A
#Hello, <UNK>.
How are you doing.
Yes.
Why don't you talk a little about our share repurchase activity in the quarter and how we're thinking about it going forward, <UNK>.
We filed it back in, now what, November 20, I think, of last year.
A 10b5-1 on an annual basis and we intend to file a new one, to register a new one also in November of this year.
And it is a formula-based instructions that we have provided between buying 350,000 shares a day under certain conditions to buying zero kind of thing with a cap as you can imagine.
We don't know exactly how it's going to play out in Q4, and the only thing that we know is that, if there is any kind of shortfall at all in our intended buying in Q4 because of the formula in the 10b5-1, it will all be carried over into the following year.
So do we intend to spend exactly what we committed to spend.
I think probably the best way to think about it, just look at the respective business groups.
You had the LSAG results of down 2%, and then the---+
ACG up 8%, and DGG up 8% also.
Minus 2%, plus 8%.
And that's why I, again, as you think about 2017 for the Company, if you really want to look at the growth rates of those two business units in the recurring revenue space, ACG and DGG, perhaps differently than you might think about how you model the risk profile for revenue projections for the instrument side of the Company.
Absolutely.
That is why I made a few comments about that earlier, because, as we said, if we can be in that 4.5%, 5% kind of growth range, perhaps even [low 4%s], it makes it a bit more challenging, but we see the path to 22% is not just around margins, I mean, excuse me, not just around margin improvement from volume, but there are specific real programs.
It's something we review once a month and we have active programs and the cost will continue to come out on some of these big programs.
Actually, I must say, I'm really pleased with the team because we've went through and did the, what we call, project [NUNU], is the finance program we just finished up.
Right on the heels of that, we're going to go live in early 2017 with our integration of Dako.
So the teams are still energized and working hard and I think these are going to have a material impact on our results in 2017 and that is why we have confidence about, assuming no major change in terms of the macro environment, that we can reach what we think are pretty challenging goals, but we have got a path to get there.
Well, thanks for the question.
I can give you only a general flavor here on what we think is going on in the market.
I will not comment on the individual competitors, but your assumption that the smaller suppliers probably take a larger hit is also our observation.
The major projects under way haven't been cancelled, but what we're not seeing there are any major new projects under way.
There is a lot of positive news by a lot of studies about where this market's going, but we're not seeing, just to clarify here, the major projects that we knew about, whether it be the one I mentioned in Saudi, or there is a major project down in Texas, these programs, they're going to come on line.
So people aren't cancelling capacity increased projects, but we're not seeing a lot of new projects, and that's why we have taken a fairly conservative, pragmatic view of that marketplace.
Again, I would like to reminder everybody, too, when we talk about chemical and energy, over 50% or so is actually chemicals, or chemical processing, not directly tied to the exploration and production of oil.
You're welcome.
Well, thanks, <UNK>, I appreciate the question.
And as you probably will understand, I'll give you a more high-level resolve because we don't actually comment specifically at a product category level, beyond I think I would just reemphasize the point that <UNK> made when he characterized the chromatography market, that business is down relative to last year, because the chemical and energy market is down.
And we have seen no movement at all, downward pressure on our share position.
It is really a market phenomenon we're dealing with right now and that's why, when that replacement market does turn, and we've been through these cycles before, when it does turn we will be in a strong position to capture that growth as given the strength of our position in that market, which right now happens to be down.
We actually don't think about it that way because the big segments of the market, like your food and environmental testing, we think, are independent, to some extent, of GDP.
The only way I think that we really think about that as relative to it is our chemical and energy space.
So if you could just kind of think about tying GDP to that sub segment of the Company, I think that would be a good place to start.
But I would not apply it to the whole of the core applied markets because these are being driven by quality of life investments in the food and environmental area and I think that's why ---+ I think that this composition of our end markets is the reason why we have been able to put up these kind of growth rates even when our number two market as a Company has shrunk this year.
Yes, I think the confidence level is the same as it was back in May, and again, I'd maybe just share a few points here which are we have this confidence of delivery on that given our belief that we can get that growth rate, that we're putting up growth rates right now in that territory.
We've got this pipeline of new products coming out.
We've got this nice recurring revenue stream with ACG and DGG that will carry this momentum into 2017.
And that, where our instrument business is going.
Pharma still looks good.
Of course, you have these double-digit compare issues.
China looks to continue to be strong.
Chemical and energy has got to turn at some point in time because the market requires these tools to support production.
Our thinking is, when we look at chemical and energy is, we know our customer is looking for productivity improvements to help improve their company profitability.
We think that's a value proposition that Agilent has.
We think, as they go through their budget justification processes and their budgets start in calendar in 2017, that this is why we can say this and the decline in this business after 18 to 24 months will start to turn and we could see low single-digits by the end of 2017 for the chem and energy market.
If that happens, which we believe it will, that will give us the confidence to get the growth and then we know we'll get the margin, given both the volume, but also in terms of gross margin improvement initiatives as well as our SG&A cost.
<UNK>, do you remember the total Japan numbers I think were ---+ .
About 5% of our overall (multiple speakers).
Just give you a sense of 5% of the total market.
Historically, we have been stronger, and I can share this from my experience having been the country manager for Japan for a few years in the early part of my career, we tend to be much stronger in the chemical and energy segment of that marketplace.
We're doing well in the life science research and in genomics, but the majority of the business sits in the chemical and energy space, which has been down.
I think Japan has been part of that story.
Pharma, the pharma business for us is a relatively smaller portion of the market for us.
I think they're doing well in pharma, but not enough to really drive significant overall growth rates for Japan.
<UNK> happens to be sitting right next to me in this conference room.
I don't think he's ready to sign up for more than 20% because it is quite an improvement from where we started, but I think he remains quite confident in the 20% achievement of that goal of an OM perspective.
You saw, we had 18.8% operating margin this quarter, up 200 basis points over last year.
And the big next wave of integration efforts will really be starting in our Q1 2017.
So we have a major program, we call it Project de Gaulle.
We seem to like a lot of these French names, <UNK>.
I'm not sure why that may be the case.
But, and that really will be the next big step to move the former Dako company into the Agilent environment.
It will take a little bit of while to get the cost out, but as you think about exiting 2017, you are going to have a much lower SG&A spend than you started the year.
And, <UNK>, I don't think you'd share anything else.
No, I think you encapsulated very correctly.
I just want to reinforce what you said that the path to 20%, of actually delivering 20% in 2017 is a significant turn around of where we were a few years ago.
Right now, that is our full aim and I'm very happy where the team is in executing this right now.
Thanks, <UNK>.
Thank you, <UNK>.
And on behalf of the entire Management Team, I'd like to thank everybody for joining us today.
If you have any questions, please give us a call at IR.
Thanks, again.
Bye bye.
