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Thermo Fisher Scientific Reports Second Quarter 2022 Results

·12 min read

WALTHAM, Mass., July 28, 2022--(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 2, 2022.

Second Quarter 2022 Highlights

  • Second quarter revenue was $10.97 billion.

  • Second quarter GAAP diluted earnings per share (EPS) was $4.22.

  • Second quarter adjusted EPS was $5.51.

  • Delivered very strong financial results in the second quarter, with 13% Core organic revenue growth and $0.63 billion of COVID-19 testing revenue.

  • Launched a range of high-impact innovative new products including the Gibco CTS TrueCut Cas9 Protein to advance genomic research by delivering consistently higher editing efficiency across a wide range of gene targets and cell types, and the Phadia 2500+ series of instruments launched in the U.S., to provide high throughput testing for both allergy diagnostics and autoimmune diseases. At the American Society for Mass Spectrometry (ASMS) Conference, the company featured new instruments, workflows, software, and industry collaborations enabling customers to generate new analytical insights, enhance productivity, and accelerate next generation vaccine and therapy development. Highlights included the Thermo Scientific Direct Mass Technology which advances the capability to analyze the characteristics of biotherapeutics, and the Thermo Scientific AccelerOme Automated Sample Preparation Platform which significantly simplifies workflows for proteomic researchers by eliminating a range of previously manual steps.

  • Strengthened our unique customer value proposition with new capacity and capabilities to meet increasing global demand: in Grand Island, NY expanded cell culture media capacity to support research and drug production applications; and in Geel, Belgium expanded our European distribution center for our laboratory chemicals business.

  • Continued to leverage our scale in high growth and emerging markets, delivering excellent growth in China, driven by both our Core business and our role in supporting local COVID-19 testing.

"We delivered another quarter of outstanding financial performance," said Marc N. Casper, chairman, president and chief executive officer of Thermo Fisher Scientific. "Our proven growth strategy and PPI Business System enabled us to deliver exceptional results across our business and we continue to see the benefit of our strategic investments to enhance our unique customer value proposition. The integration of our clinical research business is going very well, the business is performing at a high level and the outlook for long-term synergies is very compelling."

Casper added, "Our team continues to execute well and we’re in a very strong position at the halfway point of the year and on track to deliver another outstanding year for Thermo Fisher."

Second Quarter 2022
Revenue for the quarter grew 18% to $10.97 billion in 2022. Organic revenue growth was 3%; acquisitions increased revenue by 19% and currency translation decreased revenue by 4%. Core organic revenue growth was 13%. COVID-19 testing revenue was $0.63 billion.

GAAP Earnings Results

GAAP diluted EPS in the second quarter of 2022 was $4.22, versus $4.61 in the same quarter last year. GAAP operating income for the second quarter of 2022 was $2.00 billion, compared with $2.16 billion in the year-ago quarter. GAAP operating margin was 18.2%, compared with 23.3% in the second quarter of 2021.

Non-GAAP Earnings Results

Adjusted EPS in the second quarter of 2022 was $5.51, versus $5.60 in the second quarter of 2021. Adjusted operating income for the second quarter of 2022 was $2.61 billion, compared with $2.69 billion in the year-ago quarter. Adjusted operating margin was 23.7%, compared with 29.0% in the second quarter of 2021.

Annual Guidance for 2022

The company will provide updated 2022 financial guidance during its earnings conference call this morning at 8:30 a.m. Eastern Daylight Time.

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 28, 2022, at 8:30 a.m. Eastern Daylight Time. To listen, dial (844) 200-6205 within the U.S. or (929) 526-1599 outside the U.S. The conference ID is 512129. 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 "Financials." An audio archive of the call will be available under "News & Events" through Friday, August 12, 2022.

About Thermo Fisher Scientific

Thermo Fisher Scientific Inc. is the world leader in serving science, with annual revenue of approximately $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 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; 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 Statement of Income (unaudited)

Three Months Ended

July 2,

% of

July 3,

% of

(In millions except per share amounts)

2022

Revenues

2021

Revenues

Revenues

$

10,970

$

9,273

Costs and operating expenses:

Cost of revenues (a)

6,240

56.9

%

4,585

49.4

%

Selling, general and administrative expenses (b)

1,740

15.9

%

1,614

17.4

%

Amortization of acquisition-related intangible assets

600

5.5

%

449

4.8

%

Research and development expenses

365

3.3

%

343

3.7

%

Restructuring and other costs (c)

24

0.2

%

119

1.3

%

8,969

81.8

%

7,110

76.7

%

Operating income

2,001

18.2

%

2,163

23.3

%

Interest income

36

11

Interest expense

(148

)

(122

)

Other income/(expense) (d)

28

(3

)

Income before income taxes

1,917

2,049

Provision for income taxes (e)

(198

)

(219

)

Equity in earnings/(losses) of unconsolidated entities

(51

)

(1

)

Net income

1,668

1,829

Less: net income attributable to noncontrolling interests and redeemable noncontrolling interest

4

1

Net income attributable to Thermo Fisher Scientific Inc.

$

1,664

15.2

%

$

1,828

19.7

%

Earnings per share attributable to Thermo Fisher Scientific Inc.:

Basic

$

4.25

$

4.65

Diluted

$

4.22

$

4.61

Weighted average shares:

Basic

392

393

Diluted

394

396

Reconciliation of adjusted operating income and adjusted operating margin

GAAP operating income

$

2,001

18.2

%

$

2,163

23.3

%

Cost of revenues adjustments (a)

8

0.1

%

0.0

%

Selling, general and administrative expenses adjustments (b)

(28

)

-0.3

%

(42

)

-0.4

%

Restructuring and other costs (c)

24

0.2

%

119

1.3

%

Amortization of acquisition-related intangible assets

600

5.5

%

449

4.8

%

Adjusted operating income (non-GAAP measure)

$

2,605

23.7

%

$

2,689

29.0

%

Reconciliation of adjusted net income

GAAP net income attributable to Thermo Fisher Scientific Inc.

