Ladies and gentlemen, welcome to the Agilent Technologies Q4 2023 Earnings Conference Call. My name is Bo and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Parmeet Ahuja, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Bo, and welcome, everyone, to Agilent's conference call for the fourth quarter of fiscal year 2023. With me are Mike McMullen, Agilent's President and CEO; and Bob McMahon, Agilent's Senior Vice President and CFO. This presentation is being webcast live. The news release for our fourth 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 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. Guidance is based on forecasted exchange rates. 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. And now I'd like to turn the call over to Mike.

Thanks, Parmeet, and thanks, everyone, for joining our call today. Before we get into discussing our results and outlook, I want to mention that we're joined today by Padraig McDonnell, President of the Agilent CrossLab Group; and Sam Raha, President of the Agilent Diagnostics and Genomics Group. We're also joined on this call for the first time by Phil Binns, President of the Agilent Life Sciences and Applied Markets Group. Phil’s name may be new to some of you, but he's well-known at Agilent and in the industry. Phil has been with us for more than 13 years, coming over with the Varian acquisition and overseeing our market leading spectroscopy business. We’re extremely pleased to have someone with Phil’s knowledge, experience and proven leadership strength heading up our LSAG business. In his short time in the role, we’ve already seen Phil add tremendous value as a member of our senior leadership team. Welcome, Phil. Now onto our fourth quarter results. The Agilent team once again continued to perform well under challenging market conditions. Revenue of $1.69 billion declined 9.7% core after increasing 17.5% last year. This is at the high end of our guidance. Our proactive approach to managing our cost structure in this market environment helped us deliver healthy fourth quarter operating margins of 27.8%. Q4 earnings per share of $1.38 exceeded our guidance. While this was a decline of 10%, it comes against a tough compare last year when EPS grew 26%. While the market continues to be challenging, we believe we are starting to see signs of stabilization. As an encouraging data point, for the quarter our book-to-bill ratio was 1 for the company and greater than 1 for our LSAG instruments. Let’s take a closer look at our Q4 performance, starting with our regional results. During…

Thanks Mike, and good afternoon, everyone. In my remarks today, I will provide some additional details on revenue in the quarter and the year, as well as take you through the income statement and other key financial metrics. I’ll then finish up with our guidance for fiscal year 2024 and the first quarter. Unless otherwise noted, my remarks will focus on non-GAAP results. Agilent finished the fourth quarter with core growth at the top end of guidance and EPS exceeding our expectations as we executed well against challenging macroeconomic conditions. Q4 revenue was $1.69 billion, down 9.7% core and 8.7% on a reported basis. This is after growing 17.5% in Q4 last year, when we benefitted from the recovery from the Shanghai shutdown in Q2 of last year. This created an estimated 1 point of headwind in the year-on-year results this quarter. As expected, we saw weakness in capital purchases in LSAG with the biggest impact in our China business. Now, I’d like to share additional detail on our end markets for the quarter. Revenue in our largest market pharma, declined 14%, versus 20% growth in Q4 last year. BioPharma declined 2% while small molecule was down 23%. However, biopharma ex-China was up 7% in the quarter and grew solidly for the year. And while small molecule was down, the decline was most pronounced in China. And outside China, small molecule was up sequentially in the quarter. Chemicals and advanced materials declined 11% versus growth of 27% last year, while flat sequentially. Our chemicals and energy subsegments were down 15% while advanced materials were down roughly 2% globally and up 4% in the Americas and Europe combined. The food market was down low double digits against a tough 20% growth comparison last year. High single digit growth in the Americas…

Thanks, Bob. Bo, if you could please provide instructions for the Q&A now?

[Operator Instructions] We'll go first this afternoon to Vijay Kumar at Evercore ISI.

And some helpful comments here. Mike, maybe starting with those book-to-bill comments here. Overall company 1 turn LSAG instrumentation looks like it's turned. Curious what those book-to-bill numbers for ex-China? And if instrumentation has turned, that Q1 guidance, comps get easier. Why is Q1 assuming no benefit from this turn in instrumentation?

