Thermo Fisher Scientific Reports Second Quarter 2020 Results
Thermo Fisher Scientific (NYSE: TMO) reported a strong second quarter for 2020, with revenue up 10% to $6.92 billion and a 28% increase in adjusted EPS to $3.89. The growth was fueled by approximately $1.3 billion in COVID-related revenue and strategic initiatives, including enhanced PCR testing capabilities and collaborations for antibody testing. While GAAP operating income decreased from the prior year, adjusted metrics showed significant improvement, reflecting strong demand and operational efficiency.
- Revenue increased 10% to $6.92 billion.
- Adjusted EPS rose 28% to $3.89.
- Generated $1.3 billion from COVID-related revenue.
- Expanded PCR testing capabilities through EUA.
- Formed collaborative agreements to develop serology tests.
- Secured multi-year BARDA contract for vaccine support.
- Increased capacity in pharma services and viral vector manufacturing.
- GAAP operating income decreased to $1.39 billion from $1.50 billion.
- GAAP operating margin declined from 23.7% to 20.1%.
- Revenue in Analytical Instruments Segment fell to $1.05 billion, down from $1.32 billion.
WALTHAM, Mass., July 22, 2020 /PRNewswire/ -- 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
GAAP Earnings Results
GAAP diluted EPS in the second quarter of 2020 increased
Non-GAAP Earnings Results
Adjusted EPS in the second quarter of 2020 increased
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 second quarter of 2020, Life Sciences Solutions Segment revenue was
Analytical Instruments Segment
Analytical Instruments Segment revenue was
Specialty Diagnostics Segment
Specialty Diagnostics Segment revenue was
Laboratory Products and Services Segment
In the second quarter of 2020, Laboratory Products and Services Segment revenue was
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.
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. Based on acquisitions closed through the end of the second quarter of 2020, adjusted EPS for full-year 2020 will exclude approximately
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.
Conference Call
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
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.
Media Contact Information:
Karen Kirkwood
Phone: 781-622-1306
E-mail: karen.kirkwood@thermofisher.com
Website: www.thermofisher.com
Investor Contact Information:
Ken Apicerno
Phone: 781-622-1294
E-mail: ken.apicerno@thermofisher.com
Consolidated Statement of | ||||||||||||||
Three Months Ended | ||||||||||||||
June 27, | % of | June 29, | % of | |||||||||||
(In millions except per share amounts) | 2020 | Revenues | 2019 | Revenues | ||||||||||
Revenues | $ | 6,917 | $ | 6,316 | ||||||||||
Costs and Operating Expenses: | ||||||||||||||
Cost of revenues (c) | 3,416 | 49.4 | % | 3,368 | 53.3 | % | ||||||||
Selling, general and administrative expenses (d) | 1,417 | 20.5 | % | 1,261 | 20.0 | % | ||||||||
Amortization of acquisition-related intangible assets | 417 | 6.1 | % | 429 | 6.8 | % | ||||||||
Research and development expenses | 264 | 3.8 | % | 246 | 3.9 | % | ||||||||
Restructuring and other costs (income), net (e) | 12 | 0.2 | % | (484) | -7.7 | % | ||||||||
5,526 | 79.9 | % | 4,820 | 76.3 | % | |||||||||
Operating Income | 1,391 | 20.1 | % | 1,496 | 23.7 | % | ||||||||
Interest Income | 8 | 60 | ||||||||||||
Interest Expense | (137) | (181) | ||||||||||||
Other (Expense) Income, Net (f) | (9) | 18 | ||||||||||||
Income Before Income Taxes | 1,253 | 1,393 | ||||||||||||
Provision for Income Taxes (g) | (97) | (274) | ||||||||||||
Net Income | $ | 1,156 | 16.7 | % | $ | 1,119 | 17.7 | % | ||||||
Earnings per Share: | ||||||||||||||
Basic | $ | 2.92 | $ | 2.80 | ||||||||||
Diluted | $ | 2.90 | $ | 2.77 | ||||||||||
Weighted Average Shares: | ||||||||||||||
Basic | 395 | 400 | ||||||||||||
Diluted | 398 | 403 | ||||||||||||
Reconciliation of Adjusted | ||||||||||||||
GAAP Operating Income (a) | $ | 1,391 | 20.1 | % | $ | 1,496 | 23.7 | % | ||||||
Cost of Revenues Charges, Net (c) | 2 | 0.0 | % | 5 | 0.1 | % | ||||||||
Selling, General and Administrative Charges, Net (d) | 42 | 0.6 | % | 36 | 0.6 | % | ||||||||
Restructuring and Other Costs (Income), Net (e) | 12 | 0.2 | % | (484) | -7.7 | % | ||||||||
Amortization of Acquisition-related Intangible Assets | 417 | 6.1 | % | 429 | 6.8 | % | ||||||||
Adjusted Operating Income (b) | $ | 1,864 | 27.0 | % | $ | 1,482 | 23.5 | % | ||||||
Reconciliation of Adjusted Net Income | ||||||||||||||
GAAP Net Income (a) | $ | 1,156 | $ | 1,119 | ||||||||||
Cost of Revenues Charges, Net (c) | 2 | 5 | ||||||||||||
Selling, General and Administrative Charges, Net (d) | 42 | 36 | ||||||||||||
Restructuring and Other Costs (Income), Net (e) | 12 | (484) | ||||||||||||
Amortization of Acquisition-related Intangible Assets | 417 | 429 | ||||||||||||
Other Expense (Income), Net (f) | 25 | — | ||||||||||||
(Benefit from) Provision for | (104) | 122 | ||||||||||||
Adjusted Net Income (b) | $ | 1,550 | $ | 1,227 | ||||||||||
Reconciliation of Adjusted Earnings | ||||||||||||||
GAAP EPS (a) | $ | 2.90 | $ | 2.77 | ||||||||||
Cost of Revenues Charges, Net of Tax (c) | 0.00 | 0.01 | ||||||||||||
Selling, General and Administrative Charges, | 0.08 | 0.07 | ||||||||||||
Restructuring and Other Costs (Income), | 0.03 | (0.74) | ||||||||||||
Amortization of Acquisition-related Intangible Assets, Net of Tax | 0.85 | 0.84 | ||||||||||||
Other Expense (Income), Net of Tax (f) | 0.05 | 0.00 | ||||||||||||
(Benefit from) Provision for Income Taxes (g) | (0.02) | 0.09 | ||||||||||||
Adjusted EPS (b) | $ | 3.89 | $ | 3.04 | ||||||||||
Reconciliation of Free Cash Flow |
FAQ
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