But throughout the quarter, we saw an acceleration of incoming orders throughout the quarter and finished the quarter strong.’

Growth in China is strong

“I figure we’d probably spend some time today talking about China, given some of the recent news. But in terms of our performance in China in the third quarter, we have very strong revenue growth with low-double digits. And we’re tracking through the first three quarters right on the plans. We’ve talked about with all of you at the analyst meeting the high-single digit level of growth in China.”

We’re hedged in China by local manufacturing

“In terms of the areas of strength, we’re continuing to see strength in pharma, life science, research, the diagnostics, food, environmental. And the business really continues to develop as we had expected, albeit some of the recent changes, which in terms of how that affects our profitability in China, it’s really neutral. We’re naturally hedged in China in terms of both the amount of revenues that we bring in, in China. Even though it is our second largest country in terms of revenue, we also have a very large footprint there, including local manufacturing. So we are naturally hedged in China.”

we have plenty of reason to be positive

“we have reason to be positive about the outlook. If you look at the business by our three groups, our ACG and DGG business have momentum…When we look at our business here, we respect pharma, biopharma, diagnostics, clinical diagnostics, environment space to remain strong. China is on a steady trajectory, no expected hiccups there. And we just had a number of new product introductions”

Strength in China is in private sector money. Traditionally has been dominated by government investment

“What I can share with you is because we’ve been kind of nosing around on this question ourselves internally. And the areas of strength particularly the Pharma area is a lot of private sector money. So traditionally this market has been heavily dominated by the direct investment by the government.

We’re seeing a move. I think it’s still the majority but we are seeing a lot more business coming from private funded enterprises, particularly as the Chinese government also is moving a lot of its testing outside of government testing labs, for example, the food area where there’s now whole new set of private testing labs that are — they are coming online in the country.”

Deal cycles lengthening out because of anti-corruption crackdown

“I think it’s a new normal. I think this is — the effort is here to stay. I think in terms of the changes where we talked about before of slowing deal velocity and a lot more conservatism in terms of the overall approval process. I think that sort of baked out now. So we’re no longer pointing to longer deal cycles in China as a result of anti-corruption. But I think the longer deal cycles are here to stay and now are now in this kind of this rhythm of really cautious approvals by the government authorities. And that’s why I mentioned earlier that a lot of the areas of growth particularly in the private sector where you’ve not seen the same bureaucratic approach to approvals of deals. I think this is the new normal.”

Outside of currency impact, Europe has seen nice local growth this year

“I think our European outside of the currency offset, I mean the business there has been a really nice story for us this year…the European market although has held up very nicely and we have been positively surprised over several quarters now by the local currency growth we have seen in Europe.”