Yes, Vijay. Let me take that. I think if you look at the book-to-bill ratio, it's -- for LSAG instruments, it's actually very similar to both including China and excluding China. China was actually slightly positive as well. So that's a good sign. And as we mentioned in the prepared remarks, we're taking a prudent approach to our first quarter. And certainly, we see this as a positive. We did have some -- we typically do have seasonality from our Q4 to Q1, but we're taking it kind of one quarter at a time.

Yes, I think part of the big story, too, Vijay, is the 10% comp from last year as well. But as we said it in the call, we were -- it was encouraging to see some initial signs of stabilization with that kind of book-to-bill on the instrument side.

Understood. I'm glad to hear prudency and right off the bat here.

We got that into the script, Vijay.

On -- just one more related on guidance here. What are you assuming for NASD in China for fiscal '24?

Yes. So for China, we are thinking mid-single-digit decline for the full year. So very similar to this year. And then for NASD, right now, we're expecting low single-digit -- mid-single-digit growth.

Mid-singles. Yes.

We go next now to Patrick Donnelly at Citi.

Maybe kind of a follow-up on the 1Q guide. It seems like, again, the order's encouraging. Maybe a little bit prudent on the guide, as you said, I guess when you think about just the implication for the ramp 2Q to 4Q, is it optimism in the market based on some of those order trends is that obviously the comps get easier in the second half as you work through it. And can you just talk about the visibility into the recovery and kind of what gives you the confidence in the ramp as the year progresses here?

Yes, sure, Patrick. I want in lead off, Bob, and then you can add any additional comments you'd like to make here. But when we think about these comps around what we described as a gradual recovery and grow. I think is, first of all, important to remind the audience that we do expect the first half of the year to be very much like what we saw in the second half of '23. But looking forward, why do we think that things are going to be different in the second half which is though it's initial and still early, there are some early signs of potential stabilization that you see in our order book. The fact that book-to-bill for the company was above 1, the fact that we had the same result in our instrument business, which has been the most pressured part of the company. And listen, while it's too early for customers to be confirming their 2024 budgets with us, let's go back to the sales phone, which is a predictor of potential growth, right? So our sales funnels continue to show a lot of interest from customers. And we know that at some point in time of things will start to release. The funnels remain healthy. And listen, an environment like this, we've seen these things before, which was healthy capital spending has been constrained. So some release can be expected. And we hear -- I don't want to get too down my skies on this, but we hear customers talk about some new focused investments. And I think we're not calling for a big broad-based market recovery, but certain segments of the market are going to be better. We're talking about some investments in R&D tools, what's going to PFAS testing capacity expansion plan we're hearing from our customers, Advanced Materials. And then as you mentioned earlier, Patrick, there's an easier compare in second half '24 as well. So we do expect this return to growth. And I think as -- it's not simply a hope. We've got some information to be kind of back up our thinking there. Again, we'll know a lot better about how things look when we get to the budgeting phase of our customers in early 2024. Again, right now, the markets for capital -- instrument still remain quite challenged. And as I mentioned, we are seeing encouraging signs of potential stabilization, but it's going to be a journey for our return into growth. And I think our guide reflects that. And again, I think we're -- we've got a high degree of confidence this is what the back half of the year will look like.

Yes. And Patrick, you asked about Q1, as I mentioned in the prepared remarks, I think we're taking a prudent approach here. but we're also going up against last year where we did have a budget flush and happened earlier in the year but for delivery in November and December, and we're assuming that we're not seeing that or building that into our into our estimates. So that happens, then it would be -- that would be a nice thing for all of us.

Yes, absolutely, Bob.

