Ladies and gentlemen, welcome to the Agilent Technologies Q1 2023 Earnings Call. My name is Beau, and I will be coordinating your call today. If you would like to ask a question following the presentation, you may do so by pressing star one on your telephone keypad. I'll now hand you over to your host, Parmeet Ahuja, to begin the conference. Parmeet, please go ahead. Thank you, Beau. Welcome everyone to Agilent's conference call for the first quarter of fiscal year 2023. With me are Mike McMullen, Agilent President and CEO, and Bob McMahon, Agilent Senior Vice President and CFO. Joining in the Q&A after Mike and Bob's comments will be Jacob Thaysen, President of the Agilent Life Sciences and Applied Markets Group, Sam Raha, President of the Agilent Diagnostics and Genomics Group, and Padraig McDonnell, President of the Agilent CrossLab Group. This presentation is being webcast live. The news release for our first quarter financial results, investor presentation, and information to supplement today's discussion, along with a recording of this webcast, are available on our website at www.investor.agilent.com. Today's comments by Mike and Bob will refer to non-GAAP financial measures. You will find the most directly comparable GAAP financial metrics and reconciliations on our website. Unless otherwise noted, all references to increases or decreases in financial metrics are year-over-year, and references to revenue growth are on a core basis. Core revenue growth excludes the impact of currency and any acquisitions and divestitures completed within the past 12 months. Our guidance is based on forecasted currency exchange rates. During this call, we will also make forward-looking statements about the financial performance of the company. These statements are subject to risks and uncertainties and are only valid as of today. The company assumes no obligation to update them. Please look at the company's recent SEC filings for a more complete picture of our risks and other factors. Now I'd like to turn the call over to Mike. Thanks, Parmeet, thanks everyone for joining our call today. The Agilent team delivered an excellent start to 2023, exceeding both top and bottom-line expectations. Q1 revenues of $1.76 billion are up 10% core. Agilent's broad-based portfolio and resilient growth model are on a full display during the quarter, with growth across all end markets and geographic regions. Operating margins of core are 27.1%, up 80 basis points. Earnings per share of $1.37 are up 13%. Let's now take a closer look at our first quarter performance, starting with end market highlights. Chemicals and advanced materials led the way for us with another outstanding quarter, delivering 14% core growth with strength across all geographies. The strength in our pharma business continues and is up 11% with both large and small molecule growing nicely. This is on top of 17% growth last year. Our environmental friends and business grew 12%, while the academia and government and the food markets both grew 8%. On a geographic basis, China once again led the way. Our China team continued their record of strong execution, overcoming any disruption associated with COVID, and delivered 13% growth during the quarter, exceeding our expectations. In Europe, we also delivered stronger than expected results, growing 10%. The Americas posted solid results with 8% growth. Looking at our performance by business unit, the Life Science and Applied Markets Group delivered revenues of $1.03 billion, up 11% core. LSAG delivered growth across all end markets and regions. Our LC and LC-MS platforms continued their strong performance during the quarter, growing faster than the market at 16%. Demand in the chemicals and advanced materials end market continues to be strong, particularly for materials used in manufacturing semiconductors and batteries. Our spectroscopy business grew more than 20% in the quarter, and we continue to strengthen our position in spectroscopy across multiple end markets. In Q1, we announced the deployment of the Insight200M. This system is used at checkpoints throughout the London Heathrow Airport to officially provide enhanced security and ensure passenger safety. The Agilent CrossLab Group posted revenue of $381 million in Q1. This is up 13% core as the team continued to take advantage of record instruments placements over the past two years, along with continued growth in attach rates. The CrossLab team's deep knowledge of customer lab operations continues to drive consistently high levels of customer satisfaction. The breadth and diversity of our product offerings is driving record renewals for support contracts. At the same time, our enterprise services business continues its strong momentum, driving growth and converting competitive accounts. The Diagnostics and Genomics Group delivered revenues of $342 million, up 5% core. Our pathology-related business performed well with double-digit growth led by the Americas and Europe. NASD posted another strong quarter, growing 22%. Our Train B manufacturing expansion remains on track to come online mid-calendar year. In January, we announced an additional $725 million expansion of our NASD facility that will double our oligonucleotide manufacturing capacity. Two weeks ago, we are pleased to have the Governor of Colorado join us at our groundbreaking ceremony at the Frederick site. In addition to organic investments, we continue to invest externally in new technologies and partnerships. In the quarter, we welcomed the Avida Biomed team into Agilent, further enhancing our genomics capabilities. Avida is an early-stage life sciences company designed to assist clinical researchers using NGS approaches to study cancer. We also continue to partner with new technology platform companies to drive our solutions in the marketplace. This quarter, we announced a partnership with Akoya Biosciences to combine our companion diagnostic and IHC workflow expertise with their solution to drive multiplex tissue assay development for biopharma. In addition to these business group highlights, Agilent was again recognized among the top 100 most just companies in the U.S. by JUST Capital and CNBC. As part of this announcement, we are very proud to be the leader in the medical equipment and services industry for our treatment of employees and focus on customer relations. The Agilent team navigated challenging market uncertainties in Q1 and yet once again produced excellent results. It was a great start to the year. Q1 was another outstanding example of the work we've done to build a resilient company with multiple growth drivers. Those growth drivers, created through targeted investments that aim to expand and enhance our business high growth areas, are the heart of our build and buy growth strategy. As we look ahead to Q2, we remain confident in the strength and resilience of our business. We have an unstoppable One Agilent team that continues to execute at an extremely high level and is well prepared to deal with any challenges they face. Given the strong start to the year, we are raising our full year core revenue and EPS guidance, while also keeping a close eye on macroeconomic conditions. I'll provide the