Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q and our Annual Report on Form 10-K. This report contains forward-looking statements including, without limitation, statements regarding growth opportunities, including for revenue and our end markets, strength and drivers of the markets into which we sell, sales funnels, our strategic direction, new product and service introductions and the position of our current products and services, market demand for and adoption of our products, the ability of our products and solutions to address customer needs and meet industry requirements, our focus on differentiating our product solutions, improving our customers’ experience and growing our earnings, future financial results, our operating margin, mix, our investments, including in manufacturing infrastructure, research and development and expanding and improving our applications and solutions portfolios, expanding our position in developing countries and emerging markets, our focus on balanced capital allocation, our contributions to our pension and other defined benefit plans, impairment of goodwill and other intangible assets, the impact of foreign currency movements, our hedging programs and other actions to offset the effects of tariffs and foreign currency movements, our future effective tax rate, tax valuation allowance and unrecognized tax benefits, the impact of local government regulations on our ability to pay vendors or conduct operations, our ability to satisfy our liquidity requirements, including through cash generated from operations, the potential impact of adopting new accounting pronouncements, indemnification, source and supply of materials used in our products, our sales, our purchase commitments, our capital expenditures, the integration and effects of our acquisitions and other transactions, our stock repurchase program and dividends and the potential or anticipated direct or indirect impact of COVID-19 on our business that involve risks and uncertainties. Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including those discussed in Part II Item 1A and elsewhere in this Form 10-Q.

Basis of Presentation

The financial information presented in this Form 10-Q is not audited and is not necessarily indicative of our future consolidated financial position, results of operations, comprehensive income (loss) or cash flows. Our fiscal year-end is October 31, and our fiscal quarters end on January 31, April 30 and July 31. Unless otherwise stated, these dates refer to our fiscal year and fiscal periods.

Executive Summary

Agilent Technologies, Inc. ("we," "Agilent" or the "company"), incorporated in Delaware in May 1999, is a global leader in life sciences, diagnostics and applied chemical markets, providing application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow.

In the first quarter of fiscal year 2022, we announced a change in organizational structure designed to enable our growth strategies and strengthen our focus on customers. Our chemistries and supplies business and our remarketed instruments business moved from our Agilent CrossLab business segment to our life sciences and applied markets business segment. Service revenue and cost of sales related to the previous acquisition of BioTek moved from our life sciences and applied markets business segment to our Agilent CrossLab business segment. We are reporting under this new structure beginning with this Quarterly Report on Form 10-Q for the period ended January 31, 2022 and historical financial segment information has been recast to conform to this new presentation in our financial statements and accompanying notes. There was no change to our diagnostics and genomics business segment.

COVID-19 Pandemic

Both our domestic and international operations have been and continue to be affected by the ongoing global pandemic of a novel strain of coronavirus (“COVID-19”) and the resulting volatility and uncertainty it has caused in the U.S. and international markets. During the three months ended January 31, 2022, many businesses and countries, including the U.S., continued applying preventative and precautionary measures to mitigate the spread of the virus such as quarantine, shelter-in-place, travel and activity restrictions and similar isolation measures, including government orders and other restrictions on the conduct of business operations.

The COVID-19 pandemic continues to be dynamic, and near-term challenges across the economy remain. The ongoing effects of COVID-19 remain difficult to predict due to numerous uncertainties, including the severity, duration and resurgence of the outbreak, new variants and the contagiousness of these new variants, the effectiveness of health and safety measures including vaccines, managing the different pace of return-to-office in different locations, the pace and strength of the economic

recovery, supply chain pressures, delivery and installation delays due to variable access to customer sites, among others. We will continue to actively monitor the effects of the pandemic and will continue to take appropriate steps to mitigate the impacts to our employees and on our business results.

Actual Results

Net revenue of $1,674 million for the three months ended January 31, 2022 increased 8 percent when compared to the same period last year. This revenue growth came from increases in all of our segments, geographies and from our three largest end markets. Foreign currency movements for the three months ended January 31, 2022 had an overall unfavorable impact on revenue growth of 1 percentage point when compared to the same period last year. Revenue generated by our life sciences and applied markets business in the three months ended January 31, 2022 increased 6 percent when compared to the same period last year. Foreign currency movements for the three months ended January 31, 2022, had an overall unfavorable impact on revenue growth of 1 percentage point when compared to the same period last year. Revenue generated by our diagnostics and genomics business for the three months ended January 31, 2022 increased 15 percent when compared to the same period last year. Foreign currency movements for the three months ended January 31, 2022 had an overall unfavorable impact on revenue growth of 2 percentage points when compared to the same period last year. Revenue generated by our Agilent CrossLab business in the three months ended January 31, 2022 increased 8 percent when compared to the same period last year. Foreign currency movements for the three months ended January 31, 2022 had an overall unfavorable impact on revenue growth of 2 percentage points when compared to the same period last year.

