Thermo Fisher Scientific Reports Second Quarter 2023 Results

WALTHAM, Mass.–(BUSINESS WIRE)–Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported its financial results for the second quarter ended July 1, 2023.

Second Quarter 2023 Highlights

• Second quarter revenue was $10.69 billion, 3% lower versus the same quarter last year. Core organic revenue growth was 2%.
• Second quarter GAAP diluted earnings per share (EPS) was $3.51.
• Second quarter adjusted EPS was $5.15.

• The macroeconomic environment was more challenging in the second quarter and our PPI Business System helped the company to effectively navigate the environment.
• Strong execution of our proven growth strategy, launching a range of high-impact, innovative new products, including the groundbreaking Thermo Scientific™ Orbitrap™ Astral™ mass spectrometer, a significant advancement in mass spectrometry offering high resolution and speed to enable the discovery of new proteins and advance precision medicine; the Thermo Scientific Metrios 6, a fully automated scanning transmission electron microscope incorporating advanced machine learning to accelerate semiconductor development; the Gibco™ OncoPro™ Tumoroid Culture Medium Kit, to accelerate development of novel cancer therapies; and the first FDA-cleared assays for risk assessment and clinical management of preeclampsia, a serious pregnancy complication.
• Further strengthened our industry-leading commercial engine and trusted partner status with the opening of a state-of-the-art customer center of excellence in Milan, allowing us to consolidate capabilities from across the company to better serve our customers and enhance productivity.
• Shortly after the quarter ended, announced a definitive agreement to acquire CorEvitas for approximately $0.9 billion. Highly complementary to our leading clinical research business, CorEvitas provides regulatory-grade, real-world evidence solutions to pharmaceutical and biotechnology companies with objective data and clinical insights to improve patient care and clinical outcomes.
• Building on our environmental, social and governance priorities, we published our 2022 Corporate Social Responsibility Report, highlighting our actions in these areas and reflecting our commitment to society and our stakeholders.

“The macroeconomic environment became more challenging in the second quarter. Economic activity in China slowed, and across the economy more broadly, businesses became more cautious in their spend,” said Marc Casper, chairman, president and chief executive officer of Thermo Fisher Scientific. “The team is leveraging our PPI Business System to effectively manage through this dynamic environment.”

Casper added, “Our experienced management team has a long track record of successfully navigating and capitalizing on dynamic macro environments. We are incredibly well positioned to create value for all of our stakeholders and ensure a bright future for our company.”

Second Quarter 2023

Revenue for the quarter declined 3% to $10.69 billion in 2023, versus $10.97 billion in 2022. Organic revenue was 3% lower, Core organic revenue growth was 2%, and COVID-19 testing revenue was $0.08 billion.

GAAP Earnings Results

GAAP diluted EPS in the second quarter of 2023 was $3.51, versus $4.22 in the same quarter last year. GAAP operating income for the second quarter of 2023 was $1.58 billion, compared with $2.00 billion in the year-ago quarter. GAAP operating margin was 14.8%, compared with 18.2% in the second quarter of 2022.

Non-GAAP Earnings Results

Adjusted EPS in the second quarter of 2023 was $5.15, versus $5.51 in the second quarter of 2022. Adjusted operating income for the second quarter of 2023 was $2.37 billion, compared with $2.61 billion in the year-ago quarter. Adjusted operating margin was 22.2%, compared with 23.7% in the second quarter of 2022.

Annual Guidance for 2023

Given the macroeconomic environment, Thermo Fisher is revising revenue and adjusted EPS guidance for the full year. The company now expects 2023 revenue to be a range of $43.4 billion to $44.0 billion, with Core organic revenue growth of 2% to 4%, and adjusted EPS of $22.28 to $22.72.

Use of Non-GAAP Financial Measures

Adjusted EPS, adjusted net income, adjusted operating income, adjusted operating margin, free cash flow, organic revenue growth and Core organic revenue growth are non-GAAP measures that exclude certain items detailed after the tables that accompany this press release, under the heading “Supplemental Information Regarding Non-GAAP Financial Measures.” The reconciliations of GAAP to non-GAAP financial measures are provided in the tables that accompany this press release.