That's helpful. Bob. And maybe, Bob, just on the margin side, helpful to hear you talk through a few of the different moving pieces. It sounds like some cost savings in DGG, among others. I guess can you just give a bit more color on kind of the moving pieces, where you're pulling levers, the ability to take out some additional costs to hit these margin numbers. Obviously, you talked about margins being up a bit. I think there are some headwinds like incentive comp, things like that. So maybe just talk about the gives and takes there and confidence in terms of some of the cost outs.

Yes, that's a great insight there, Patrick. Yes, because we do have some add backs, I would say that -- so don't take that $175 million and drop it to the bottom line because we have some resets, I would say roughly half of that is kind of a reset between our sales comp and variable pay. If we think about it is really across the P&L, the biggest piece actually is in DGG with the exit of the Res Bio business, but we've also taken some tough decisions in other product lines to streamline the portfolio there. And I would say roughly a little over 30% of that is associated with that. The other 25% is really within our COGS. Our OFS team has done a phenomenal job of really kind of leaning into reducing our costs around logistics and material costs. And then I talked about the site consolidation as well, which will show up and down the P&L. So we've taken a look at our real estate footprint and have actually closed several smaller sites between -- around the world really. And then the final piece is really kind of infrastructure optimization, which would be discretionary spend but then also headcount reductions that would be focused on areas where we've rightsized it to the demand.

And Patrick, this is Mike, I stated about the confidence about the growth recovery. I think when it comes to hitting the $175 million, high degree of confidence, we control this 100%, and we'll deliver on this.

We'll go next now to Matt Sykes at Goldman Sachs.

Maybe just on NASD, I noticed just over the past, call it 1.5 years, we've kind of gone from high double digits, low double digits next year, mid-single digits, which it's probably just some level of normalization as you ramp capacity. But just given the step up in CapEx you're guiding to next year, is there some wiggle room in terms of how you guys lay that capacity out? Or is the confidence in that market growth enough to keep investing in that area next year?

I'll jump right into that one. So I tried to make that come out in the script. But our plans to continue to invest for the future long-term growth this business remains high. We're going full steam ahead on the capital expansion and they're tracking according to plan. In fact, I think we'll probably do a little bit better on the cost side when all said and done relative to the CapEx that's involved. And Bob, maybe you can talk a little bit about some of the things we're seeing relative -- I think we commented on this before, but what have we seen in the marketplace relative to 2024 relative to NASD.

Yes. I think, Matt, it's a great question. And so if we look at the details of kind of the mix, actually, I would say we have the most healthy mix of portfolio in NASD and '24 than we've had. So a significant increase in the number of programs that we are going to have been going through. Now it's a bigger component of clinical volume versus commercial volume, which I actually think bodes very well for the future going forward. We have seen some, I would say, some pausing of certain customers as associated with IRA but we think that, that's transitory. So as Mike said, we're not at all concerned about the long-term growth prospects of this market. And in fact, many of the programs that we're seeing come into our portfolio are actually as what we had talked about in previous calls, much larger targeted patient populations, which really speaks well to the volume. And then as Mike mentioned, we're actually expanding our portfolio, our technologies. And so it's not just siRNA, but we're having the ability to continue to grow our CRISPR -- GMP grade CRISPR business as well as antisense. So we're continuing to do that as well.

Sam, I know this will be your last call, would have thought it might be interesting for you to jump in here for a second. As part of your transition, you've been talking to a lot of our key customers. And I think we're hearing the same story from them about long-term growth continued investment here.

Yes. Absolutely, Mike. I'll just add a couple of things to your and Bob's comments. One, we are now on contract with more major pharma than we ever have been. And it's very promising. If you look at publicly the percentage of their overall R&D budgets that they're now spending on therapeutic oligos, and we are in the driver's seat to win those opportunities. And just in the last couple of weeks alone, I've spoken with a number of our lead pharma partners, and they've reaffirmed. So there is a slight navigation through the IRA, as Bob mentioned, the conviction on their end of the market potential remains unchanged and in the leadership position to pursue that.