details and overall outlook, overall, we remain convinced our strategic focus and unmatched execution capabilities will continue to drive strong results. Thank you for joining us today. Now, Bob, over to you. Thanks, Mike, good afternoon, everyone. In my remarks today, I'll provide some additional details on revenue in the quarter, as well as take you through the income statement and other key financial metrics. I'll finish up with our updated full year guidance and initial guidance for the second quarter. Unless otherwise noted, my remarks will focus on non-GAAP results. We are extremely pleased with our Q1 performance. It was a very solid start to the year. Q1 revenue was $1.76 billion, exceeding our expectations. Revenues were up 10% core and 5% on a reported basis. Currency was a five-point headwind, which was an improvement from the beginning of the quarter, while the M&A contribution was as we expected. Pricing for the quarter was higher than the full year forecast, also as we expected. Now I'd like to share some additional detail on our end markets. Results in our largest market, pharma, were again very strong. Pharma grew 11% following 17% growth of last year. Performance was solid across both small and large molecule. Small molecule grew 12%, while large molecule grew 9%. As Mike mentioned, chemicals and advanced materials also continue to be very strong, growing 14% during the quarter on top of 15% growth last year. The chemical and energy subsegments of the market are doing well, while the advanced materials market continues to deliver outsized growth. Semiconductors and batteries are driving demand, helped by government investment in this area. The food market grew 8% during the quarter, driven by double-digit growth in China. The environmental and forensics business grew 12%, led by the Americas, as increased testing for PFAS chemicals drives customer investment in this area and recently approved U.S. legislation leads to broad spending in the environmental market. Our business in the diagnostics and clinical market grew 4% versus 11% growth last year. Pathology led the way for us here, partially offset by industry-wide challenges in the genomics market. The academia and government market was up 8%, led by LCs and services. Regionally, Europe and Asia showed strong results. On a geographic basis, the China team delivered 13% growth, and Europe grew 10%, both exceeding expectations. The Americas had another solid quarter coming in at 8%, in line with our expectations. Now let's turn to the rest of the P&L. First quarter gross margin was 56.5%, up 40 basis points from a year ago. The gross margin performance, coupled with good cost discipline in SG&A, helped drive our operating margin to 27.1%, up 80 basis points from last year. Below the line, our tax rate was 13.75% for the quarter, and we had $297 million diluted shares outstanding, both as expected. Putting it all together, earnings per share were $1.37, up 13% from a year ago. In summary, Q1 ended with 10% core top-line growth and 13% earnings per share growth. A very good start to the year. Some metrics on cash flow and our balance sheet. In Q1, we generated $296 million in operating cash flow, up 16% versus last year, while investing $76 million in CapEx. CapEx spending continues to be driven by our scale-up of our Train B manufacturing line and other capacity expansion projects. In the quarter, we returned $142 million to shareholders through $67 million in dividends and by repurchasing shares worth $75 million. We also announced we're increasing our dividend by 7% along with a new $2 billion share repurchase authorization, continuing our successful balanced approach to capital deployment. Our balance sheet continues to remain healthy as we ended the quarter with a net leverage ratio of 0.8. Let's move to our revised outlook for the year and the upcoming quarter. The macroeconomic environment remains dynamic and interest rates and currencies continue to be volatile. However, given the good start to the year, we are increasing our full year revenue to a range of $7.03 billion-$7.10 billion. This increase updates our full year core revenue guidance to a range of 5.5%-6.5%, increasing the midpoint of our guidance to 6%. We've also seen the dollar weaken against major currencies in the first quarter, although it has rebounded somewhat in February. As a result, the full year guide reflects $100 million of favorable currency movements since our initial guide in November. For the full year, we still expect currency to be an almost 300 basis point headwind to reported growth. We're also raising our full year EPS guidance to a new range of $5.65-$5.70 per share. Lastly, given the recently announced NASD expansion to double our oligo manufacturing capacity, we are updating our forecasted capital spending for the year to $500 million, up $200 million from our guidance at the beginning of the year. Now turning to Q2, we expect revenue in the range of $1.655 billion-$1.680 billion. This represents core growth of 6% to 7.5% and reported growth of 3% to 4.5%. Currency is expected to be a headwind of 3.1 points, while M&A will contribute 0.1 points of growth in Q2, which is consistent with Q1. Second quarter non-GAAP earnings per share are expected to be between $1.24 and $1.27, representing growth of 10%-12% versus the prior year. I'm pleased with how the team has delivered in the first quarter. We are focused on the things we can control. Our team is driving strong execution in the marketplace, coupled with our broad portfolio of products and services, we expect to continue to grow faster than the market as we go through the year. Thanks for being on the call. Now I'll turn over things back to Parmeet as we take your questions. Parmeet? Thanks, Bob. Beau, if you could please provide instructions for the Q&A now. Certainly, Mr. Ahuja. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two to withdraw your question. When preparing to ask your question, please ensure your phone is unmuted locally. Let's take our first question this afternoon from Matthew Sykes of Goldman Sachs. Hi, good afternoon, Mike and Bob. Thanks for taking my questions. You're quite welcome, Matt. Maybe we'll start on ACG, just given the quarter that it had and the comp it was facing last year. You've talked in the past about areas of under-penetration. I think China was a region you called out. Could you just maybe kind of give us a mark to market on where you feel from sort of an end market and regional standpoint there's still a lot of room for that growth in ACG if we see it continue throughout this year and into next? Yeah. Thanks, Matthew. First of all, appreciate the recognition of the numbers we posted. We think there's still a lot more opportunity in front of us. I'm going to actually have Padraig provide a little bit more color on where those opportunities may lie. Look, I think the broad product offering across the hardware platforms where we add a lot of value to customer operations has been broad-based. We certainly see a lot of our offerings, particularly around asset utilization and so on, being able to be used outside pharma in different industries, and we see that as an