Conference Call

Thermo Fisher Scientific will hold its earnings conference call today, July 26, 2023, at 8:30 a.m. Eastern Time. To listen, dial (833) 470-1428 within the U.S. or (404) 975-4839 outside the U.S. The access code is 852304. You may also listen to the call live on the “Investors” section of our website, www.thermofisher.com. The earnings press release and related information can also be found in that section of our website under the heading “Financials”. A replay of the call will be available under “News, Events & Presentations” through Friday, August 11, 2023.

About Thermo Fisher Scientific

Thermo Fisher Scientific Inc. is the world leader in serving science, with annual revenue over $40 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, increasing productivity in their laboratories, improving patient health through diagnostics or the development and manufacture of life-changing therapies, we are here to support them. Our global team 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, Patheon and PPD. 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. Important factors that could cause actual results to differ materially from those indicated by forward-looking statements include risks and uncertainties relating to: 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; any natural disaster, public health crisis or other catastrophic event; 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 most recent annual report on Form 10-K and subsequent quarterly report on Form 10-Q, which are 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.

Condensed Consolidated Statements of Income (unaudited)
		Three Months Ended
		July 1,				% of			July 2,				% of
(Dollars in millions except per share amounts)			2023			Revenues				2022			Revenues
Revenues		$	10,687						$	10,970
Costs and operating expenses:
Cost of revenues (a)			6,323			59.2	%			6,240			56.9	%
Selling, general and administrative expenses (b)			1,673			15.7	%			1,740			15.9	%
Amortization of acquisition-related intangible assets			585			5.4	%			600			5.5	%
Research and development expenses			345			3.2	%			365			3.3	%
Restructuring and other costs (c)			183			1.7	%			24			0.2	%
Total costs and operating expenses			9,109			85.2	%			8,969			81.8	%
Operating income			1,578			14.8	%			2,001			18.2	%
Interest income			178							36
Interest expense			(326	)						(148	)
Other income/(expense) (d)			—							28
Income before income taxes			1,430							1,917
Provision for income taxes (e)			(52	)						(198	)
Equity in earnings/(losses) of unconsolidated entities			(16	)						(51	)
Net income			1,362							1,668
Less: net income/(losses) attributable to noncontrolling interests and redeemable noncontrolling interest			1							4
Net income attributable to Thermo Fisher Scientific Inc.		$	1,361			12.7	%		$	1,664			15.2	%
Earnings per share attributable to Thermo Fisher Scientific Inc.:
Basic		$	3.53						$	4.25
Diluted		$	3.51						$	4.22
Weighted average shares:
Basic			386							392
Diluted			388							394
Reconciliation of adjusted operating income and adjusted operating margin
GAAP operating income		$	1,578			14.8	%		$	2,001			18.2	%
Cost of revenues adjustments (a)			18			0.2	%			8			0.1	%
Selling, general and administrative expenses adjustments (b)			6			0.1	%			(28	)		-0.3	%
Restructuring and other costs (c)			183			1.7	%			24			0.2	%
Amortization of acquisition-related intangible assets			585			5.4	%			600			5.5	%
Adjusted operating income (non-GAAP measure)		$	2,370			22.2	%		$	2,605			23.7	%
Reconciliation of adjusted net income
GAAP net income attributable to Thermo Fisher Scientific Inc.		$	1,361						$	1,664
Cost of revenues adjustments (a)			18							8
Selling, general and administrative expenses adjustments (b)			6							(28	)
Restructuring and other costs (c)			183							24
Amortization of acquisition-related intangible assets			585							600
Other income/expense adjustments (d)			(1	)						(18	)
Provision for income taxes adjustments (e)			(171	)						(127	)
Equity in earnings/losses of unconsolidated entities			16							51
Adjusted net income (non-GAAP measure)		$	1,997						$	2,174
Reconciliation of adjusted earnings per share
GAAP diluted EPS attributable to Thermo Fisher Scientific Inc.		$	3.51						$	4.22
Cost of revenues adjustments (a)			0.05							0.02
Selling, general and administrative expenses adjustments (b)			0.01							(0.07	)
Restructuring and other costs (c)			0.47							0.06
Amortization of acquisition-related intangible assets			1.51							1.52
Other income/expense adjustments (d)			0.00							(0.05	)
Provision for income taxes adjustments (e)			(0.44	)						(0.32	)
Equity in earnings/losses of unconsolidated entities			0.04							0.13
Adjusted EPS (non-GAAP measure)		$	5.15						$	5.51
Reconciliation of free cash flow
GAAP net cash provided by operating activities		$	1,540						$	1,528
Purchases of property, plant and equipment			(284	)						(506	)
Proceeds from sale of property, plant and equipment			4							12
Free cash flow (non-GAAP measure)		$	1,260						$	1,034

