Thermo Fisher Scientific Reports Third Quarter 2022 Results

WALTHAM, Mass.–(BUSINESS WIRE)–Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, today reported its financial results for the third quarter ended October 1, 2022.

Third Quarter 2022 Highlights

• Third quarter revenue was $10.68 billion.
• Third quarter GAAP diluted earnings per share (EPS) was $3.79.
• Third quarter adjusted EPS was $5.08.

• Delivered very strong financial results in the third quarter, with 14% Core organic revenue growth and $0.44 billion of COVID-19 testing revenue.

• Launched a range of high-impact innovative new products, including the Orbitrap Ascend Tribrid mass spectrometer, which offers new capabilities for quantification and characterization of proteins while delivering high throughput and ease of use for diagnostic and drug discovery applications, as well as the Thermo Scientific Arctis Cryo-Plasma Focused Ion Beam, an automated microscope that streamlines cryo-electron tomography research and provides insights into how proteins and other molecules operate within cells. We also advanced our diagnostic offerings with the CE-IVD certification of the Oncomine Dx Express Test and Oncomine Reporter Dx software, which are designed to run on our Ion Torrent Genexus Next-Generation Sequencing System to advance precision oncology testing.

• Continued to strengthen our unique customer value proposition with two new facilities to expand our capacity and capabilities: in Chelmsford, Massachusetts, we expanded our capacity for purification resins used in the production of biologics for a number of diseases; and in Plainville, Massachusetts, we expanded our viral vector manufacturing capacity to support cell and gene therapies.

• Advanced on our environmental, social and governance priorities, signing an agreement with Enel North America to source half of our U.S. electricity needs from renewable wind power, continuing to deliver on our emissions-reduction strategy.

“We delivered another quarter of excellent financial performance driven by our proven growth strategy and powered by our PPI Business System. Our strategic investments and innovative new product launches are further enhancing our unique customer value proposition and leading to continued share gain,” said Marc N. Casper, chairman, president and chief executive officer of Thermo Fisher Scientific. “We saw broad-based strength across our businesses, including our new clinical research business, which is performing very well. Customers are excited about our expanded capabilities, the integration continues to progress smoothly, and the long-term synergies remain very compelling.”

Casper added, “With a strong nine months behind us, we are on track to deliver another outstanding year.”

Third Quarter 2022

Revenue for the quarter grew 14% to $10.68 billion in 2022. Organic revenue was 1% lower; acquisitions increased revenue by 20% and currency translation decreased revenue by 5%. Core organic revenue growth was 14%. COVID-19 testing revenue was $0.44 billion.

GAAP Earnings Results

GAAP diluted EPS in the third quarter of 2022 was $3.79, versus $4.79 in the same quarter last year. GAAP operating income for the third quarter of 2022 was $1.71 billion, compared with $2.28 billion in the year-ago quarter. GAAP operating margin was 16.0%, compared with 24.4% in the third quarter of 2021.