Net income for the three months ended January 31, 2022 was $283 million compared to net income of $288 million for the corresponding period last year. In the three months ended January 31, 2022, cash provided by operations was $255 million compared to cash provided by operations of $238 million in the same period last year.

For the three months ended January 31, 2022 and 2021, we paid cash dividends on the company's outstanding common stock of $63 million and $59 million, respectively.

On February 16, 2021 we announced that our board of directors had approved a new share repurchase program (the "2021 repurchase program") designed, among other things, to reduce or eliminate dilution resulting from issuance of stock under the company's employee equity incentive programs. The 2021 repurchase program authorizes the purchase of up to $2.0 billion of our common stock at the company's discretion and has no fixed termination date. The 2021 repurchase program which became effective on February 18, 2021, replaced and terminated the 2019 repurchase program on that date. The 2021 repurchase program does not require the company to acquire a specific number of shares and may be suspended, amended or discontinued at any time. During the three months ended January 31, 2022, we repurchased and retired 2.9 million shares for $447 million under this authorization. As of January 31, 2022, we had remaining authorization to repurchase up to approximately $1.13 billion of our common stock under the 2021 repurchase program.

During the three months ended January 31, 2021, we repurchased and retired 2.9 million shares for $344 million under the 2019 repurchase program. Effective February 18, 2021, the 2019 repurchase program was terminated and was replaced by the 2021 share repurchase program. The remaining authorization under the 2019 repurchase plan of $193 million expired on February 18, 2021.

Looking forward, as we continue to navigate the impacts of the COVID-19 pandemic, our top priority continues to be the health and safety of our employees, customers and community, as well as supporting our customers' operations. We expect to face continued logistical pressures, such as longer lead times and limited sources of supply in the near term that we will continue to mitigate through various sourcing strategies. We also remain focused on improving our customers’ experience, differentiating product solutions and productivity. With our strong results in the first quarter of fiscal year 2022 and the continued recovery in our end markets, we remain optimistic about our long-term growth opportunities in all of our end markets.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. The preparation of condensed consolidated financial statements in conformity with GAAP in the U.S. requires management to make estimates, judgments and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, inventory valuation, retirement and post-retirement benefit plan assumptions, valuation of goodwill and purchased intangible assets and accounting for income taxes. There have been no significant changes to our critical accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and if different estimates that reasonably could have been used or changes in the accounting estimate that are reasonably likely to occur could materially change the financial statements.

Adoption of New Pronouncements

See Note 2, “New Accounting Pronouncements,” to the condensed consolidated financial statements for a description of new accounting pronouncements.

Foreign Currency

Our revenues, costs and expenses, and monetary assets and liabilities and equity are exposed to changes in foreign currency exchange rates as a result of our global operating and financing activities. Foreign currency movements for the three months ended January 31, 2022 had an overall unfavorable impact on revenue of 1 percentage point when compared to the same period last year. When movements in foreign currency exchange rates have a negative impact on revenue, they will also have a positive impact by reducing our costs and expenses. We calculate the impact of movements in foreign currency exchange rates by applying the actual foreign currency exchange rates in effect during the last month of each quarter of the current year to both the applicable current and prior year periods. We hedge revenues, expenses and balance sheet exposures that are not denominated in the functional currencies of our subsidiaries on a short term and anticipated basis. We do experience some fluctuations within individual lines of the condensed consolidated statement of operations and balance sheet because our hedging program is not designed to offset the currency movements in each category of revenues, expenses, monetary assets and liabilities. Our hedging program is designed to hedge currency movements on a relatively short-term basis (up to a rolling thirteen-month period). We may also hedge equity balances denominated in foreign currency on a long-term basis. To the extent that we are required to pay for all, or portions, of an acquisition price in foreign currencies, we may enter into foreign exchange contracts to reduce the risk that currency movements will impact the U.S. dollar cost of the transaction.

Results from Operations

Net Revenue

			Three Months Ended																		Year over Year Change
			January 31,																		Three
			2022						2021																		Months
			(in millions)
Net revenue:
Products			$	1,263					$	1,172																	8%
Services and other			411						376																		9%
Total net revenue			$	1,674					$	1,548																	8%

Net revenue of $1,674 million for the three months ended January 31, 2022 increased 8 percent when compared to the same period last year. Foreign currency movements for the three months ended January 31, 2022 had an overall unfavorable

impact on revenue growth of 1 percentage point when compared to the same period last year. In the three months ended January 31, 2022, net revenue increased in all three of our business segments, geographic regions and from our three largest end markets; the pharmaceutical, chemical and energy and diagnostics and clinical markets when compared to the same periods last year.