Business Segment Information		Three Months Ended
		July 1,				% of			July 2,				% of
(Dollars in millions)			2023			Revenues				2022			Revenues
Revenues
Life Sciences Solutions		$	2,463			23.0	%		$	3,292			30.0	%
Analytical Instruments			1,749			16.4	%			1,607			14.6	%
Specialty Diagnostics			1,109			10.4	%			1,101			10.0	%
Laboratory Products and Biopharma Services			5,831			54.6	%			5,537			50.5	%
Eliminations			(465	)		-4.4	%			(567	)		-5.1	%
Consolidated revenues		$	10,687			100.0	%		$	10,970			100.0	%
Segment income and segment income margin
Life Sciences Solutions		$	817			33.2	%		$	1,327			40.3	%
Analytical Instruments			432			24.7	%			344			21.4	%
Specialty Diagnostics			297			26.7	%			243			22.1	%
Laboratory Products and Biopharma Services			824			14.1	%			691			12.5	%
Subtotal reportable segments			2,370			22.2	%			2,605			23.7	%
Cost of revenues adjustments (a)			(18	)		-0.2	%			(8	)		-0.1	%
Selling, general and administrative expenses adjustments (b)			(6	)		-0.1	%			28			0.3	%
Restructuring and other costs (c)			(183	)		-1.7	%			(24	)		-0.2	%
Amortization of acquisition-related intangible assets			(585	)		-5.4	%			(600	)		-5.5	%
Consolidated GAAP operating income		$	1,578			14.8	%		$	2,001			18.2	%
(a) Adjusted results in 2023 and 2022 exclude charges for the sale of inventory revalued at the date of acquisition. Adjusted results in 2023 also exclude $2 of charges for inventory write-downs associated with large-scale abandonment of product lines and $5 of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations.
(b) Adjusted results in 2023 and 2022 exclude certain third-party expenses, principally transaction/integration costs related to recent acquisitions, and charges/credits for changes in estimates of contingent acquisition consideration.
(c) Adjusted results in 2023 and 2022 exclude restructuring and other costs consisting principally of severance, impairments of long-lived assets, abandoned facility, and other expenses of headcount reductions and real estate consolidations. Adjusted results in 2023 also exclude $26 of contract termination costs associated with facility closures.
(d) Adjusted results in 2023 and 2022 exclude net gains/losses on investments.
(e) Adjusted provision for income taxes in 2023 and 2022 excludes incremental tax impacts for the reconciling items between GAAP and adjusted net income, incremental tax impacts as a result of tax rate/law changes, and the tax impacts from audit settlements.
Note:
Consolidated depreciation expense is $270 and $236 in 2023 and 2022, respectively.

Organic and Core organic revenue growth		Three months ended
		July 1, 2023
Revenue growth		-3 %
Acquisitions		1 %
Currency translation		0 %
Organic revenue growth (non-GAAP measure) *		-3 %
COVID-19 testing revenue		-5 %
Core organic revenue growth (non-GAAP measure) *		2 %
* Results may not sum due to rounding.
Note:
For more information related to non-GAAP financial measures, refer to the section titled “Supplemental Information Regarding Non-GAAP Financial Measures” of this release.