opportunity to grow. I think also, you know, given our big install base and our ability to attach in different markets and sectors is going to continue as we go through the year. Yeah. I think we see a lot of opportunity obviously in China. That's one we flagged in the past. The other one that we're pointing to is, you know, a lot of the growth has historically been centered in the pharma space. We're seeing growing interest in the CAM space as well. I think from an end market perspective, you know, that's an area we would expect to see some more growth. And geographically, the China story still hasn't fully played out yet. Again, I would just remind you, Matt, some of the points we made in the call, record renewals for support contracts and also clearly taking share on the enterprise level. Those attach rates we keep talking about are going up as well. A lot to like here. Great. Thanks. Maybe just kind of refresh us on your outlook for instruments. I mean, you've kind of guided to a mid-single-digit growth for the full year. Given that we're a little ways into this year, you probably have a little more visibility on that backlog. How are you thinking about sort of the back half for instruments overall? First of all, let me, I tagged you a bit on this with Bob, but let's talk about the backlog first of all. I think it's very important to just remind the audience that the quality of our backlog remains extremely high. And you can see the great work of our team really to work down that backlog, but we're not seeing any cancellations or anything pulling out of backlog. That gives us a level of confidence around the revenues we can forecast. I think there really isn't anything new to talk about today new news relative to the second half. We still remain, you know, We still want to acknowledge the uncertainty about the back half of the year. Really no new news here. Very consistent what we talked about in November. I think you're going to hear a lot of us talking about normalization of growth rates, normalization of deal cycle times. The funnels remain healthy. The deal cycle times are, I think, we're veering more towards historical levels. Bob, I don't know if you got anything to that. I think you're right. I mean, I think, you know, obviously we had a very strong start to the year with double-digit growth from LSAG. We will go up against very tough comps in the back half of the year with, you know, the recovery of the business. As Mike said, you know, pleased with the very good start, but not anything material changed. Got it. Thanks, and congrats on the quarter. Thank you very much. Thank you. We'll go next now to Brandon Couillard of Jefferies. Hey, thanks. Good afternoon. Thanks for taking my question. Sure. Um- Sure, Brandon. Mike, I think you said China was up 13% in the quarter. That's a lot better than we've heard from some of your other counterparts. Could you unpack that a little bit for us? Could it perhaps have been due to the fact that you're one month later? maybe talk about linearity in China through the quarter and if your outlook for the full year, which I think was high single digits. Yeah has changed at all. Well, I'm glad you noticed, Brandon. If you were in the conference room here, you'd see there's a lot of smiling in the room here because really proud of what the team has done here. I don't think it's all a timing issue. It's about execution and its ability of this team to execute because our teams were hit with waves of COVID during the quarter. We know how to execute. We've also enabled our ability to interact with customers digitally. While people maybe couldn't go to the office or couldn't go to customer sites, they were able to support the customers. We were just delighted with the performance out of China in Q3. Bob, I think it was a broad-based story. You know, we had growth and double digit growth in pharma, CAM, food. It was really pleased with the results. I know our narrative is different than others are saying, but I also think my team in China, our capability is also different. Got it. On the NASD Train C, I guess, expansion, can you just talk about timeline for that build-out? You know, as I remember back to Train B, I think a good amount of that was already kind of earmarked for customer demand. Is it the same case, you know, this time around with the current expansion? Yeah. I'm going to tag team a bit with this, with Sam and myself and Bob. We lovingly refer to Train B. That's the latest expansion that's coming online this year. In fact, we had a chance to see that firsthand when we went to the groundbreaking ceremony for what we call Project Endeavor, or as you're referring to, Train C and D. It looks really good. We're on track for that mid-calendar year go live, and we have a full book of business for that. It's a matter of ramping, getting the project up. I'm going to pass it over to Sam, and maybe you want to remind, you know, Brandon, what of our plans are with the new expansion, when we expect to see some of that first revenue coming into Agilent. Yeah. Yeah, happy to do so. As you mentioned, Mike, first of all, we're tracking right on plan for Train B, right, mid point, mid-year, you know, coming on. It was great to see firsthand, Bob joined me, really, the progress that we're making. The facility's looking really, really nice. A lot of validation work happening, miles and miles of stainless steel piping, and other infrastructure that's been put in place. As you also noted, we did on the end of February, the middle of February, pardon me, the groundbreaking for Train C and D. These projects will take some time, but we've, you know, started the process and, you know, the first revenue from that would be, you know, coming online in 2025. Remember there's two trains, Train C and Train D, both, you know, dedicated to siRNA, antisense capabilities, as well as for expanding our ability to serve customers with single guide RNA or CRISPR. Excited about the progress and the NASD team under Brian Carothers' leadership is firing on all cylinders. Hey, hey, Sam, unless you're going to commit to me for an earlier go live, I think you meant to say 2026, right? Yeah. Did I say 2025? Thank you, Mike, for catching. Usually you're the one that accelerates me instead of the other way. Indeed, it's 2026. Thanks for catching that. Yeah. Yeah. Hey, Brandon, to your point around, you know, the question of purchase orders and so forth, we have good visibility into the pipeline and the funnel. Yeah. Mm-hmm. We haven't started taking orders given the timeframe there. Yeah. Yeah. Exactly right. We have high confidence or we wouldn't be putting in $725 million into the expansion. Very helpful. Thank you. Thank you. We'll go next now to Vijay Kumar of Evercore ISI. Hey, guys, congrats and a good print here, Mike. Thank you, Vijay. My first question here on the second quarter guidance, 6%-7.5% organic, that's a sequential step down of 250 basis points at the high end. Yeah, I guess the comps get easier. Is there anything in the second quarter? Was there any timing of revenues that got pulled forward to Q1 or any China impact? Anything that can explain here at the sequential guide for 2Q? Yeah. No, I'll