Revenue from products increased 8 percent for the three months ended January 31, 2022 when compared to the same period last year. The growth in product revenue was primarily driven by increased sales within our liquid chromatography mass spectrometry business with continued strong growth in our nucleic acid solutions business.

Services and other revenue increased 9 percent for the three months ended January 31, 2022 when compared to the same period last year. Services and other revenue consist of contract repair, preventive maintenance, compliance services, repair and maintenance, installation services and consulting services related to the companion diagnostics and nucleic acid solutions businesses. For the three months ended January 31, 2022, service revenue increases reflected solid growth from contract repair services and consultative services.

Net Revenue By Segment

						Three Months Ended																		Year over Year Change
						January 31,																		Three
						2022						2021																		Months
						(in millions)
Net revenue by segment:
Life sciences and applied markets						$	976					$	923																	6%
Diagnostics and genomics						339						294																		15%
Agilent CrossLab						359						331																		8%
Total net revenue						$	1,674					$	1,548																	8%

Revenue in the life sciences and applied markets business for the three months ended January 31, 2022 increased 6 percent when compared to the same period last year. Foreign currency movements for the three months ended January 31, 2022 had an overall unfavorable impact on revenue growth of 1 percentage point when compared to the same period last year. For the three months ended January 31, 2022, we saw strong revenue growth within the pharmaceutical, chemical and energy and diagnostics and clinical markets partially offset by a decline in the food, academia and government and environmental and forensics markets when compared to the same periods last year.

Revenue in the diagnostics and genomics business for the three months ended January 31, 2022, increased 15 percent when compared to the same period last year. Foreign currency movements for the three months ended January 31, 2022 had an overall unfavorable impact on revenue growth of 2 percentage points when compared to the same period last year. For the three months ended January 31, 2022, revenue growth was strong within the pharmaceutical market led by performance from our nucleic acid solutions business. Revenue growth was strong within the diagnostics and clinical markets led by performance from our pathology business.

Revenue generated by Agilent CrossLab in the three months ended January 31, 2022, increased 8 percent when compared to the same period last year. Foreign currency movements for the three months ended January 31, 2022 had an overall unfavorable impact on revenue growth of 2 percentage points when compared to the same period last year. For the three months ended January 31, 2022, we saw strong revenue growth from the pharmaceutical, chemical and energy and food markets when compared to the same periods last year.

Operating Results

						Three Months Ended																		Year over Year Change
						January 31,																		Three
						2022						2021																		Months
(in millions, except margin data)
Total gross margin						54.3		%				54.2		%																—
Research and development						$	117					$	103																	13%
Selling, general and administrative						$	417					$	407																	2%
Operating margin						22.5		%				21.2		%																1 ppt
Income from operations						$	376					$	328																	15%

Total gross margin for the three months ended January 31, 2022 was flat when compared to the same period last year. Gross margin for the three months ended January 31, 2022 was impacted by higher sales volume and price increases which were offset by higher wages, logistics costs, intangible amortization expense and share-based compensation expense.

Research and development expenses for the three months ended January 31, 2022 increased 13 percent when compared to the same period last year. Research and development expenses for the three months ended January 31, 2022 increased due to higher wages and variable pay, program investments in our diagnostics and genomics and our life sciences and applied markets segments, and additional expenses related to our acquisition of Resolution Bioscience.

Selling, general and administrative expenses for the three months ended January 31, 2022 increased 2 percent when compared to the same period last year. The increase in selling, general and administrative expenses for the three months ended January 31, 2022 was due to higher wages, the change in the fair value of an acquisition-related contingent consideration, higher share-based compensation expense and amortization of intangible assets partially offset by lower transformational initiatives expenses.

Total operating margin for the three months ended January 31, 2022 increased 1 percentage point when compared to the same period last year. Operating margin for the three months ended January 31, 2022 increased due to higher sales volume partially offset by increases in operating expenses.

Income from operations for the three months ended January 31, 2022 increased $48 million or 15 percent on a corresponding revenue increase of $126 million.

At January 31, 2022, our headcount was approximately 17,200 as compared to approximately 16,400 at January 31, 2021.

Other income (expense), net

In the three months ended January 31, 2022 other income and expense, net includes income of $3 million related to the provision of site service costs to, and lease income from Keysight Technologies, Inc. The costs associated with these services are reported within income from operations. In the three months ended January 31, 2022 other income and expense, net also includes net loss on the fair value of equity investments of approximately $47 million.

In the three months ended January 31, 2021 other income and expense, net includes a $5 million loss on the extinguishment of debt. In the three months ended January 31, 2021 other income and expense also includes income of $3 million related to the provision of site service costs to, and lease income from Keysight Technologies, Inc. The costs associated with these services are reported within income from operations.