Condensed Consolidated Statements of Income (unaudited)
		Six months ended
		July 1,				% of			July 2,				% of
(Dollars in millions except per share amounts)			2023			Revenues				2022			Revenues
Revenues		$	21,397						$	22,788
Costs and operating expenses:
Cost of revenues (a)			12,760			59.6	%			12,454			54.7	%
Selling, general and administrative expenses (b)			3,319			15.5	%			3,548			15.6	%
Amortization of acquisition-related intangible assets			1,191			5.5	%			1,209			5.3	%
Research and development expenses			691			3.2	%			729			3.2	%
Restructuring and other costs (c)			295			1.4	%			26			0.1	%
Total costs and operating expenses			18,256			85.3	%			17,966			78.8	%
Operating income			3,141			14.7	%			4,822			21.2	%
Interest income			324							54
Interest expense			(626	)						(284	)
Other income/(expense) (d)			(46	)						(135	)
Income before income taxes			2,793							4,457
Provision for income taxes (e)			(98	)						(499	)
Equity in earnings/(losses) of unconsolidated entities			(41	)						(70	)
Net income			2,654							3,888
Less: net income/(losses) attributable to noncontrolling interests and redeemable noncontrolling interest			4							9
Net income attributable to Thermo Fisher Scientific Inc.		$	2,650			12.4	%		$	3,879			17.0	%
Earnings per share attributable to Thermo Fisher Scientific Inc.:
Basic		$	6.86						$	9.90
Diluted		$	6.83						$	9.83
Weighted average shares:
Basic			386							392
Diluted			388							394
Reconciliation of adjusted operating income and adjusted operating margin
GAAP operating income		$	3,141			14.7	%		$	4,822			21.2	%
Cost of revenues adjustments (a)			59			0.3	%			19			0.1	%
Selling, general and administrative expenses adjustments (b)			14			0.1	%			(21	)		-0.1	%
Restructuring and other costs (c)			295			1.4	%			26			0.1	%
Amortization of acquisition-related intangible assets			1,191			5.5	%			1,209			5.3	%
Adjusted operating income (non-GAAP measure)		$	4,700			22.0	%		$	6,055			26.6	%
Reconciliation of adjusted net income
GAAP net income attributable to Thermo Fisher Scientific Inc.		$	2,650						$	3,879
Cost of revenues adjustments (a)			59							19
Selling, general and administrative expenses adjustments (b)			14							(21	)
Restructuring and other costs (c)			295							26
Amortization of acquisition-related intangible assets			1,191							1,209
Other income/expense adjustments (d)			45							149
Provision for income taxes adjustments (e)			(342	)						(296	)
Equity in earnings/losses of unconsolidated entities			41							70
Adjusted net income (non-GAAP measure)		$	3,953						$	5,035
Reconciliation of adjusted earnings per share
GAAP diluted EPS attributable to Thermo Fisher Scientific Inc.		$	6.83						$	9.83
Cost of revenues adjustments (a)			0.15							0.05
Selling, general and administrative expenses adjustments (b)			0.03							(0.05	)
Restructuring and other costs (c)			0.76							0.06
Amortization of acquisition-related intangible assets			3.07							3.06
Other income/expense adjustments (d)			0.11							0.38
Provision for income taxes adjustments (e)			(0.88	)						(0.75	)
Equity in earnings/losses of unconsolidated entities			0.11							0.18
Adjusted EPS (non-GAAP measure)		$	10.18						$	12.76
Reconciliation of free cash flow
GAAP net cash provided by operating activities		$	2,269						$	3,730
Purchases of property, plant and equipment			(742	)						(1,146	)
Proceeds from sale of property, plant and equipment			10							14
Free cash flow (non-GAAP measure)		$	1,537						$	2,598

Business Segment Information		Six months ended
		July 1,				% of			July 2,				% of
(Dollars in millions)			2023			Revenues				2022			Revenues
Revenues
Life Sciences Solutions		$	5,075			23.7	%		$	7,523			33.0	%
Analytical Instruments			3,472			16.2	%			3,125			13.7	%
Specialty Diagnostics			2,217			10.4	%			2,583			11.3	%
Laboratory Products and Biopharma Services			11,594			54.2	%			10,979			48.2	%
Eliminations			(961	)		-4.5	%			(1,422	)		-6.2	%
Consolidated revenues		$	21,397			100.0	%		$	22,788			100.0	%
Segment income and segment income margin
Life Sciences Solutions		$	1,653			32.6	%		$	3,503			46.6	%
Analytical Instruments			853			24.6	%			645			20.6	%
Specialty Diagnostics			577			26.0	%			596			23.1	%
Laboratory Products and Biopharma Services			1,617			14.0	%			1,311			11.9	%
Subtotal reportable segments			4,700			22.0	%			6,055			26.6	%
Cost of revenues adjustments (a)			(59	)		-0.3	%			(19	)		-0.1	%
Selling, general and administrative expenses adjustments (b)			(14	)		-0.1	%			21			0.1	%
Restructuring and other costs (c)			(295	)		-1.4	%			(26	)		-0.1	%
Amortization of acquisition-related intangible assets			(1,191	)		-5.5	%			(1,209	)		-5.3	%
Consolidated GAAP operating income		$	3,141			14.7	%		$	4,822			21.2	%
(a) Adjusted results in 2023 and in 2022 exclude charges for the sale of inventories revalued at the date of acquisition. Adjusted results in 2023 also exclude $33 of charges for inventory write-downs associated with large-scale abandonment of product lines and $5 of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations.
(b) Adjusted results in 2023 and 2022 exclude certain third-party expenses, principally transaction/integration costs related to recent acquisitions and charges/credits for changes in estimates of contingent acquisition consideration.
(c) Adjusted results in 2023 and 2022 exclude restructuring and other costs consisting principally of severance, impairments of long-lived assets, abandoned facility and other expenses of headcount reductions and real estate consolidations. Adjusted results in 2023 also exclude $26 of contract termination costs associated with facility closures and $18 of net charges for pre-acquisition litigation and other matters.
(d) Adjusted results in 2023 and 2022 exclude net gains/losses on investments. Adjusted results in 2022 also exclude $26 of losses on the early extinguishment of debt.
(e) Adjusted provision for income taxes in 2023 and 2022 excludes incremental tax impacts for the reconciling items between GAAP and adjusted net income, incremental tax impacts as a result of tax rate/law changes and the tax impacts from audit settlements.
Notes:
Consolidated depreciation expense is $523 and $486 in 2023 and 2022, respectively.
Note:
For more information related to non-GAAP financial measures, refer to the section titled “Supplemental Information Regarding Non-GAAP Financial Measures” of this release.