pass this over to Bob for some additional detail, but I think the answer is no, nothing unusual about movements between the, you know, the quarters. Bob, I think what we're going to do is we want to set up another guide in Q2 that was above our full year guide. That was the thought process there. That's exactly right. I mean, I think as we look at this, we just came off a 10%, you know, still 6%-7.5% is still significantly above where we're forecasting the full year. I think we feel good, and I think it's consistent with how we How we have guided in the past. I haven't used the word prudent yet today, Bob. I was waiting for that, Mike. Safe to say the second quarter is a prudent guide. Is that a fair comment? That is correct. Yeah. Fantastic. I did have one on this NASD, Mike. Sure. Recently, there was a Novartis, I think they're pulling their API manufacturing in-house, and I know you're starting Train C. Maybe provide some context on how big is Novartis as a customer, what's the pipeline looking in NASD, and is this a risk? Yeah. I'll tag team on this. I'll lead, Sam, if you want to add some additional color. First of all, the announcement from Novartis is no new news. That has always been part of the plan, we actually have contractual agreements relative to how much of the on-market demand we get. That's all well known. Relative to the, Novartis is one of many customers we have in this business, we really have worked hard to build a diversified book of business. We talk a lot about Novartis, great customer. Talk a lot about Alnylam because we're allowed to talk about those programs, we have a much broader base outbook of business. I think that gives us a lot of confidence as we move forward because we have a number of programs that we're supporting. We know not everyone's going to hit, but we know that there's going to be a lot of success rates there as well. Bob- Yeah. Let me just add something. I mean, I would, you know, say, this means nothing to our expansion. I mean. Oh, yeah. I went that far. Sorry. I want to be very clear about that. I mean, I think we feel very good about, we've continued to be capacity constrained. You know, we've had more orders than we can satisfy, and I think that continues to be the case. We feel extremely good about the overall technology and our position in the marketplace. Thanks, Bob. Appreciate that. Bob. Hey, Mike, if I can just add just a couple of quick things, right? We've stated this before. We think the therapeutic oligo market for the suppliers that we are $1 billion today, growing to $2.4 billion, you know, by 2027. What's really encouraging about the market is the number of molecules that are advancing, right? Just to give you a little bit more color, we're doing work with over 30 pharma partners today and on dozens of programs at various stages. You know, the pipeline of programs are working on, some of which have the potential of being, you know, molecules that will serve broad populations is absolutely there and something that we're excited about. Great. Thanks. That's helpful, guys. Thank you. You're welcome, Vijay. Thank you. We'll go next now to Puneet Souda of SVB Securities. Yeah, hi, Mike, Bob. Thanks for taking the questions. First one, Bob, I don't know if I heard it on the call, contribution sort of from pricing in the quarter and for the full year. If I'm correct, you are still expecting 3% pricing contribution this year, and that would imply a 3% volume contribution, which, you know, it appears below historical levels for what Agilent has grown. Just maybe just, you know, we're trying to understand, given the tailwinds you're seeing in China, any of the other areas and obviously, you know, congrats on the strong growth in the quarter. You know, is there anything you're seeing beyond sort of tougher compares that are emerging in the sort of the second half? It's a great question. I did make a quick reference in the prepared remarks. Actually, Q1 was higher than the overall 3%, as expected. We are still planning and forecasting that 3% price contribution for the full year of FY23. You're right, that would, you know, speak to roughly a three-point volume. What I would say is, you know, we're taking it one quarter at a time. You know, as we've said, we're dealing with looking forward, there's still some uncertainties around macro, that's where I think where our forecast and our guidance is prudent to use that word again. I wouldn't say anything has materially changed since the beginning of the year from that standpoint. I've been very pleased with our ability to continue to maintain that pricing throughout the course of the last several quarters, and I would expect that to continue going forward. Okay. That's helpful. Then on the Lunar New Year, is that part of, is that baked in into the guide as well? Just wanted to clarify on China. I mean, obviously you have heard about the stimulus. You're actually Agilent is listed, one of the companies listed within the document that was put out for the loan stimulus for China. This is sizable. How are you thinking about it? You obviously have the longest and one of the most, you know, legacy positions in China. Just trying to understand what does that mean for China growth in 2023 and 2024. Thank you. You want to take the first part? Yeah, yeah. I'll take the similar question. Sure. I, yeah. The impact of Lunar New Year was not only in Q1, but it's also been reflected in our Q2. You know, it was roughly a half a point headwind in Q1, and that should come back to us in Q2. It was kind of as planned. In regards to the stimulus, the way we're looking at this is, stimulus got kicked off in the calendar Q4. You know, there is a section in there that's focused on equipment for universities and hospitals, but from our perspective, it's still early. We're kind of waiting right now to see how it plays out. Bob, I think at this point, we really haven't put anything assumed in our guide or China growth relative to the stimulus. If it does get deployed and comes to our way, then that'll be an upside to. That's right. our current forecast. I think, you know, the Puneet, you said it well. I mean, our business in China continues to be very, very strong. Couldn't be prouder of the team, how they delivered in Q1. You know, and that's continuing, you know, strong momentum throughout the second half of last year. We would expect that to continue here in Q2 as well. Got it. Congrats guys. Yep, thank you. Thanks. Thank you. We'll go next now to Rachel Vatnsdal at J.P. Morgan. Hey, thanks for taking the questions and congrats on the quarter. First up on semiconductors, one of your peers had flagged that they were expecting the semiconductor market to be soft throughout 2023, just as semiconductors or semi customers were facing a reset just given that macro environment. You mentioned strength in semis during your prepared. Can you just walk us through, first off, which part of the market do you guys really play in in semis? And then are you seeing any of the softness that one of your peers have flagged? Yeah. Yeah. One, I'll start and then we'll turn it over to Jacob to give in some additional color about where we play and so forth. I would