Got it. That's a great amount of detail. Maybe just, Bob, for you, just on pricing. Kind of what's embedded for next year as you think about pricing? And how has pricing kind of trended over the course of this year? Are we back to sort of normalized levels of pricing that you guys have historically achieved? Or is there still some pricing gains to see sort of as we move into next year in certain areas of your business?

Yes. Matt, that's a great question. And we ended the Q4 at just a little under 3% and actually for the full year was greater than that. So it actually continues to be hold up very well. What we're building into our plan for next year is roughly 2 percentage points of price, which, as you know, is greater than our historical kind of pre-COVID levels. And so what we've been able to do, I think, is -- really speaks to the value proposition that we have as well as the emerging mix of our businesses as well.

We go next now to Rachel Vatnsdal at JPMorgan.

So first off, I just want to ask on China. You mentioned that the region is down 30% this quarter. That was in line with your expectations. You're expecting it to decline mid-singles again next year. So I guess, just how much of a function is that really due to some of the comps and starting to lap the easier comp late into next year versus is there anything structurally wrong with that market? And how do you expect China to continue to grow on that medium to long term?

Do you want to take the first part, Bob, I think it's...

Yes, yes. So well, I think from the standpoint of the comps, what we would see is, obviously, if you looked at what we did in the first half of this year, we had very strong growth, and then we're going up against, extremely difficult comparisons this year. I mean, as I mentioned, we were down -- up 44% in Q4 of last year, so down 31% this year, we're still up over the 2 years. And as we think about this similar to the rest of the kind of the guide, we're expecting kind of declines in the mid-20s in Q1 and getting better from there. And some of that, it will be an easier comp. And I'm sure Mike will talk a little bit more about this, but we don't see anything structurally changing in the Chinese marketplace for life science tools.

Absolutely, Bob. Why don't pick up from there. So I made a few comments about this in the prepared remarks, but I may first trip to China since October 2019 when we're there for the [BCIA] show. And what did I see, first of all, I'll just remind how quickly things can happen in China. Electric vehicles everywhere, a lot more green, digital adoption was just amazing. I don't think anybody uses cash there anymore. And then you also remind as you travel around the country, just how big a country is, how big the economy is and how big the markets are for Life Sciences. But to your specific question, here's what I was hearing from customers and my team when I have seen as well, which was why do we think this market eventually will return to growth, all the things that have been driving this market over the years, which is primarily the Chinese government's 14th 5-year plan. They're still on it. They're pointing to long-term growth, improving the quality of life in China. We're hearing stories of new environmental regs coming from PFAS. The anticorruption impacts that we've seen in the health and the pharma space look to may have peaked, with a lot of the actions occurring, which could ultimately long term, lead to more R&D investments because there'll be less money being spent in the SG&A area. But I don't want to be too short-term optimistic about this expansion of growth because the business is bouncing along at a certain level. And that's why we call it stabilization in our prepared remarks. So what we're seeing, what we're forecasting, what we're hearing is from our teams and our customers don't expect any significant near-term improvements but don't expect any significant near-term deterioration either. And I think that's why when you look at the year-to-year numbers in terms of growth rate, Bob, was probably a comp -- payer issue. But we've had a couple of months now just run at a certain level, and that gives us the sense that what -- I think we used were potential signs of stabilization. So I hope that helps.

Yes. No, that's helpful color. And then I just want to dig a little bit more on your comments around next year. So you mentioned that you expect the first half to be similar to what you're seeing in the back half of this year. So I guess, can you just walk us through in a little bit more detail what exactly you mean by that? Should we be expecting similarities from an organic growth perspective? Or are you really talking about more from a revenue dollar standpoint. And then same type of question on the trajectory of the rebound on margins and EPS next year. Should we expect kind of that similar ramp given the cost dynamic as well?