Non-GAAP Earnings Results

Adjusted EPS in the third quarter of 2022 was $5.08, versus $5.77 in the third quarter of 2021. Adjusted operating income for the third quarter of 2022 was $2.37 billion, compared with $2.78 billion in the year-ago quarter. Adjusted operating margin was 22.2%, compared with 29.8% in the third 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 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, October 26, 2022, at 8:30 a.m. Eastern Time. To listen, dial (844) 200-6205 within the U.S. or (929) 526-1599 outside the U.S. The conference ID is 406803. 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, November 11, 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 reports 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
		October 1,				% of			October 2,				% of
(In millions except per share amounts)		2022				Revenues			2021				Revenues
Revenues		$	10,677						$	9,330
Costs and operating expenses:
Cost of revenues (a)			6,246			58.5	%			4,533			48.6	%
Selling, general and administrative expenses (b)			1,743			16.3	%			1,727			18.5	%
Amortization of acquisition-related intangible assets			594			5.6	%			423			4.6	%
Research and development expenses			351			3.3	%			351			3.8	%
Restructuring and other costs (c)			33			0.3	%			18			0.2	%
			8,967			84.0	%			7,052			75.6	%
Operating income			1,710			16.0	%			2,278			24.4	%
Interest income			68							9
Interest expense			(173	)						(128	)
Other income/(expense) (d)			(4	)						18
Income before income taxes			1,601							2,177
Provision for income taxes (e)			(31	)						(271	)
Equity in earnings/(losses) of unconsolidated entities			(72	)						(3	)
Net income			1,498							1,903
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interest			3							1
Net income attributable to Thermo Fisher Scientific Inc.		$	1,495			14.0	%		$	1,902			20.4	%
Earnings per share attributable to Thermo Fisher Scientific Inc.:
Basic		$	3.82						$	4.83
Diluted		$	3.79						$	4.79
Weighted average shares:
Basic			392							394
Diluted			395							397
Reconciliation of adjusted operating income and adjusted operating margin
GAAP operating income		$	1,710			16.0	%		$	2,278			24.4	%
Cost of revenues adjustments (a)			22			0.2	%			—			0.0	%
Selling, general and administrative expenses adjustments (b)			11			0.1	%			59			0.6	%
Restructuring and other costs (c)			33			0.3	%			18			0.2	%
Amortization of acquisition-related intangible assets			594			5.6	%			423			4.6	%
Adjusted operating income (non-GAAP measure)		$	2,370			22.2	%		$	2,778			29.8	%
Reconciliation of adjusted net income
GAAP net income attributable to Thermo Fisher Scientific Inc.		$	1,495						$	1,902
Cost of revenues adjustments (a)			22							—
Selling, general and administrative expenses adjustments (b)			11							59
Restructuring and other costs (c)			33							18
Amortization of acquisition-related intangible assets			594							423
Other income/expense adjustments (d)			14							(5	)
Provision for income taxes adjustments (e)			(238	)						(109	)
Equity in earnings/losses of unconsolidated entities			72							3
Adjusted net income (non-GAAP measure)		$	2,003						$	2,291
Reconciliation of adjusted earnings per share
GAAP diluted EPS attributable to Thermo Fisher Scientific Inc.		$	3.79						$	4.79
Cost of revenues adjustments (a)			0.06							0.00
Selling, general and administrative expenses adjustments (b)			0.03							0.15
Restructuring and other costs (c)			0.08							0.04
Amortization of acquisition-related intangible assets			1.50							1.06
Other income/expense adjustments (d)			0.04							(0.01	)
Provision for income taxes adjustments (e)			(0.60	)						(0.27	)
Equity in earnings/losses of unconsolidated entities			0.18							0.01
Adjusted EPS (non-GAAP measure)		$	5.08						$	5.77
Reconciliation of free cash flow
GAAP net cash provided by operating activities		$	1,937						$	2,650
Purchases of property, plant and equipment			(547	)						(524	)
Proceeds from sale of property, plant and equipment			4							4
Free cash flow (non-GAAP measure)		$	1,394						$	2,130

Segment data		Three Months Ended
		October 1,				% of			October 2,				% of
(In millions)		2022				Revenues			2021				Revenues
Revenues
Life Sciences Solutions		$	2,962			27.7	%		$	3,721			39.9	%
Analytical Instruments			1,621			15.2	%			1,476			15.8	%
Specialty Diagnostics			1,065			10.0	%			1,362			14.6	%
Laboratory Products and Biopharma Services			5,585			52.3	%			3,487			37.4	%
Eliminations			(556	)		-5.2	%			(716	)		-7.7	%
Consolidated revenues		$	10,677			100.0	%		$	9,330			100.0	%
Operating income and operating margin
Life Sciences Solutions		$	1,039			35.1	%		$	1,821			48.9	%
Analytical Instruments			386			23.8	%			264			17.8	%
Specialty Diagnostics			220			20.6	%			310			22.7	%
Laboratory Products and Biopharma Services			725			13.0	%			383			11.0	%
Subtotal reportable segments			2,370			22.2	%			2,778			29.8	%
Cost of revenues adjustments (a)			(22	)		-0.2	%			—			0.0	%
Selling, general and administrative expenses adjustments (b)			(11	)		-0.1	%			(59	)		-0.6	%
Restructuring and other costs (c)			(33	)		-0.3	%			(18	)		-0.2	%
Amortization of acquisition-related intangible assets			(594	)		-5.6	%			(423	)		-4.6	%
GAAP operating income		$	1,710			16.0	%		$	2,278			24.4	%