say the short answer is no. I mean, as, you know, our spectroscopy business grew over 20% in the quarter and, you know, we're still like seeing, you know, strong demand. Jacob, do you want to provide a little more color? Yeah, absolutely. We have, I would say we have the strongest portfolio in atomic spectroscopy for this market in semi, but generally speaking, in material science. We continue to see demand from the semicon industry, both in the fabs, but also in the upstreams for all the fine chemicals that goes into the fabs. They require the same level of QC testing like they do in the labs, and hence they are using the same instruments. We see a lot of benefits both when there's new fabs built, but also for the continuous operation in the fab labs. We expect this to continue for a while. We of course, see a lot of news around investments into this in other parts of the world, also, particularly in the U.S. Obviously, that will take some time before it comes into real play. We expect the whole semicon market to continue to be an upside for us. As I mentioned also, we also see a lot of interest in the rest of the materials market, particularly in lithium batteries, where we see a lot of demands, not only for our spectroscopy business, but really across our broad portfolio where lithium battery needs both the LCs, the GCs, the spectroscopies, and the LC-MS. We are very excited about that space and see a lot of continued growth there. Jacob, I think the point you made earlier too about some of the funding environment. We're seeing some government funding coming in from different parts of the world as part of that. Yes industry, which has benefited us. Great. Maybe just shifting over more towards pharma biotech. Small molecule grew faster than large molecule this quarter. You've talked in the past about some of that outpaced strength in small molecule being driven from catch-up spending related to instrument purchases that were delayed back in 2018-2019 timeframe. Can you walk us through really what inning are we in in terms of that catch-up spend, and how long can you sustain this outpaced growth in small molecule before it kind of resets back to that normalized level? Just update on large molecule as well. Thanks. Sure, Rachel. Do I dare pass this question to the Danish member of the staff that the baseball analogy? You know, I think Jacob, you had a great print on LC and LC-MS, 17% growth, clearly outpacing the market. I think we saw some really good strength in small molecule, in particular this quarter. Yeah, absolutely. I would start by saying I don't think this is a baseball game. I think there is a continuous opportunity in this market space. We see both opportunities, and we continue to believe that there is a big market in small molecules. I think the current performance is a reflection of the investment we made into our portfolio over the past years, both for the LC and the LC-MS. It's really, really focused very much on where we have gone strategically on a lot of investment into making robust, reliable and routine instruments and instrument solutions. We continue to spend significant time to truly understand our customers' pain point. That is not only about the overall performance, but also about how you can ease of use, a lot of smarts we put into the instruments and of course, also continues on focus on uptime of the instruments. Our commercial organization is brilliant in going out and connect both our consumables and also the service contracts to it. This just continues to be a great business for Agilent. Yeah, Rachel, maybe. This is Bob. Maybe I can add a few points, because, you know, we talked at the beginning of the year about, you know, this strong performance kind of normalizing this year. We also said, if it continues, we're going to take it. I think what you're seeing is some of that as well. We still do think that this will normalize. Yeah over time. You know, the portfolio that Jacob and team have, I think speaks very well to us growing faster than the market. You know, I think you talked about the biopharma. The beauty of our business is we've got that nice diversification across both small and large molecule, and certainly, starting off the year very nicely. Great. Thank you, guys. You're welcome. We'll go next now to Derik De Bruin of Bank of America. Hi, good afternoon. This is Peter on for Derik. Thanks for taking our question. Could you just dive a bit more into the latest on what you're seeing in Europe? You expressed embedding some caution, particularly in chem on the last call. If you can touch on that as well, that would be great. I hope it came through in the call remarks, and I'll make a few comments here then invite Padraig in here as well. We were delighted with the print in Europe in the first quarter. Exceeded our expectations. Actually, the strength across the marketplace was pretty good. I think five of our six end markets were growing at a high single digits or better. I think the standouts for us were actually the CAM markets along with diagnostics. I have to say we continue to watch closely the investment plans particularly for our large accounts in the chemical space as well as the pharma space. We're off to a really good start. That remains a watch area for us. We again, we're delighted with the broad-based growth we had. I don't know if you'd. I think you said it all, Mike. I think it's broad-based, five out of the six markets, you know, growing high single digits. I think what the team has been able to do is been able to really work together to take share in a lot of areas and on all the markets. Our focus, of course, on attach rates in both service and consumables has really benefited it as well. Yep. I think, we usually don't talk about weather. I think the more favorable weather environment in Europe actually has put less pressure on customers relative to energy costs and energy demand. That's been a net positive, we're still keeping an eye on things. Yep. Okay. Could you just discuss your margin outlook and then pacing across 2023? You know, further ahead, kind of what's the level of expansion potential going forward? How much gas is left in the tank there looking out in the out years? Thank you. You want to take that, Mike? Yeah, yeah. I'll say there's still gas in the tank. There is still gas in the tank. Yeah. I mean, I think obviously, despite the, you know, inflationary environment that we're in, we're still able to manage growing our margins. You saw both a nice balance here this quarter with about half of it coming through gross margin as well as half of it coming through OpEx. I think as we think about it going forward, I think that 50 to 100 basis points over the course of the next several years is still a reasonable way to think about it. That's how we're thinking about the rest of this year as well. Very good. Thank you. You're welcome. We'll go next now to Dan Brennan of Cowen. Great. Thanks, thanks for taking the question, guys. Congrats on the quarter. Thanks, Dan. Hey, hey, Mike. Maybe the first one, I know there were a few questions asked on the chemical and advanced material segment, but obviously great growth in the quarter. Just wondering, with