Income Taxes

For the three months ended January 31, 2022, our income tax expense was $36 million with an effective tax rate of 11.3 percent. The income taxes for the three months ended January 31, 2022 include the excess tax benefits from stock-based compensation of $16 million. For the three months ended January 31, 2022, our effective tax rate and the resulting provision for income taxes were also impacted by the expiration of various foreign statutes of limitations which resulted in the recognition of previously unrecognized tax benefits of $8 million.

Our calculation of income tax expense for the three months ended January 31, 2022 is dependent in part on forecasts of full year results. The impact of the COVID-19 outbreak on the economic environment is uncertain and may change these forecasts, which could impact tax expense.

For the three months ended January 31, 2021, our income tax expense was $24 million with an effective tax rate of 7.7 percent. The income taxes for the three months ended January 31, 2021 include the excess tax benefits from stock-based compensation of $20 million. For the three months ended January 31, 2021, our effective tax rate and the resulting provision for income taxes were also impacted by the expiration of various foreign statutes of limitations which resulted in the recognition of previously unrecognized tax benefits of $16 million.

In the U.S., tax years remain open back to the year 2018 for federal income tax purposes and for significant states. In other major jurisdictions where the company conducts business, the tax years generally remain open back to the year 2012.

With these jurisdictions and the U.S., it is reasonably possible there could be significant changes to our unrecognized tax benefits in the next twelve months due to either the expiration of a statute of limitation or a tax audit settlement which will be partially offset by an anticipated tax liability related to unremitted foreign earnings, where applicable. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, management is unable to estimate the range of possible changes to the balance of our unrecognized tax benefits.

Segment Overview

In the first quarter of fiscal year 2022, we announced a change in organizational structure designed to enable our growth strategies and strengthen our focus on customers. Our chemistries and supplies business and our remarketed instruments business moved from our Agilent CrossLab business segment to our life sciences and applied markets business segment. Service revenue and cost of sales related to the previous acquisition of BioTek moved from our life sciences and applied markets business segment to our Agilent CrossLab business segment. Following this reorganization, we continue to have three business segments (life sciences and applied markets, diagnostics and genomics and Agilent CrossLab), each of which continues to comprise a reportable segment. We are reporting under this new structure beginning with this Quarterly Report on Form 10-Q for the period ended January 31, 2022 and historical financial segment information has been recast to conform to this new presentation in our financial statements and accompanying notes. There was no change to our diagnostics and genomics business segment.

Life Sciences and Applied Markets

Our life sciences and applied markets business provides application-focused solutions that include instruments and software that enable customers to identify, quantify and analyze the physical and biological properties of substances and products, as well as enable customers in the clinical and life sciences research areas to interrogate samples at the molecular and cellular level. Key product categories include: liquid chromatography ("LC") systems and components; liquid chromatography mass spectrometry ("LCMS") systems; gas chromatography ("GC") systems and components; gas chromatography mass spectrometry ("GCMS") systems; inductively coupled plasma mass spectrometry ("ICP-MS") instruments; atomic absorption ("AA") instruments; microwave plasma-atomic emission spectrometry ("MP-AES") instruments; inductively coupled plasma optical emission spectrometry ("ICP-OES") instruments; raman spectroscopy; cell analysis plate based assays; flow cytometer; real-time cell analyzer; cell imaging systems; microplate reader; laboratory software for sample tracking; information management and analytics; laboratory automation and robotic systems; dissolution testing; vacuum pumps and measurement technologies. Our consumables portfolio is designed to improve customer outcomes. Most of the portfolio is vendor neutral, meaning Agilent can serve and supply customers regardless of their instrument purchase choices. Solutions range from chemistries to supplies. Key product categories in consumables include GC and LC columns, sample preparation products, custom chemistries, and a large selection of laboratory instrument supplies.

Net Revenue

						Three Months Ended																		Year over Year Change
						January 31,																		Three
						2022						2021																		Months
						(in millions)
Net revenue						$	976					$	923																	6%

Life sciences and applied markets business revenue for the three months ended January 31, 2022 increased 6 percent when compared to the same period last year. For the three months ended January 31, 2022, foreign currency movements had an overall unfavorable impact on revenue growth of 1 percentage point when compared to the same period last year.

Geographically, revenue increased 14 percent in the Americas with no currency impact, increased 3 percent in Europe with a 3 percentage point unfavorable currency impact and increased 2 percent in Asia Pacific with a 1 percentage point unfavorable currency impact for the three months ended January 31, 2022 compared to the same period last year. For the three months ended January 31, 2022, revenue growth was strong across all businesses.