Condensed Consolidated Balance Sheets (unaudited)
		July 1,			December 31,
(In millions)		2023			2022
Assets
Current assets:
Cash and cash equivalents		$	3,133		$	8,524
Accounts receivable, net			8,019			8,115
Inventories			5,655			5,634
Other current assets			3,188			2,956
Total current assets			19,995			25,229
Property, plant and equipment, net			9,292			9,280
Acquisition-related intangible assets, net			17,437			17,442
Other assets			4,108			4,007
Goodwill			43,273			41,196
Total assets		$	94,105		$	97,154
Liabilities, redeemable noncontrolling interest and equity
Current liabilities:
Short-term obligations and current maturities of long-term obligations		$	4,814		$	5,579
Other current liabilities			9,298			11,431
Total current liabilities			14,112			17,010
Other long-term liabilities			6,884			7,087
Long-term obligations			29,194			28,909
Redeemable noncontrolling interest			113			116
Total equity			43,802			44,032
Total liabilities, redeemable noncontrolling interest and equity		$	94,105		$	97,154

Condensed Consolidated Statements of Cash Flows (unaudited)
		Six months ended
		July 1,				July 2,
(In millions)			2023				2022
Operating activities
Net income		$	2,654			$	3,888
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,714				1,695
Change in deferred income taxes			(328	)			(601	)
Other non-cash expenses, net			480				472
Changes in assets and liabilities, excluding the effects of acquisitions			(2,251	)			(1,724	)
Net cash provided by operating activities			2,269				3,730
Investing activities
Acquisitions, net of cash acquired			(2,751	)			(40	)
Purchases of property, plant and equipment			(742	)			(1,146	)
Proceeds from sale of property, plant and equipment			10				14
Other investing activities, net			(102	)			83
Net cash used in investing activities			(3,585	)			(1,089	)
Financing activities
Repayment of debt			(1,000	)			(375	)
Net proceeds from issuance of commercial paper			1,620				1,032
Repayment of commercial paper			(1,441	)			(3,490	)
Purchases of company common stock			(3,000	)			(2,000	)
Dividends paid			(252	)			(220	)
Other financing activities, net			24				3
Net cash used in financing activities			(4,049	)			(5,050	)
Exchange rate effect on cash			(19	)			(177	)
Decrease in cash, cash equivalents and restricted cash			(5,384	)			(2,586	)
Cash, cash equivalents and restricted cash at beginning of period			8,537				4,491
Cash, cash equivalents and restricted cash at end of period		$	3,153			$	1,905
Free cash flow (non-GAAP measure)		$	1,537			$	2,598
Note:
For more information related to non-GAAP financial measures, refer to the section titled “Supplemental Information Regarding Non-GAAP Financial Measures” of this release.

Contacts

Media Contact Information:

Sandy Pound

Thermo Fisher Scientific

Phone: 781-622-1223

E-mail: [email protected]

Investor Contact Information:

Rafael Tejada

Thermo Fisher Scientific

Phone: 781-622-1356

E-mail: [email protected]

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