your new hire guide for the year, are you assuming something above the mid-single-digit outlook that you previously guided to for the year? Would love if you can give us any color on kind of how the growth broke out this quarter between advanced material and then chemical and energy. Yeah. That's a great question, Dan. I'll take that. You know, with our revised guide, we have ticked it up a bit, given the strong performance that we had in Q1, we continue to be surprised to the upside. When we talked about at the beginning of the year what was a source of upside, this would've been one of the markets that we would've talked about. What we're seeing is actually good growth across all of the submarkets in our CAM market. If I think about the chemical and energy markets, those were up high single digits. The growth was really outsized in that advanced materials that we've been talking about. That semiconductor and batteries area grew in excess, you know, in the high 20s. This is a continued strength, you know, really given not only the investment there, but really the power and strength of our portfolio to be able to supply, you know, critical tools and instrumentation to markets that are really continuing to expand. You know, we're expecting that. Don't book, you know, high single digits in the high 20s for the rest of the quarters. We'll take it, but, you know, we're expecting, you know, a slight uptick there, given the strong performance that we had in Q1. Great. Thanks, Bob. maybe just one on the balance sheet. Obviously. Sure it's in great shape. Leverage is, you know, very low. Just wondering what you're seeing from the M&A environment. You know, obviously, you know, Waters had a deal in the quarter. I'm wondering what you're seeing in terms of, you know, have you identified any interesting opportunities? Like, what's the appetite like for sellers to kind of move forward? Just wondering what we could expect from Agilent. While it's always hard to time, I'm just kind of wondering about your appetite and potential to do something bigger since I know you guys been looking for the right fit. Thanks. No, I think your closing comment. Happy to comment on that, Dan. Your closing comment is exactly where our head's at, which is the right fit. We think the environment is much more favorable than it was a year ago. We think it's now much more of a buyer's market, so to speak. Most people are willing to come off their view of the last round. You know, there's still some dialogue around the area, you know. We have obviously nothing to announce, but we remain, you know, very interested in looking for opportunities that can augment our core organic business, and this is at the heart of our build and buy growth strategy. As I've said a number of times, you know, the buy side is all optionality for us. We'll do just fine with all the bets we have right now. If we, you know, if we see the right thing, we will move on it. We just have also just wanted to make sure we stuck with our framework, we don't ever want to have buyer's remorse. We've been very happy with all the deals we've done to date, and we'll continue to use that framework, moving forward. I think that fit piece that you described is really the key criteria for us. Great. Thank you. Mm-hmm. Our next question comes from Patrick Donnelly of Citi. Hey guys, thanks for taking the questions. Sure. Maybe one on just the order side. I know you guys talked a little bit about the backlog remaining pretty healthy. Can you just give a little bit of color in terms of what the order growth looked like in the quarter? I know last quarter you guys started eating into the backlog a little bit, which is natural, you know, just given the supply chains normalizing a little bit. Can you just talk about, I guess, order growth versus revenue growth, what you saw in the quarter, and any color there would be helpful? Yeah, let me make some summary comments, you know, Bob, feel free to jump in here. As you mentioned, you know, we don't specifically provide, you know, book to bill ratios, what I can tell you is that orders for the quarter were greater than revenue. We continue to grow orders with particular strength in our ACD and services business. On the instrument side, you know, we continue to bring down this record backlog we had, as we really are focused on meeting those customer shipping requirements, and really thanks to the great work of our order fulfillment team, we've really been able to, you know, get back to a normal flow of shipment times and delivery commitments. Again, I would just say that the funnels remain healthy. The backlog is still a very high quality. I think we had well, pretty much next to no cancellations. Yeah. The quality is good. Gives Bob and I a level of predictability around revenue from that backlog. I would say, you know, as Mike said, I mean, the backlog continues to be healthy. We haven't seen anyone back out of, you know, any cancellations or anything like that that would be beyond kind of the normal activities. I would emphasize the one point I made earlier, the deal cycles are reverting towards, you know, the historic norms in this space. Okay. This whole construct that we see of a normalization of particularly the analytic instrumentation marketplace evolving. Yep, no, that's helpful. I appreciate that. Maybe just on kind of the environmental spend, PFAS testing. I know you called out the last couple of quarters. You know, Mike, I know you're excited to see some actual infrastructure dollars kind of coming through in the U.S. here. Can you just talk about, you know, what you're seeing there, kind of the, where we are? I mean, it seems really early, but just your perspective on kind of how that's tracking, you know, what impact you guys are seeing from that and obviously the durability as well. Sure. Happy to talk about that, and actually happy to have Jacob talk about it, because I think you've just spent some time in front of the board recently and talking about the PFAS opportunity, not only educating the board on what it's all about, but the durability of growth we see here. Yeah, absolutely. And we continue to see a lot of opportunities in the PFAS where the beginning was really all about looking for PFAS in the water supply and now it's moving into food and other types of areas. I think you are right. We are still in the early phases of the growth opportunity. As you know, the U.S. Infrastructure Bill, there was a $4 billion set aside to PFAS testing, and so we have one of the leading solutions here. I mean, PFAS is very difficult to measure, so you need high-end instrumentation, but also very specified the sample prep and consumables to really make sure that you don't contaminate while you measure. We have spent a lot of energy of putting a high quality solutions out there, and we continue to see a lot of opportunities, and we will continue to invest in this space beyond PFAS. I think environmental is a really a place that there will be a lot of investment going in over the next decade. We excited about that area also, besides the advanced materials. Great. Thank you, guys. You're quite welcome. We'll go next now to Jack Meehan at Nephron