For the three months ended January 31, 2022, results by end markets were mixed with pharmaceutical, chemical and energy and diagnostics and clinical markets delivering strong revenue growth while forensics and environmental, food and academia declined when compared to the same period last year. Revenue growth in the pharmaceutical end market was primarily driven by our liquid chromatography, consumables, liquid chromatography mass spectrometry and spectroscopy businesses. Revenue growth in chemical and energy was mainly driven by strength in our gas chromatography, spectroscopy and consumables portfolio while diagnostics and clinical growth was mainly led by liquid chromatography mass spectrometry products.

For the three months ended January 31, 2022, the food end market declined mainly due to weakness in liquid chromatography mass spectrometry and gas chromatography applications in China partially offset by consumables products when compared to the same period last year. Forensics and environmental weakness was mainly driven by declines in gas chromatography mass spectrometry and gas chromatography spectroscopy products. Academia and government decline was mainly in the U.S. and China. In the U.S., the decline was due to the impact of the Omicron surge as many universities went back to remote-learning after the holidays. In China, the declines were due to both the Omicron surge and the Lunar New Year impacting delays in delivery of our instruments.

Looking forward, despite supply chain uncertainties and the adverse effects of the COVID-19 pandemic, we are optimistic about our long-term growth opportunities in the life sciences and applied markets as our broad portfolio of products and solutions are well suited to address customer needs. We anticipate growth from our new product introductions and acquisitions in the last couple of years as we continue to invest in expanding and improving our applications and solutions portfolio. While we anticipate volatility in our markets, we expect continued growth across most end markets in the long term.

Operating Results

						Three Months Ended																		Year over Year Change
						January 31,																		Three
						2022						2021																		Months
(in millions, except margin data)
Gross margin						60.5		%				60.3		%																—
Research and development						$	74					$	65																	13%
Selling, general and administrative						$	234					$	227																	3%
Operating margin						28.9		%				28.6		%																—
Income from operations						$	282					$	265																	7%

Gross margin for products and services for the three months ended January 31, 2022, was flat when compared to the same period last year. Gross margin for the three months ended January 31, 2022 was impacted by higher sales volume, price increases and favorable hedging gains which were mostly offset by higher materials costs, wages and variable pay.

Research and development expenses for the three months ended January 31, 2022, increased 13 percent when compared to the same period last year. Research and development expenses for the three months ended January 31, 2022 increased due to higher wages and program investments in software and informatics and higher share-based compensation expense partially offset by favorable currency impact.

Selling, general and administrative expenses for the three months ended January 31, 2022, increased 3 percent when compared to the same period last year. Selling, general and administrative expenses for the three months ended January 31, 2022 increased due to higher wages, commissions and share-based compensation expense partially offset by favorable currency movements.

Operating margin for products and services for the three months ended January 31, 2022 was flat when compared to the same period last year. Operating margin for the three months ended January 31, 2022 increased due to higher sales volume which was partially offset by higher material costs, program expenses, wages and share-based compensation expense.

Income from operations for the three months ended January 31, 2022, increased $17 million or 7 percent on a corresponding revenue increase of $53 million. Income from operations for the three months ended January 31, 2022 increased primarily due to higher sales volume.

Diagnostics and Genomics

Our diagnostics and genomics business includes the genomics, nucleic acid contract manufacturing and research and development, pathology, companion diagnostics, reagent partnership and biomolecular analysis businesses.

Our diagnostics and genomics business is comprised of six areas of activity providing active pharmaceutical ingredients ("APIs") for oligo-based therapeutics as well as solutions that include reagents, instruments, software and consumables, which enable customers in the clinical and life sciences research areas to interrogate samples at the cellular and molecular level. First, our genomics business includes arrays for DNA mutation detection, genotyping, gene copy number determination, identification of gene rearrangements, DNA methylation profiling, gene expression profiling, as well as next generation sequencing ("NGS") target enrichment and genetic data management and interpretation support software. This business also includes solutions that enable clinical labs to identify DNA variants associated with genetic disease and help direct cancer therapy. Second, our nucleic acid solutions business provides equipment and expertise focused on production of synthesized oligonucleotides under pharmaceutical good manufacturing practices ("GMP") conditions for use as API in an emerging class of drugs that utilize nucleic acid molecules for disease therapy. Third, our pathology solutions business is focused on product offerings for cancer diagnostics and anatomic pathology workflows. The broad portfolio of offerings includes immunohistochemistry ("IHC"), in situ hybridization ("ISH"), hematoxylin and eosin ("H&E") staining and special staining. Fourth, we also collaborate with a number of major pharmaceutical companies to develop new potential tissue and liquid-based pharmacodiagnostics, also known as companion diagnostics, which may be used to identify patients most likely to benefit from a specific targeted therapy. Fifth, the reagent partnership business is a provider of reagents used for turbidimetry and flow cytometry. Finally, our biomolecular analysis business provides complete workflow solutions, including instruments, consumables and software, for quality control analysis of nucleic acid samples. Samples are analyzed using quantitative and qualitative techniques to ensure accuracy in further genomics analysis techniques utilized in clinical and life science research applications.

