Agilent Technologies, Inc. (NYSE: A) Q1 2022 earnings call dated Feb. 22, 2022
Corporate Participants:
Parmeet Ahuja — Vice President, Investor Relations
Mike McMullen — President and Chief Executive Officer
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Sam Raha — Senior Vice President, Agilent, President, Diagnostics and Genomics Group
Jacob Thaysen — Senior Vice President, President, Life Sciences and Applied Markets Group
Padraig McDonnell — Senior Vice President, President and Chief Commercial Officer Agilent CrossLab Group
Analysts:
Rachel Vatnsdal — J.P. Morgan — Analyst
Dave — Goldman Sachs — Analyst
Vijay Kumar — Evercore ISI — Analyst
Brandon Couillard — Jefferies — Analyst
Puneet Souda — SVB Leerink — Analyst
Patrick Donnelly — Citigroup — Analyst
Jack Meehan — Nephron Research LLC — Analyst
Michael Ryskin — Bank of America Securities — Analyst
Thomas Petersen — Baird — Analyst
Daniel Brennan — Cowen — Analyst
Paul Knight — KeyBanc Capital Markets Inc. — Analyst
Presentation:
Operator
Hello, and welcome to the Q1 2022 Agilent Technologies’ Earnings Conference Call. My name is Emily and I’ll be coordinating the call today. [Operator Instructions]
I now have the pleasure of handing the call over to our host, Parmeet Ahuja, Vice President, Investor Relations at Agilent Technologies. Please go ahead.
Parmeet Ahuja — Vice President, Investor Relations
Thank you, Emily, and welcome everyone to Agilent’s conference call for the first quarter of fiscal year 2022. With me are Mike McMullen, Agilent President and CEO, and Bob McMahon, Agilent’s Senior Vice President and CFO. Joining in the Q&A after Mike and Bob’s comments will be Jacob Thaysen, President of the Agilent Life Science and Applied Markets Group, Sam Raha, President of the Agilent Diagnostics and Genomics Group, and Padraig McDonnell, President of the Agilent CrossLab Group. This presentation is being webcast live. The news release for our Q1 financial results, investor presentation, and information to supplement today’s discussion along with a recording of this webcast are available on our website at www.investor.agilent.com.
Today’s comments by Mike and Bob will refer to non-GAAP financial measures. You will find the most directly comparable GAAP financial metrics and reconciliations on our website. Unless otherwise noted, all references to increases or decreases in financial metrics are year-over-year and references to revenue growth are on a core basis. Core revenue growth excludes the impact of currency and any acquisitions and divestitures completed within the past 12 months. Guidance is based on exchange rates as of January 31.
As previously announced, beginning in the first quarter of fiscal 2022, we implemented certain changes to our segment reporting structure. We have recast our historical segment information to reflect these changes. These changes have no impact on our Company’s consolidated financial statements. 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.
Mike McMullen — President and Chief Executive Officer
Thanks, Parmeet, and thanks, everyone, for joining our call today. Our momentum continues. The Agilent team delivered a strong start to 2022 in Q1 exceeding expectation of the both the top and bottom line. Our Q1 revenues are $1.67 billion. This is up 9% core and up 8% reported. This is on top of going to 11% core in Q1 a year ago. Excluding COVID-19 related revenues, our core growth is even better at 10% this quarter.
We continue to see strength in our order book with robust order intake throughout the quarter. In fact, Q1 orders grew roughly twice as fast as revenues. Q1 operating margins are a healthy 26.3%, up 80 basis points from last year. Earnings per share of $1.21 are up 14%. The EPS increase was a tough comparison of 31% growth in the first quarter of 2021. These strong results have been achieved in a very dynamic environment. I could not be more proud of the Agilent team’s ability to execute and deliver.
Let’s take a closer look at some of what’s driving our strong results. Bob will go into more detail later in the call but our two largest markets continued strong double-digit growth. Our Pharma business, Agilent’s largest market continues to lead the way for us growing 17%. Global end market demand for our products and services remained very strong.
BioPharma grew 32% while Small Molecule growth came in about in at a robust 9%. The momentum in our Chemical and Energy business also continues delivering 15% growth in the quarter. This was driven by mid-teens revenue increases in Chemicals and Advanced Materials. PMIs remain positive, along with our overall outlook in the Chemicals, Energy and Advanced Materials markets. On a geographic basis, our results led by 13% growth in the Americas. This is on top of 13% growth in Q1 a year ago.
China grew 3% on top of 25% growth in Q1 of last year and was impacted by the timing of Lunar New Year, as noted in our November call. Demand in China remains strong as orders grew high teens in the first quarter, we continue to invest in China — for China to further strengthen our ability to serve our customers. We recently announced a $20 million expansion our Shanghai manufacturing center to meet growing demand for locally made liquid chromatography, spectroscopy and mass spec systems. Looking at performance by business unit, the Life Science and Applied Markets Group generated revenue of $976 million, an increase of 7% on a core basis.