Research. Thank you. Good afternoon, everyone. Wanted to spend a little time on DGG. Maybe start with the pathology business. Double-digit growth, was stronger than I guess what we've seen the last few quarters. Was there anything you noticed in terms of the uptick in the quarter? Yeah, Jack, I'm going to actually pass that over to Sam, because Sam actually is calling in from Denmark. He's actually with the pathology team right now, so you can get it right latest and greatest on the ground from Glostrup. Go ahead, Sam. Yeah. Thanks, Mike. Jack, thanks for the question. I, you know, offer you a couple of things that we've observed in the quarter and I think are also promising going forward. You know, first of all, you know, we continue to see the trend of, you know, hospitals and healthcare systems being able to work through COVID and, you know, start to reprioritize cancer diagnostics. You know, overall, I think that's been something that's positive. You know, we've continued to see strength in our IHC solutions, be it our companion diagnostic solutions that are in the market, but more broadly speaking, including for the antibodies that we have, that we sell as, you know, ready-to-use reagents. We're also continuing to see good traction for our advanced staining system, the Dako Omnis. you know, all of that, you look at, geographically, you know, we've had some, you know, good success, particularly in Europe, but the Americas as well. Great. Sticking with DGG, either for you, Sam, or for Mike, just on the genomic side, I was backing into sort of like a high teens, decline in the quarter, if that sounds right. I'm just curious, different companies have called out different issues in this end market. If you could talk about just maybe what exactly you're seeing, that would be great. Hey, Bob, I don't remember the exact number, but it was down, but not to that extent. Yeah. It was down close to double digits. Yeah. Okay. Not high teens. Okay. I'm going to have Sam talk about this, but we're seeing some what we think is a transitory disruption in the diagnostic side of genomics. There's a lot going on with a lot of the diagnostics firms where we provide our solutions into their assays. Sam, your perspective on this, I think, would be really good. Yeah, happy to provide that. Building on what you said, Mike, right, you know, there's a lot of public information now that, you know, I'm sure, Jack, that you're aware of, be it restructuring or, you know, other sort of, operational challenges that a number of customers, you know, from research into, you know, technology-driven genomics companies and, diagnostic testing companies are going through. You know, based on that, you know, we've definitely seen conservatism from customers that they've pulled back on purchasing levels. You know, they're working down, you know, excess safety stock that they perhaps have built up and, you know, we've just seen a little bit of hesitation in purchase patterns. That being said, you know, just recently, earlier in February, I had the chance to attend AGBT, which is one of the, you know, most important technology and science conferences and, you know, there we definitely saw, you know, good interest for our, you know, early access that we've been doing for our SureSelect Cancer CGP, which is a comprehensive cancer panel and, you know, 679 genes. We continue to see really good interest in our Magnis, you know, automation system, which is the walkaway for our SureSelect platform, and, you know, and our broad-based market leadership and, you know, genomics and NGS QC remains intact. I think this is a, you know, some market headwinds that we're seeing, but, you know, it's just I think a transitory thing, as Mike mentioned. Thank you. All right. Thank you. We take our next question now from Joshua Waldman of Cleveland Research. Hey, guys. Thanks for taking my questions. Sure, Josh. Two for you. Yeah, thanks. Two for you, if I may. First, on the core growth guide, wondered if you could provide a bit more color on the considerations that went into reiterating the top end of the core growth outlook for the year. I guess maybe a bit surprised we didn't see more of the Q1 upside flow through the full year. You know, I'm wondering if maybe this is backlog work down benefit here in the quarter that starts to abate as we get into the second half or some. I guess something else. Yeah. Well, I'll let you handle, but I think the headline was more just the recognition of the continuing uncertainty about the back half. Yeah, I think the way to think about that, Josh, is that, you know, we raised the midpoint of the guidance, you know, delivered 10% in Q1. We're saying that Q2 is going to be higher than the full year, we're going to take this one quarter at a time, given some of the uncertainty that we're seeing. Obviously, we did talk about having great visibility into Q1 with some of the backlog activities and so forth, I wouldn't say it was just that. I mean, I think what I would characterize it as a prudent guide, given kind of what we're seeing, taking it 1 quarter at a time. Got it. Okay. Mike, following up on pharma, I think these accounts typically start to get better clarity on their full-year budgets this time of year. Wondered if you could update us on what you're hearing from key pharma accounts with respects to instrument budgets and purchasing plans here in 2023? Yeah. Yeah. Sure, Josh. In fact, Padraig, I think you've just done recently a round with some of the our large pharma accounts and. Yeah. I think what we're seeing is, you know, our funnels are very, very stable on it, and of course, you're correct. The pharma budgets are set around this time of year, and I think we're watching closely at how that moves to the second half. For now, no change. I think we probably haven't seen any surprises on the budgets themselves. No surprises. They're not aggressively releasing yet either. Yeah. I think that's- For sure. That's why I made a few times in this call comments around a normalization of the deal cycle times. Got it. Okay. Appreciate it, guys. You're welcome. We'll take our next question now from Elizabeth Garcia of UBS. Evening, guys. Thanks so much for taking the question, congrats on the quarter. I wanted to talk about cell analysis, if we could. Obviously, this is like a $400 million business over for you at this point. I'd love to hear about performance and then, you know, I think in a recent presentation kind of indicated that it's pharma that's like maybe the largest customer set followed by research. It'd be great to get a sense of kind of the different customer groups and what you're seeing there. It was hard to get a lot of all the good news in, but I think we had a good start to the year in cell analysis, Jake, as I recall. Yeah. We had another good quarter in cell analysis. Actually, we're really proud of what we have built up of a business over the past years here in cell analysis, including the M&A and the acquisitions we have done. You, you're absolutely right that the main opportunities are within the biopharma academia, and we've actually done a really good job in diversifying where we had some of the business we acquired