Yes. I think if -- I'll try to answer all that in short order, Rachel. As we think about the first half of the year, yes, we think that we -- as we look at our business and look at that kind of book-to-bill, we've kind of troughed in Q2. Q3, I think we mentioned actually was a little better. It was less than -- still less than 1 and then Q4 continue to improve. And our expectation is that, that kind of performance will continue. Now we're going up against difficult comps when we were actually bleeding down our inventory. And that particularly happened in Q1 and Q2 of last year as we were talking about it. And so I would expect us to have the trough of '24 be in Q1, Q2 being a little better and then growing out of that as we benefit from the easier compares. And I would expect our P&L and the EPS to look very similar to that. Q1, we are -- we've taken most of the actions they will have all been taken in the first quarter, but they won't have a full quarter. And so we'll have full quarters of the cost savings in Q2 through Q4. And so as that business kind of improves as the business improves, we'll get more and more leverage on the bottom line.

Moving on now to Derik De Bruin at Bank of America.

So can we talk a little bit about pharma? That market was up and down all year, not a lot of visibility. Are you seeing some of the orders that were sort of stuck in the funnel starting to come loose, right? I mean, how are you sort of looking at the pharma market going forward?

Yes, I think the answer is the deal funnel still remain elongated. So…

So yes, I think what we see from our funnels is that they're growing, but the velocity in closing deals from the point of funnel to order is still static on that side -- elongated.

Yes. And Derik, I think if we think about the pharma end market, we're assuming very low single-digit growth for next year. And some of that is actually getting past the tougher comps in China. If we looked at actually our pharma business ex China, we grew in FY23. And actually, our biopharma business grew in total. And we think about small molecule was the area that was dragging the pharma business down as you know very well, that typically has a replacement cycle. We are well into that replacement cycle. We were up very high. We kept calling it. And we've seen that be very depressed, and our expectation is that will start coming back in earnest in '24, but probably in the back half of '24.

So this goes -- sorry to beat this up, but your China got going down. Pharma, you just basically said you've got -- not -- you don't have a ton of visibility, hope things have come back. I'm just not -- I'm curious why you can put a little bit more cushion in the guide, like that. It just seems like -- it still feels like it's a little bit -- it still feels like it's a little back end. Well, it's not a little a lot back-end heavy, given where we are soaring in the cycle?

Yes. I think as we said earlier, Derik, there's reason to believe that you have the comps working in our favor for the second half, there’s real. And we know that customers want there's interest in the products. And I think they've got a step -- and by the way, we're not calling for this miracle snapback in 2024. But we're also saying that small markets continue to decline 20%, 30% on the numbers we're seeing this year, particularly, that's where the pressure has been. But we know that biopharma, they need some tools for R&D. We know that those replacement cycles only last -- can only be held up for so long. So there's confidence relative to what we see in the funnel. Deals aren't coming out of the funnel. And then although we are focusing here on pharma right now in his commentary, there's a lot of other strength in some of the other secular markets and applied markets, in particular, which is a nice diversification we have on the instrument side as well. And Bob, I don't know if there's any additional thoughts on the pharma story.

No.

And just one final one. Just what were bookings. I mean, I know you said the book-to-bill was greater than 1, but I'm just curious in terms of bookings. And do you often see a spike in bookings in Q4 Basically, I'm just trying to get the sense of like what you saw as a head fake or you've got -- where you think you've got real demand here?

Yes. So we don't give the absolute dollars rather than to say it was greater than 1. It was -- roughly 1 for the total company and then instruments were higher. Typically, we do see a where it is higher. So this kind of goes back to kind of our historical performance where orders are a little higher, particularly because we have October in our results. And so last year was actually an aberration, so to speak, as we're working down the backlog and this kind of gets back to our normal process.

Yes. And through the quarter, Derik, we saw a normal seasonality. So there wasn't anything unusual about the order pattern to kind of say, is this a head fake or not. So I think that also is one of the reasons why we say, okay, early signs of some stabilization here. Again, not huge growth. We're seeing stabilization.

We'll go next now to Jack Meehan at Nephron Research.