(a) Adjusted results in 2022 exclude charges for inventory write-downs associated with large-scale abandonment of product lines.

(b) Adjusted results in 2022 and 2021 exclude certain third-party expenses, principally transaction/integration costs related to recent acquisitions, charges/credits for changes in estimates of contingent acquisition consideration, and charges associated with product liability litigation.

(c) Adjusted results in 2022 and 2021 exclude restructuring and other costs consisting principally of severance, impairment of long-lived assets, abandoned facility, and other expenses of headcount reductions within several businesses and real estate consolidations. Adjusted results in 2021 also exclude $4 of credits for the settlement of environmental-related matters, offset in part by $3 of net charges for pre-acquisition related matters.

(d) Adjusted results in 2022 and 2021 exclude net gains/losses on investments. Adjusted results in 2022 also exclude $2 of settlement charges for pension plans. Adjusted results in 2021 also exclude $20 of 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, incremental tax impacts as a result of tax rate/law changes and the tax impacts from audit settlements (including a $658 benefit from an audit settlement in 2022). Adjusted results in 2022 also exclude a $423 charge for the impact of deferred tax realizability assessments as a result of audit settlements.

Note:

Consolidated depreciation expense is $244 and $205 in 2022 and 2021, respectively.

Organic and Core organic revenue growth		Three months ended
		October 1, 2022
Revenue growth		14	%
Acquisitions		20	%
Currency translation		-5	%
Organic revenue growth		-1	%
COVID-19 testing revenue		-14	%
Contribution of PPD to Core organic revenue growth (a)		1	%
Core organic revenue growth		14	%