This is versus a 10% core growth in Q1 of 2021. LSAG is thereby strength in the Pharma and Chemical and Energy markets. From a platform perspective customer interest and purchase of our chromatography systems and mass spec offerings are very robust. Our chemistries and supplies business, which moved over from ACG this year continues to do very well, delivering double-digit growth. We also continue to invest and strategically partner for future growth. Late last week we announced the acquisition of very exciting artificial intelligence technology that will be integrated into our industry-leading chromatography businesses.
This technology has the potential to significantly improve laboratory productivity and accuracy by automating manual interpretation of chromatography data. We believe that this capability will be very well received by the high throughput labs Atlas serves around the world. This acquisition is an example of our build and buy growth strategy as accomplice to work, our internal R&D teams are doing to develop these types of capabilities for other Agilent platforms. During the quarter, we also announced a partnership with Lonza to integrate Agilent’s analytics technologies and techniques into Lonza’s Cocoon Platform cell therapy manufacturing workflow.
The collaboration has the potential to transform the way personalized cell therapies are manufactured. In addition to ensure we can meet the strong and growing demand for our Cell Analysis offerings. We also recently announced plans to invest more in the $30 billion for the construction of a new manufacturing site in Chickpea, Massachusetts. The Agilent’s CrossLab Group posted services revenues of $359 million. This is up 10% core against 11% Q1 2021 core growth compare. This growth is broad based with strength in service contracts, preventative maintenance, compliance, education and Informatic Enterprise services.
Our focus on providing a differentiated customer experience that leverages our large-scale and talented customer support team continues to pay off. Our connect rate continues to improve and our installed base continues to expand, both boding well for continued strength in our services business. The Diagnostics and Genomics Group delivered revenue of $339 million, up 14% core versus Q1 ’21 and core growth of 15%. Our excellent growth is broad based across pathology, genomics and NASD. Our pathology business grew roughly 10% with strength across all regions. Our core genomics business grew low teens with strength in target enrichment and our Genomics quality control product lines. The NASD team continue to deliver driving 45% plus growth in the quarter.
Meanwhile, the additional capacity expansion at our Frederick, GMP oligo manufacturing facility continues to proceed as planned, we continue to spec– inspect this capacity to come online by the end of calendar year 2022. Our Resolution Bioscience team achieved a major milestone in the first quarter by completing the pre-market approval submission for the resolution CtDx’s FIRST liquid biopsy as a component assay as a companion diagnostic. This was done in conjunction with Mirati Therapeutics for non-small cell lung cancer and is currently under review by the FDA. It is the first and what we hope will be several indications for liquid biopsy assays.
I am pleased with how we have started the year. Building our Q1 results, continued order strength and execution prowess. We are increasing our full-year financial guidance, we are raising our core growth guidance to a range of 7% to 8%, up 125 basis points at the midpoint from our prior guidance. Fiscal year 2022 non-GAAP EPS guidance is increased to a range of $4.80 to $4.90 per share, going 11% to 13% over last year. Bob will define the Q2 outlook along with more detail on our improved full-year guidance. We’re very pleased with our Q1 results and are looking forward to another strong quarter and year ahead. I’m also very confident in our team and our ability to execute and deliver to our customers and shareholders, no matter what the challenge. Thank you for being on the call today and look forward to taking your questions later.
However, for right now, I will now hand the call off to Bob. Bob?
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Thanks, Mike, and good afternoon everyone and my remarks today, I’ll provide some additional details on revenue, take you through the income statement and some other key financial metrics. I’ll then finish up with our improved outlook for the full year and our guidance for the second quarter. Unless otherwise noted, my remarks will focus on non-GAAP results, as Mike described we posted very strong results in Q1 and exceeded expectations, revenue was $1.67 billion, up a reported 8.1%. Core growth was even better at 8.9% as we overcame a greater than expected negative exchange rate impact of 1.3 points while M&A added half a point to growth.
Q1 core growth was 170 basis points higher than the top end of our guidance. In addition, after adjusting for the one point headwind due to COVID-19 revenues. Our core growth outside of COVID was roughly 10% and as Mike said, order growth was even better. Again a very strong start to the year. Now moving to our end market performance, our results were driven by a continuation of strong growth in Pharma led by Biopharma while momentum in Chemical and Energy and our strong results and Diagnostics and clinical also led the way for us in Q1. Our largest market, Pharma grew 17% during that quarter. On top of 20% growth last year.
The Small Molecule sub segment delivered high single-digit growth while Large Molecule continue to strong performance growing 32%. We are seeing our ongoing investments in Biopharma, paying off it’s demand was strong throughout the quarter. We continue to believe in the long-term growth potential of the Pharma market and that our business will drive above market growth. Chemical and Energy continue to show strength growing 15% during the quarter. Growth in Chemicals and Advanced Materials led the way, and we expect continued growth in this business.