$

1,664

$

1,828

Cost of revenues adjustments (a)

8

Selling, general and administrative expenses adjustments (b)

(28

)

(42

)

Restructuring and other costs (c)

24

119

Amortization of acquisition-related intangible assets

600

449

Other income/expense adjustments (d)

(18

)

8

Provision for income taxes adjustments (e)

(127

)

(142

)

Equity in earnings/losses of unconsolidated entities

51

1

Adjusted net income (non-GAAP measure)

$

2,174

$

2,221

Reconciliation of adjusted earnings per share

GAAP diluted EPS attributable to Thermo Fisher Scientific Inc.

$

4.22

$

4.61

Cost of revenues adjustments (a)

0.02

0.00

Selling, general and administrative expenses adjustments (b)

(0.07

)

(0.10

)

Restructuring and other costs (c)

0.06

0.30

Amortization of acquisition-related intangible assets

1.52

1.13

Other income/expense adjustments (d)

(0.05

)

0.02

Provision for income taxes adjustments (e)

(0.32

)

(0.36

)

Equity in earnings/losses of unconsolidated entities

0.13

0.00

Adjusted EPS (non-GAAP measure)

$

5.51

$

5.60

Reconciliation of free cash flow

GAAP net cash provided by operating activities

$

1,528

$

2,227

Purchases of property, plant and equipment

(506

)

(540

)

Proceeds from sale of property, plant and equipment

12

Free cash flow (non-GAAP measure)

$

1,034

$

1,687

Segment data

Three Months Ended

July 2,

% of

July 3,

% of

(In millions)

2022

Revenues

2021

Revenues

Revenues

Life Sciences Solutions

$

3,292

30.0

%

$

3,557

38.4

%

Analytical Instruments

1,607

14.6

%

1,481

16.0

%

Specialty Diagnostics

1,101

10.0

%

1,235

13.3

%

Laboratory Products and Biopharma Services

5,537

50.5

%

3,583

38.6

%

Eliminations

(567

)

-5.1

%

(583

)

-6.3

%

Consolidated revenues

$

10,970

100.0

%

$

9,273

100.0

%

Operating income and operating margin

Life Sciences Solutions

$

1,327

40.3

%

$

1,718

48.3

%

Analytical Instruments

344

21.4

%

280

18.9

%

Specialty Diagnostics

243

22.1

%

245

19.9

%

Laboratory Products and Biopharma Services

691

12.5

%

446

12.4

%

Subtotal reportable segments

2,605

23.7

%

2,689

29.0

%

Cost of revenues adjustments (a)

(8

)

-0.1

%

0.0

%

Selling, general and administrative expenses adjustments (b)

28

0.3

%

42

0.4

%

Restructuring and other costs (c)

(24

)

-0.2

%

(119

)

-1.3

%

Amortization of acquisition-related intangible assets

(600

)

-5.5

%

(449

)

-4.8

%

GAAP operating income

$

2,001

18.2

%

$

2,163

23.3

%

(a) Adjusted results in 2022 exclude charges for the sale of inventories revalued at the date of acquisition.

(b) Adjusted results in 2022 and 2021 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 2022 and 2021 exclude restructuring and other costs consisting principally of severance, abandoned facility and other expenses of headcount reductions within several businesses and real estate consolidations. Adjusted results in 2021 also exclude $110 of charges for impairment of technology.

(d) Adjusted results in 2022 and 2021 exclude net gains/losses on investments. Adjusted results in 2021 also exclude amortization of bridge loan commitment fees related to a pending acquisition.

(e) Adjusted provision for income taxes in 2022 and 2021 excludes incremental tax impacts for the reconciling items between GAAP and adjusted net income, and incremental tax impacts as a result of tax rate/law changes. Adjusted results in 2022 also exclude incremental tax impacts from audit settlements.

Note:

Consolidated depreciation expense is $236 and $211 in 2022 and 2021, respectively.

Organic and Core organic revenue growth

Three months ended

July 2, 2022

Revenue growth

18 %

Acquisitions

19 %

Currency translation

-4 %

Organic revenue growth

3 %

COVID-19 testing revenue

-11 %

Contribution of PPD to Core organic revenue growth (a)

-1 %

Core organic revenue growth

13 %

(a) Adjustment to include the contribution of PPD to Core organic revenue growth as though the acquisition had occurred on January 1, 2021.

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 Statement of Income (unaudited)

Six months ended

July 2,

% of

July 3,

% of

(In millions except per share amounts)

2022

Revenues

2021

Revenues

Revenues

$

22,788

$

19,179

Costs and operating expenses:

Cost of revenues (a)

12,454

54.7

%

9,142

47.7

%

Selling, general and administrative expenses (b)

3,548

15.6

%

3,157

16.5

%

Amortization of acquisition-related intangible assets

1,209

5.3

%

872

4.5

%

Research and development expenses

729

3.2

%

663

3.5

%

Restructuring and other costs (c)

26

0.1

%

133

0.7

%

17,966

78.8

%

13,967

72.8

%

Operating income

4,822

21.2

%

5,212

27.2

%

Interest income

54

23

Interest expense

(284

)

(247

)

Other income/(expense) (d)

(135

)

(186

)

Income before income taxes

4,457

4,802

Provision for income taxes (e)

(499

)

(635

)

Equity in earnings/(losses) of unconsolidated entities

(70

)

(1

)

Net i...