(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)
		Nine months ended
		October 1,				% of			October 2,				% of
(In millions except per share amounts)		2022				Revenues			2021				Revenues
Revenues		$	33,465						$	28,509
Costs and operating expenses:
Cost of revenues (a)			18,700			55.9	%			13,675			48.0	%
Selling, general and administrative expenses (b)			5,291			15.8	%			4,884			17.1	%
Amortization of acquisition-related intangible assets			1,803			5.4	%			1,295			4.6	%
Research and development expenses			1,080			3.2	%			1,014			3.6	%
Restructuring and other costs (c)			59			0.2	%			151			0.5	%
			26,933			80.5	%			21,019			73.7	%
Operating income			6,532			19.5	%			7,490			26.3	%
Interest income			122							32
Interest expense			(457	)						(375	)
Other income/(expense) (d)			(139	)						(168	)
Income before income taxes			6,058							6,979
Provision for income taxes (e)			(530	)						(906	)
Equity in earnings/(losses) of unconsolidated entities			(142	)						(4	)
Net income			5,386							6,069
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interest			12							2
Net income attributable to Thermo Fisher Scientific Inc.		$	5,374			16.1	%		$	6,067			21.3	%
Earnings per share attributable to Thermo Fisher Scientific Inc.:
Basic		$	13.72						$	15.41
Diluted		$	13.62						$	15.29
Weighted average shares:
Basic			392							394
Diluted			395							397
Reconciliation of adjusted operating income and adjusted operating margin
GAAP operating income		$	6,532			19.5	%		$	7,490			26.3	%
Cost of revenues adjustments (a)			41			0.1	%			8			0.0	%
Selling, general and administrative expenses adjustments (b)			(10	)		0.0	%			33			0.1	%
Restructuring and other costs (c)			59			0.2	%			151			0.5	%
Amortization of acquisition-related intangible assets			1,803			5.4	%			1,295			4.6	%
Adjusted operating income (non-GAAP measure)		$	8,425			25.2	%		$	8,977			31.5	%
Reconciliation of adjusted net income
GAAP net income attributable to Thermo Fisher Scientific Inc.		$	5,374						$	6,067
Cost of revenues adjustments (a)			41							8
Selling, general and administrative expenses adjustments (b)			(10	)						33
Restructuring and other costs (c)			59							151
Amortization of acquisition-related intangible assets			1,803							1,295
Other income/expense adjustments (d)			163							200
Provision for income taxes adjustments (e)			(534	)						(381	)
Equity in earnings/losses of unconsolidated entities			142							4
Adjusted net income (non-GAAP measure)		$	7,038						$	7,377
Reconciliation of adjusted earnings per share
GAAP diluted EPS attributable to Thermo Fisher Scientific Inc.		$	13.62						$	15.29
Cost of revenues adjustments (a)			0.11							0.02
Selling, general and administrative expenses adjustments (b)			(0.02	)						0.08
Restructuring and other costs (c)			0.15							0.38
Amortization of acquisition-related intangible assets			4.56							3.26
Other income/expense adjustments (d)			0.41							0.50
Provision for income taxes adjustments (e)			(1.35	)						(0.96	)
Equity in earnings/losses of unconsolidated entities			0.36							0.01
Adjusted EPS (non-GAAP measure)		$	17.84						$	18.58
Reconciliation of free cash flow
GAAP net cash provided by operating activities		$	5,667						$	6,855
Purchases of property, plant and equipment			(1,693	)						(1,692	)
Proceeds from sale of property, plant and equipment			18							9
Free cash flow (non-GAAP measure)		$	3,992						$	5,172

Segment data		Nine months ended
		October 1,				% of			October 2,				% of
(In millions)		2022				Revenues			2021				Revenues
Revenues
Life Sciences Solutions		$	10,485			31.3	%		$	11,481			40.3	%
Analytical Instruments			4,746			14.2	%			4,344			15.2	%
Specialty Diagnostics			3,648			10.9	%			4,212			14.8	%
Laboratory Products and Biopharma Services			16,564			49.5	%			10,667			37.4	%
Eliminations			(1,978	)		-5.9	%			(2,195	)		-7.7	%
Consolidated revenues		$	33,465			100.0	%		$	28,509			100.0	%
Operating income and operating margin
Life Sciences Solutions		$	4,542			43.3	%		$	5,818			50.7	%
Analytical Instruments			1,031			21.7	%			816			18.8	%
Specialty Diagnostics			816			22.4	%			983			23.3	%
Laboratory Products and Biopharma Services			2,036			12.3	%			1,360			12.8	%
Subtotal reportable segments			8,425			25.2	%			8,977			31.5	%
Cost of revenues adjustments (a)			(41	)		-0.1	%			(8	)		0.0	%
Selling, general and administrative expenses adjustments (b)			10			0.0	%			(33	)		-0.1	%
Restructuring and other costs (c)			(59	)		-0.2	%			(151	)		-0.5	%
Amortization of acquisition-related intangible assets			(1,803	)		-5.4	%			(1,295	)		-4.6	%
GAAP operating income		$	6,532			19.5	%		$	7,490			26.3	%

(a) Adjusted results in 2022 and 2021 exclude charges for the sale of inventories revalued at the date of acquisition. Adjusted results in 2022 also exclude $22 of inventory write-downs associated with large-scale abandonment of product lines.

(b) Adjusted results in 2022 and 2021 exclude certain third-party expenses, principally transaction/integration costs related to recent acquisitions, charges/credits for changes in estimates of contingent acquisition consideration, and charges associated with product liability litigation.