Net Revenue

						Three Months Ended																		Year over Year Change
						January 31,																		Three
						2022						2021																		Months
						(in millions)
Net revenue						$	339					$	294																	15%

Diagnostics and genomics business revenue for the three months ended January 31, 2022 increased 15 percent when compared to the same period last year. For the three months ended January 31, 2022, foreign currency movements had an overall unfavorable impact on revenue growth of 2 percentage points when compared to the same period last year.

Geographically, revenue increased 24 percent in the Americas with no currency impact, increased 1 percent in Europe with a 3 percentage point unfavorable currency impact and increased 17 percent in Asia Pacific with a 4 percentage point unfavorable currency impact for the three months ended January 31, 2022 compared to the same period last year. For the three months ended January 31, 2022, the increase in the Americas was driven by strong performance in our nucleic acid solutions and genomics portfolios. In Europe, revenue growth from the pathology business was mostly offset by a decline in the genomics portfolio, driven by the COVID-19 related instrument and reagents sales decreasing from the prior year. The growth in Asia Pacific was driven by strong performance across the genomics and pathology portfolio.

For the three months ended January 31, 2022, revenue performance in the diagnostics and genomics business was led by strong revenue growth in our nucleic acid solutions business. All key end markets had revenue increases when compared to the same periods last year.

Looking forward, we are optimistic about our long-term growth opportunities in our end markets and continue to invest in expanding and improving our applications and solutions portfolio. We remain positive about our growth in our end markets as our product portfolio around OMNIS, PD-L1 assays and SureFISH continues to gain strength with our customers in clinical oncology applications, and our next generation sequencing target enrichment solutions continue to be adopted. Market demand in the nucleic acid solutions business related to therapeutic oligo programs continues, and with our newly opened and planned extension of our nucleic acid solutions production facility in Frederick, Colorado, we are well positioned to serve more of the market demand. The acquisition of Resolution Bioscience will expand our capabilities in NGS-based cancer diagnostics and provide innovative technology to further serve the needs of the fast-growing precision medicine market. We will continue to invest in research and development and seek to expand our position in developing countries and emerging markets.

Operating Results

						Three Months Ended																		Year over Year Change
						January 31,																		Three
						2022						2021																		Months
(in millions, except margin data)
Gross margin						52.8		%				51.6		%																1 ppt
Research and development						$	34					$	29																	18%
Selling, general and administrative						$	77					$	68																	13%
Operating margin						20.1		%				18.6		%																2 ppts
Income from operations						$	68					$	55																	25%

Gross margin for products and services for the three months ended January 31, 2022, increased 1 percentage point when compared to the same period last year. Gross margin in the three months ended January 31, 2022 increased due to higher sales volume more than offsetting higher wages and variable pay.

Research and development expenses for the three months ended January 31, 2022, increased 18 percent when compared to the same period last year. Research and development expenses for the three months ended January 31, 2022 included higher pathology and genomics program investments, higher wages and variable pay and additional expenses related to the Resolution Bioscience acquisition.

Selling, general and administrative expenses for the three months ended January 31, 2022, increased 13 percent when compared to the same period last year. Selling, general and administrative expenses for the three months ended January 31, 2022 increased due to an increase in share based compensation expenses, higher wages and variable pay and additional expenses related to the Resolution Bioscience acquisition.

Operating margin for products and services for the three months ended January 31, 2022 increased 2 percentage points when compared to the same period last year. Operating margin for the three months ended January 31, 2022 improved as the revenue growth more than offset the increase in program investments, wages and variable pay.

Income from operations for the three months ended January 31, 2022 increased $13 million or 25 percent on a corresponding revenue increase of $45 million. Income from operations for the three months ended January 31, 2022 increased due to strong revenue performance.

Agilent CrossLab

The Agilent CrossLab business spans the entire lab with its extensive services portfolio, which is designed to improve customer outcomes. The majority of the portfolio is vendor neutral, meaning we can serve and supply customers regardless of their instrument purchase choices. The services portfolio includes repairs, parts, maintenance, installations, training, compliance support, software as a service, asset management, consulting and various other custom services to support the customers' laboratory operations. Custom services are tailored to meet the specific application needs of various industries and to keep instruments fully operational and compliant with the respective industry requirements.

Net Revenue

						Three Months Ended																		Year over Year Change
						January 31,																		Three
						2022						2021																		Months
						(in millions)
Net revenue						$	359					$	331																	8%

Agilent CrossLab business revenue for the three months ended January 31, 2022 increased 8 percent when compared to the same period last year. Foreign currency movements for the three months ended January 31, 2022 had an overall unfavorable impact on revenue growth of 2 percentage points when compared to the same period last year.