was very exposed to academia, and we've been able to really penetrate into the biopharma over the past years. We continue to see opportunities, and especially actually in the high end of the business that there's still a lot of opportunities in the biopharma space and especially in understanding the immune system, immune oncology, CAR T and others is areas that we have put a lot of investments into, and we see that pays off. I believe there is still a lot of opportunities in front of us here. There is a strong correlation there in the biopharma academia space. There's a lot of collaborations where, especially if you look into the CAR T, where you see a lot of the big university hospitals that is investing into this. There's kind of a crossover between the academia and biopharma right now. We see opportunities in both those arenas right now. Awesome. I guess, you know. Liza, I think. Hey, Liza, just, I might want to comment as well. You had asked about kind of growth rates. What I would say is it grew faster than the overall company and faster than LSAG. Awesome. Thank you. Super helpful. I guess if I could just squeeze in one last one on. Sure the attachment rates. you know, you just crossed over the 30% line. I think I'm more thinking about kind of how do we think about kind of the incremental, particularly I'm thinking about services. ACG did pretty well this quarter. The revenue progression as we're looking at a larger install base that's been put out over the past couple years. Yeah, and I'll have you make some comments here, Pad, but I think we're expecting to continue to step up on that attach rate. Yeah. I think there's significant opportunity to drive growth for our business, and it's about at one point of attach rate is about $30 million annually. We know our customers have adopted workflow solutions that, you know, with tight integration on the instruments. That allows us, of course, with the one commercial organization to demonstrate the value and of course, attach more services and consumables. I will say if you think about what Jacob said about PFAS and biopharma, our focus on solution selling has really paid off. That's really driven attach rates. I think, you know, our overall attach rate in both service and consumables are now in the low thirties, and that represents a 2% increase, and we expect that to grow as we move forward. Elizabeth, you know, your question focused on the attach rate on services, but I'd be remiss not to have Jacob talk about what's going on with attach rate to consumers that ties in this workflow solution because we did make some changes organizationally. The ACG strategy of driving connect rates and services and consumables remains intact. Exactly, and I think, along what Padraig also mentioned is that there's been a lot of investment from both the businesses and in commercial about, driving, connect rate also with consumables. It's more about selling the full solution and hence going out not only present an instrument, but present the instrument, the consumables, the informatics to go after, as Padraig was mentioning, PFAS, other workflows in the biopharmas and we're starting to addressing the high-end parts of the markets. We've seen a significant uptake in our attach rates in our consumables. I would say we will continue to see growth. We still have a long, a lot of opportunities, but, I've been really impressed with the team to take it from, you know, the 20s up, way beyond the 30s now. Thanks so much, guys. Appreciate the time. You're welcome. Thank you. We'll go next now to Paul Knight of KeyBanc. Hey, Mike, thanks for being patient and getting me in. Not a problem, Paul. I'll call in earlier next time. On the RNA, or the oligo production business, it looks like we've had, I guess, you know, four or five here in the last four years or so dominated by Alnylam and Novartis. I'm assuming that this customer count you talked to and project count is expanding well beyond that group of that customer. My question really is, what's your position in the market? Do you think you're the dominant vendor? Two, does this number of partners suggest you're going way beyond Novartis and Alnylam? Paul, I'm really glad you hung on and got your question in because very enthusiastic to answer that question. We have a much broader base of business beyond I mean, two very good customers, but the programs go much, much, much broader than that. We are the market leader. Oh, yeah. Yeah. We crossed over on the siRNA piece. We are the clear the market leader. We are going to be going after more aggressively the CRISPR space, where we can't yet claim leadership. Overall, we've really with the capacity expansion, the continued great work of our team, we've continued to gain market share. From the math we're doing, we've now crossed over in the leader in the space. In effect, what you're really building out is the, kind of market, or the technological, I guess, threshold we've now achieved. Is that fair to say? I'm not sure I understand completely the question. I think what we're doing is, I think I got it, which is we're actually expanding our portfolio, which is we're the leader in siRNA. We've got a broad base of business with broad base set of number of pharma customers. You know, over time, you hear more about those when their therapeutics come to market. Also we're expanding into the CRISPR area. We've got a small business there right now. We do really well. We just don't have all the capacity we need, and that's part of the storyboard of what we're doing, what we call Project Endeavor. Yeah. Paul, to build on what Mike was saying is not only are we expanding, but I think just as importantly, the market's expanding. The, you know, Alnylams of the world were the pioneers of this technology or one of the pioneers. If you look at the number of products that are in the clinic or compounds that are in the clinic, it goes well beyond the two customers that you just talked about. Pad, maybe just to add just a touch of color to that. You know, the actual number of programs that are in various stages has literally doubled over the last four years. Then in terms of pharma partners, you know, we're not in a position today to share anything publicly. I already said we're working with more than 30 pharma partners, and I think what's encouraging for us is, you know, even within pharma, the caliber of the companies that have now entered and, you know, advancing molecules at various stages. You know, this is a market that is maturing. You know, the number of FDA approvals that have happened, European approvals that have happened, there's momentum in the market. You know, we're, you know, we've worked hard to be leaders in the siRNA, but there's momentum that's there for us to ride as well. Thank you. Congrats. Thank you. Gentlemen, it appears we have no further questions today. Parmeet, I'll hand things back to you for any closing comments. Thanks, Bo, and thanks everyone for joining. With that, we would like to end the call for today. Have a great rest of the day, everyone. Thank you, Parmeet. Ladies and gentlemen, this concludes today's call. Thank you again for joining, and you may now disconnect your lines.