So I wanted to dig a little bit more into LSAG in the quarter. Can you break down the growth between instruments and consumables and just any commentary across product lines.

Everything I would say for the quarter was pressured, although consumables performed better than the instrumentation. Our consumables business was down kind of low single digits and against a very tough comp of almost 9%, 10%. And if you looked at it ex-China, that was largely influenced by China, we grew low single digits in consumables.

Okay. And so does that imply instruments may be down over 20% in the quarter?

They were down, yes.

Okay. Yes. And I guess maybe just a follow up on Derik's question. I think everybody is trying to think about the right way to interpret this book-to-bill commentary, but just is there any additional color you can share on the magnitude were orders down in the quarter? Or I guess, just trying to understand because there was an easy or a difficult comp on revenue like are orders kind of more -- don't have a similar level of volatility. It should have mathematically been over 1, right?

Yes. So the orders were down year-on-year, but obviously down not as much as revenue down year-on-year. And so when we look at it, I think that kind of shows though, the stabilization because we had some pretty significant revenue last year because of the recovery in the first thing Shanghai shutdown. So I don't think that, that -- we actually think that this is the best way to kind of look at it on a go-forward basis because we don't have the play of the backlog happening much anymore. And so actually, as we look at it on a quarterly basis, we've seen a nice, steady progression up back to historical numbers.

And Jack, I think it's fair to say, Bob, that one of the things we were conscious was a lot of commentary about how significantly things we're getting in terms of being worse. And as you know, we've been out for some time, calling for no year-end budget flush, constrained capital environment. We came into the year actually guiding for a slower growth in the second half. So what we're trying to intimate in the call today is what we've been saying for the last several quarters is exactly what we're seeing right now. And I thought -- we thought a proof point was the book-to-bill -- listen, it's not great out there in terms of robust growth, but the sky is also not falling either.

The next now to Puneet Souda at Leerink Partners.

First one on CrossLab. Bob, with 65% of your business being a service contracts, could you elaborate on what sort of growth contribution we should expect here for full year? And also, I don't know if you provided the LSAG expectation contribution for 2024 as well?

Yes. For ACG, we're expecting kind of mid-single-digit growth as we are -- with the contracted services piece being double digit, but then being pressured by the instrumentation. So that will be moderated. And for the LSAG business, right now, we're looking at kind of low single-digit decline. Again, with a greater decline in the first half of the year and the return to better performance in the second half of the year.

Got it. Okay. And then on -- if I could ask a little bit on am I onshoring that's point that you're pointing -- that's not something we are focused on in prior calls. And I hear you that you're growing on the PFAS side, but just wondered -- could you elaborate a little bit on both some onshoring as well as the environmental gains that you're having? And why shouldn't that contribute more to your instrumentation growth in 2024.

Yes. It has the potential to do that. And as we talked about it, we're at the beginning of the year, and so we want to be prudent there. But there's nothing out there that doesn't say that, that should continue given the macro economic environment and the incentives that governments are providing to continue to invest. And actually, what we're seeing is nice business in Southeast Asia as well as India. And I would expect that to continue. That's where we're placing incremental investments to continue to drive and capture that demand. I would expect the same thing in the environmental area as well. But we're not going to build all of that in right now at the beginning of the year.

But I think we saw some trends too that we're starting to see, PFAS is also now driving some testing in the food marketplace as well as every country that we talk to is in the process of further enhancing their own reg. So we wanted to have some other areas of potential growth for the company beyond the story around pharma.

We'll go next now to Josh Waldman at Cleveland Research.

Maybe one for Bob and then one for Mike. Bob, maybe circling back on Derik's question, I wondered if you could provide more context on the forecasting process this round or the puts and takes that went into the organic guide. Could you take a step back, were there segments in the business that were like decelerating or slowing as you went into the guide or maybe areas where you're still trying to find bottom? And if so, how did you expect that in the guide?