Geographically, revenue increased 6 percent in the Americas with no currency impact, increased 6 percent in Europe with a 4 percentage point unfavorable currency impact and increased 12 percent in Asia Pacific with a 2 percentage point unfavorable currency impact for the three months ended January 31, 2022 compared to the same period last year. During the three months ended January 31, 2022, the solid growth in all three regions was driven by contract repair services and consultative services.

For the three months ended January 31, 2022, the Agilent CrossLab business continued to see low double digit revenue growth from the pharmaceutical market, chemical and energy market and the food market, which together accounts for three-quarters of the Agilent CrossLab business revenues. The environmental and forensics market, as well as the academia and government market, remained subdued with flat growth, following the weakness in the growth of instrument sales in those two markets.

Looking forward, Agilent CrossLab services are well positioned to continue their success in our key end markets by supporting a growing installed base of instruments. Digital and remote capabilities will continue to be a key factor in improving the service quality and the experience to customers. Geographically, the business is well diversified across all regions to take advantage of local market opportunities and to hedge against weakness in any one region.

Operating Results

						Three Months Ended																		Year over Year Change
						January 31,																		Three
						2022						2021																		Months
(in millions, except margin data)
Gross margin						47.5		%				46.8		%																1 ppt
Research and development						$	8					$	9																	(5)%
Selling, general and administrative						$	72					$	70																	2%
Operating margin						25.2		%				23.1		%																2 ppts
Income from operations						$	91					$	76																	19%

Gross margin for the three months ended January 31, 2022 increased 1 percentage point when compared to the same period last year. Higher cash flow hedging gains, higher sales volumes and targeted price increases improved margins which were partially offset by higher service delivery costs, such as logistics, parts and labor.

Research and development expenses for the three months ended January 31, 2022 decreased 5 percent when compared to the same period last year. Delays in certain research and development projects led to lower expenditures in the three months ended January 31, 2022.

Selling, general and administrative expenses for the three months ended January 31, 2022 increased 2 percent when compared to the same period last year, primarily due to higher wages and higher sales commissions.

Operating margin for products and services for the three months ended January 31, 2022 increased 2 percentage points when compared to the same period last year, mostly driven by higher cash flow hedging gains and higher sales volume.

Income from operations for the three months ended January 31, 2022 increased $15 million or 19 percent on a corresponding revenue increase of $28 million. Income from operations for the three months ended January 31, 2022 increased primarily due to higher sales volume.

FINANCIAL CONDITION

Liquidity and Capital Resources

We believe our cash and cash equivalents, cash generated from operations, and ability to access capital markets and credit lines will satisfy, for at least the next twelve months, our liquidity requirements, both globally and domestically, including the following: working capital needs, capital expenditures, business acquisitions, stock repurchases, cash dividends, contractual obligations, commitments, principal and interest payments on debt, and other liquidity requirements associated with our operations.

Our financial position as of January 31, 2022 consisted of cash and cash equivalents of $1,113 million as compared to $1,484 million as of October 31, 2021.

We may, from time to time, retire certain outstanding debt of ours through open market cash purchases, privately-negotiated transactions or otherwise. Such transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Net Cash Provided by Operating Activities

Net cash inflow from operating activities was $255 million for the three months ended January 31, 2022 compared to cash inflow of $238 million for the same period in 2021. Net cash paid for income taxes in the three months ended January 31, 2022 was approximately $22 million compared to income taxes paid of $52 million for the same period in 2021. Other assets and liabilities, for the three months ended January 31, 2022, had cash inflow of $40 million compared to cash outflow of $95 million for the same period in 2021. Cash inflow in the three months ended January 31, 2022 compared to cash outflow in 2021 was largely the result of higher Non U.S. transaction tax refunds, lower income tax payments and higher deferred revenue accrual in 2022.

In the three months ended January 31, 2022, accounts receivable used cash of $46 million compared to cash used of $31 million for the same period in 2021. Days’ sales outstanding as of January 31, 2022 and 2021 was 65 days and 63 days, respectively. Cash used for inventory was $54 million for the three months ended January 31, 2022 compared to cash used of $35 million for the same period in 2021. Inventory days on-hand was 103 days as of January 31, 2022 compared to 96 days as of January 31, 2021 mainly due to increased inventory levels to meet customer needs and to compensate for long lead time in ordering from our suppliers. In the three months ended January 31, 2022, accounts payable provided cash of $37 million compared to cash provided of $43 million for the same period in 2021. The change in the employee compensation and benefits liability was $210 million for the three months ended January 31, 2022 compared to cash used of $88 million for the same period in 2021. This was largely due to an increase in variable and incentive payments of $201 million in 2022 compared to $119 million in 2021.