(c) Adjusted results in 2022 and 2021 exclude restructuring and other costs consisting principally of severance, impairment of long-lived assets, 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 acquired technology; $13 of charges for compensation due to employees at recently acquired businesses at the date of acquisition; $3 of net charges for pre-acquisition related matters; offset in part by $4 of credits for the settlement of environmental-related matters.

(d) Adjusted results in 2022 and 2021 exclude net gains/losses on investments and losses on the early extinguishment of debt. Adjusted results in 2022 also exclude $2 of settlement charges for pension plans. Adjusted results in 2021 also exclude $26 of charges for 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, incremental tax impacts as a result of tax rate/law changes and the tax impacts from audit settlements (including a $658 benefit from an audit settlement in 2022). Adjusted results in 2022 also exclude a $423 charge for the impact of deferred tax realizability assessments as a result of audit settlements.

Notes:

Consolidated depreciation expense is $730 and $614 in 2022 and 2021, respectively.

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 Sheet (unaudited)
		October 1,				December 31,
(In millions)		2022				2021
Assets
Current assets:
Cash and cash equivalents		$	2,919			$	4,477
Accounts receivable, net			7,671				7,977
Inventories			5,722				5,051
Other current assets			2,987				2,608
Total current assets			19,299				20,113
Property, plant and equipment, net			8,628				8,333
Acquisition-related intangible assets, net			17,813				20,113
Other assets			4,308				4,640
Goodwill			40,488				41,924
Total assets		$	90,536			$	95,123
Liabilities, redeemable noncontrolling interest and equity
Current liabilities:
Short-term obligations and current maturities of long-term obligations		$	1,010			$	2,537
Other current liabilities			10,108				10,899
Total current liabilities			11,118				13,436
Other long-term liabilities			7,541				8,377
Long-term obligations			28,150				32,333
Redeemable noncontrolling interest			119				122
Total equity			43,608				40,855
Total liabilities, redeemable noncontrolling interest and equity		$	90,536			$	95,123

Condensed Consolidated Statement of Cash Flows (unaudited)
		Nine months ended
		October 1,				October 2,
(In millions)		2022				2021
Operating activities
Net income		$	5,386			$	6,069
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,533				1,909
Change in deferred income taxes			(862	)			(455	)
Other non-cash expenses, net			701				542
Changes in assets and liabilities, excluding the effects of acquisitions			(2,091	)			(1,210	)
Net cash provided by operating activities			5,667				6,855
Investing activities
Acquisitions, net of cash acquired			(39	)			(1,519	)
Purchases of property, plant and equipment			(1,693	)			(1,692	)
Proceeds from sale of property, plant and equipment			18				9
Other investing activities, net			80				(38	)
Net cash used in investing activities			(1,634	)			(3,240	)
Financing activities
Net proceeds from issuance of debt			—				3,122
Repayment of debt			(375	)			(2,803	)
Net proceeds from issuance of commercial paper			1,231				—
Repayment of commercial paper			(3,690	)			—
Purchases of company common stock			(2,000	)			(2,000	)
Dividends paid			(338	)			(292	)
Net proceeds from issuance of company common stock under employee stock plans			57				101
Other financing activities, net			(86	)			(14	)
Net cash used in financing activities			(5,201	)			(1,886	)
Exchange rate effect on cash			(389	)			(17	)
(Decrease) increase in cash, cash equivalents and restricted cash			(1,557	)			1,712
Cash, cash equivalents and restricted cash at beginning of period			4,491				10,336
Cash, cash equivalents and restricted cash at end of period		$	2,934			$	12,048
Free cash flow (non-GAAP measure)		$	3,992			$	5,172

Contacts

Media:

Sandy Pound

Phone: 781-622-1223

E-mail: [email protected]

Investors:

Rafael Tejada

Phone: 781-622-1356

E-mail: [email protected]

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