Yes. Obviously, this year has been one for the ages in terms of being able to try to manage the forecasting. And so we've taken a number of different angles at it to look at it. So not only growth rates, which I think is the focus here, but also actually if you looked at it on a sequential basis and look at the actual dollars, I think that that's probably more instructive, particularly as we were looking at the bleeding of the inventory. I would say what we've seen over the last couple of quarters is that signs of stabilization. There are always puts and takes across the various businesses. And we think that we've tried to do that. We've built in feedback based on the field's projections, the funnel that Mike and Padraig talked about and then an assumption around the conversion of those funnels. And we haven't seen the funnels slow down. There's still modest growth, and we're starting to see the slowing of the elongation. I'm not saying that it's stopped or accelerated in terms of the purchase but we are starting to see that slowing and you're actually seeing that in that book to bill. And when we look at the orders on a sequential basis, we're starting to see that kind of stabilization as well. And so that's kind of how we're looking at continuing to go forward. if you kind of just built that going into next year, you would start seeing a challenging first half and then better performance in the second half. Hopefully, that gives you some flavor.

Yes, that's helpful. And that was actually going to be my follow-up. And maybe I don't know, Bob or Mike, if you want to take it. I was curious if you could maybe quantify where the funnel stands entering '24 versus maybe where it typically is entering the year? And just how correlative or how much do you think it is a predictor of near-term demand? I mean is that -- is better funnel conversion at all kind of part of what drives the improvement as you progress through the year?

I think pursuant to Padraig and Bob, kind of the same rates, right, no significant improvement.

Correct. We're going up against -- the first half of this year, actually, what you saw was the elongation of those cycle times. And so what we're seeing right now is kind of -- like I said, it's not necessarily fully stable, but it's not decline -- or increasing at the rate that we saw in the first and second quarters of last year. And so you're starting to see that. And so all things being equal, that conversion is actually improving slightly versus a year ago. It's still not back to historical numbers. And that's what we're trying to handicap here as we look at our forecast going forward.

We'll go next now to Daniel Brennan at Cowen.

Great. Maybe just on China. I know you mentioned, I think, in the prepared remarks like month-to-month pacing had improved in the quarter. Just any more color or anything on exit rates in China. And if you could, I'd be entered to get like some more color on the end market trends in China. I know you gave some color on biopharma, but could you discuss pharma overall and any other interesting color from an end market basis?

Sure. Bob, maybe we'll tag team on this, which was -- I think the -- relative to the order book, I think we were slightly above revenue for the quarter. No really unusual pacing through the quarter from China. We've been calling -- I know a lot of our conversation today has been about pharma, but we've been saying for some quarters overall for China, it's been a broad-based slowdown. And that's what the business has been, and that's how we ended the year in terms of the end market performance. I will say that we were pleased that we were in line with our expectations for the business. So again, we described earlier that the business was moving along at a certain overall level. I think we do have a view of China that we will still be down in terms of the revenue for the year. But reflective of where we are, where we're seeing the business right now. So…

Dan, and to build on Mike's point, just a couple of other additional data points. we were down pretty significantly in all end markets in Q4, as you would expect because we were up 44% in Q4 of '22. And so that's probably not as relevant because we were catching up relative to some of the catch-up of the Shanghai shutdown. Another data point, though, is if we looked at kind of year-on-year growth actually, we exited October, the year-on-year performance. It was still a decline, but it was much better than what we saw at the beginning of the quarter. And so we actually saw a sequential improvement. I think Mike mentioned that in his prepared remarks. And then if we looked at kind of absolute dollars, they've been pretty steady month-on-month.

Got it. And then Chemical and Advanced Material was like a tale of 2 cities. It looks like C&E was down 15% in the quarter, you said and you talked a lot about PFAS. And so is there any more color like what you're seeing on kind of both sides of coin there? What's kind of baked in on the core chemical and energy side for the year and just anything on trends there? And then obviously, it sounds like you guys still remain really constructive on the Applied Materials side or Advanced Material side.