We contributed approximately $5 million to our defined benefit plans in both the three months ended January 31, 2022 and 2021, respectively. Our annual contributions are highly dependent on the relative performance of our assets versus our

projected liabilities, among other factors. We expect to contribute approximately $14 million to our defined benefit plans during the remainder of 2022.

Net Cash Used in Investing Activities

Net cash used in investing activities was $79 million for the three months ended January 31, 2022 as compared to net cash used in investing activities of $42 million in the same period of 2021. Investments in property, plant and equipment were $75 million for the three months ended January 31, 2022 compared to $41 million in the same period of 2021. The increase in our investments in property plant and equipment is primarily due to the expansion of our Frederick, Colorado site. We expect that total capital expenditures for the current year will be approximately $300 million. Cash used to purchase fair value investments for the three months ended January 31, 2022 was $3 million compared to $1 million in the same period in 2021.

Net Cash Used in Financing Activities

Net cash used in financing activities for the three months ended January 31, 2022 was $546 million compared to net cash used in financing activities of $316 million for the same period of 2021.

Treasury Stock Repurchases

Our 2021 repurchase program authorizes the purchase of up to $2.0 billion of our common stock at the company's discretion and has no fixed termination date. During the three months ended January 31, 2022, we repurchased and retired 2.9 million shares for $447 million under this authorization. As of January 31, 2022, we had remaining authorization to repurchase up to approximately $1.13 billion of our common stock under the 2021 repurchase program.

During the three months ended January 31, 2021, we repurchased and retired 2.9 million shares for $344 million under the 2019 repurchase program. Effective February 18, 2021, the 2019 repurchase program was terminated and was replaced by the 2021 share repurchase program. The remaining authorization under the 2019 repurchase plan of $193 million expired on February 18, 2021.

Dividends

During the three months ended January 31, 2022 and 2021, we paid cash dividends of $0.210 per common share or $63 million, and $0.194 per common share or $59 million, respectively, on the company's common stock. The timing and amounts of any future dividends are subject to determination and approval by our board of directors.

Credit Facilities and Short-Term Debt

On March 13, 2019, we entered into a credit agreement with a group of financial institutions which, as amended, provided for a $1 billion five-year unsecured credit facility that will expire on March 13, 2024 and incremental term loan facilities in an aggregate amount of up to $500 million. On April 21, 2021, we entered into an incremental assumption agreement, pursuant to which the aggregate amount available for borrowing under the revolving credit facility was increased to $1.35 billion and the aggregate amount available for incremental facilities was refreshed to remain at $500 million. As of January 31, 2022, we had no borrowings outstanding under the credit facility and no borrowings under the incremental facilities. We were in compliance with the covenants for the credit facility during the three months ended January 31, 2022.

Commercial Paper

Under our U.S. commercial paper program, the company may issue and sell unsecured, short-term promissory notes in the aggregate principal amount not to exceed $1.35 billion with up to 397-day maturities. At any point in time, the company intends to maintain available commitments under its revolving credit facility in an amount at least equal to the amount of the commercial paper notes outstanding. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time. The proceeds from issuances under the program may be used for general corporate purposes. During the three months ended January 31, 2022, we borrowed and repaid $240 million. As of January 31, 2022, we had no borrowings outstanding under our U.S. commercial paper program.

Long-Term Debt

There have been no changes to the principal, maturity, interest rates and interest payment terms of the Agilent outstanding senior notes in the three months ended January 31, 2022 as compared to the senior notes as described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021.

Other

Our commitments for indirect material and services increased by $59 million from $83 million as reported in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021. These commitments are related to a variety of suppliers including IT support service providers. Our commitments to contract manufacturers and suppliers increased by $129 million from $901 million as reported in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021.These commitments are related to a variety of suppliers, and we use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, we issue purchase orders with estimates of our requirements several months ahead of the delivery dates. These open purchase orders with our suppliers have not yet been received and our agreements usually provide us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the firm orders being placed. There were no other substantial changes from our Annual Report on Form 10-K for the fiscal year ended October 31, 2021 to our contractual commitments in the first three months of fiscal year 2022. We have no other material non-cancelable guarantees or commitments.

Other long-term liabilities as of January 31, 2022 and October 31, 2021 include $234 million and $241 million, respectively, related to long-term income tax liabilities. Of these amounts, $110 million and $117 million related to uncertain tax positions as of January 31, 2022 and October 31, 2021, respectively. We are unable to accurately predict when these amounts will be realized or released. However, it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next twelve months due to either the expiration of a statute of limitations or a tax audit settlement. The remaining $124 million in other long-term liabilities relates to the U.S. transition tax payment which is due in installments over the next four years.