So how about Bob lead here a few comments. And then I've been dying to pull Phil in on here as well. And maybe talk about some of the things he's seen on the Advanced Materials side, which is a real area of expertise for him, so. But I think your word of tail of 2 cities is really quite appropriate, both in terms of breakout by segment, also by geography. I think we posted 70% growth, if I remember correctly, in China last year. So I mean that's a tough comp. I don't care who you are. But we're seeing continued slowness on the C&E side. Our major customers here are really conservative in terms of their deployment of capital. Many of our largest customers are on cost control. So that's been -- that's what you're seeing reflected in the numbers, and that's why we expect a constrained outlook on that side of the business for a while. The different story on the Advanced Materials, and I think Bob, you pointed to good growth geographically globally outside of China. And then Phil, I know you and the team got a whole bunch of initiatives around the applied markets, particularly not only PFAS but Advanced Materials. And I thought a good opportunity for me to introduce you to the audience and have you share your perspective on what we're doing on the applied on the Advanced Materials side.

Yes. Thanks, Mike. Yes, certainly, we've mentioned you've talked around the activity within labs being ex-China, at least being reasonably robust. But on the applied market side and certainly around Advanced Materials. We're certainly relatively strong in those markets, and we're seeing good really good generation around the batteries market. And of course, we've spoken about the onshoring process around there in the Advanced Materials area. So globally, that obviously comes into the onshoring. And globally, we're in strong positions in those markets and have been historically and continue to innovate strongly around those markets and stay close to those customers.

We go next now to Dan Leonard at UBS.

I wanted to circle back for a moment on the Q1 guide. You spoke about a challenging year-on-year comp a couple of times. But as you're thinking about the Q4 to Q1 sequential ramp in dollars, how much of that decline forecasted is what you chalk up to seasonality versus prudent if you could give us a flavor.

Great question, Bob.

Yes, Dan, that's a great question. If you look at last year and our revenue went down roughly $90 million; $90 million, $95 million from an extremely strong Q4 to also a very strong -- if you look at the midpoint of the guide, it's a little over $105 million, $110 million. So there is an element of looking at what we did last year, again, not assuming a strong budget. I don't want to kind of parse it out to give you a percent, but that kind of at least gives you kind of how we were thinking about the Q1 guide relative to what we saw in Q1 of last year.

Appreciate that. And then as a follow-up, can you remind me in 2024, when do we lap the headwinds on the genomics side? And what is your appetite continued investment in genomics as part of the DGG portfolio.

Yes, I would expect us to -- we will have a difficult Q1 and then starting to get better from Q2 and beyond, not dissimilar from the rest of some of the businesses. And then I'll let Mike talk about the kind of the investment.

Yes, I think first of all, just to remind the audience, when we talk about the genomics mix business, what are we talking about? We got a $500 million business, probably 50% of it is in QA/QC instrumentation, where we are the undisputed leader here, a lot of appetite to invest here. Our TapeStation product, particularly the consumables business is on fire right now. Capital side is constrained as we've seen across the marketplace. And then I think we all believe in the view that NGS will continue to be a growth market for us. And for the industry, I think that people are dying on back their expectations about how robust it is for a period of time. And I think we're seeing that in our business. So why do we make some of the structure changes we made in the portfolio because we want to ensure that we've got the ability to have a healthy P&L while at the same point in time invest in growth. So there's a reallocation of R&D dollars happening as a result of some of the changes we made that we talked about over the call. So answer the story is we have a lot of appetite for focused investments in areas where we think we can win in genomics.

And ladies and gentlemen, that is all the time we have for questions this afternoon. I'd like to turn things back to you Mr. Ahuja for any closing comments.

Thanks, Bob, and thanks, everyone, for joining the call today. With that, we would like to end the call. Have a good day, everyone.

Thank you. Again, ladies and gentlemen, that will conclude the Agilent Technologies Q4 2023 Earnings Call. Again, thanks for joining us, and we wish you all a great evening. Goodbye.