Diagnostics in Clinical grew 11% on top of 9% growth last year with all three business groups again, expanding revenues nicely during the quarter. Our expansion of LC/MS equipment into the clinical space continues to do well and our growth in China was particularly strong, increasing more than 30% as we continue to penetrate this market. The academia and government market was flat in Q1. The business remained resilient despite Omicron impacts in the U.S. as some universities delayed in person learning in the period following the holiday break in December and reduced lab activity in January. We have seen lab activity improve in the February and believe the funding environment remains positive. The Food segment declined low single digits against a very strong 22% growth comparison from last year.
The Americas were a bright spot for us growing in the mid teens, while Europe was flat and China was down due to a difficult comparisons and Lunar New Year timing. Closing out the performance of the markets, Environmental and Forensics, our smallest market was down 11%. For Agilent overall on a geographic basis, all regions again grew in Q1, led by Americas at 13% and Europe at 6%. China grew 3% on top of 25% in Q1 last year. In addition to the effect of Lunar New Year timing, which should benefit us in Q2.
Now turning to the rest of the P&L. First quarter gross margin was 56.1%, up 30 basis points from a year ago. Our team has done a good job increasing productivity and pricing has helped offset higher input and logistics costs. Operating margins of 26.3% increased to 80 basis points even as we have increased our R&D investments. Our investments in digital technology for our internal operations also continue to pay off as we leverage our infrastructure across the company using our One Agilent approach.
Our tax rate of 14.25% came in as expected, and we had 303 million diluted shares outstanding slightly lower than projected. Putting it all together, we delivered EPS of $1.21, up 14% versus last year after growing 31% in Q1 of fiscal 2021. We continue to produce strong operational cash flow generating $255 million in the quarter beating our forecast. We also invested $75 million in capital expenditures during Q1. And during the quarter, we took advantage of market volatility to repurchase $447 million worth of shares, and we also paid out $63 million in dividends returning a combined total of $510 million to shareholders. Our balance sheet remains very healthy with a net leverage ratio of 0.9 times, and given current market conditions, we expect to continue to be aggressive in deploying capital.
Now let’s move on to our improved full year guidance and our outlook for the second quarter. As Mike indicated, we are raising our full year core revenue growth to an expected range of 7% to 8%, up from our initial guide in November of 5.5% to 7%. Excluding the COVID-related half point headwind this year, our new full year core revenue growth results in 7.5% to 8.5%. This new guidance takes into account our strong Q1 results and an improved outlook for the rest of the year on a core basis. While we’ve increased our core growth expectations, the dollar has strengthened considerably, doubling the estimated exchange rate headwinds from our initial guide to $110 million for the year while M&A impact remains relatively unchanged.
Putting it all together, we’re expecting full year revenues to be between $6.67 billion and $6.73 billion. In addition, we’ve increased our EPS guidance for the full year to $4.80 to $4.90 per share up from the previous range of $4.76 to $4.86, and representing 11% to 13% growth versus fiscal year 2021. For Q2, we’re expecting revenue to range from $1.595 billion to $1.625 billion. This represents core growth between 7% and 9% after adjusting for an expected 0.5 point impact related to COVID year-on-year. And we expect reported growth in the range of 4.6% to 6.6%.
Exchange rates are expected to have a negative impact of about 2.3% in the quarter while M&A is expected to contribute 0.3 points to growth. In closing out our Q2 guidance, non-GAAP EPS is expected to be in the range of $1.10 to $1.12 up 13% to 15% versus the prior year. This is based on a 14.25% tax rate and 303 million diluted shares outstanding. Again, the Agilent team performed extremely well in Q1, and with the solid growth we’re seeing in orders and the team’s willingness and ability to take on every challenge that comes their way, I’m confident that Q2 and our full year results will also be strong.
With that, Parmeet, back to you for the Q&A.
Parmeet Ahuja — Vice President, Investor Relations
Thanks, Bob. Emily, if you could please provide instructions for the Q&A now.
Questions and Answers:
Operator
Of course. [Operator Instructions] Our first question for the call today comes from Tycho Peterson from J.P. Morgan. Tycho, your line is open.
Rachel Vatnsdal — J.P. Morgan — Analyst
Great. Hi, this is Rachel on for Tycho. Thanks for taking the questions. So first off, great to hear that you submitted that companion diagnostic package for FDA review, so can you just give us the expected timeline for when you think you’ll get that back and if anything is expected in contribution for this guide for ’22?
Mike McMullen — President and Chief Executive Officer
Rachel, thanks for that question. I’m going to pass it over to Sam.
Sam Raha — Senior Vice President, Agilent, President, Diagnostics and Genomics Group
Yeah, Rachel. Thank you very much for the question. We are very excited about having completed all the modules and made the submission for the companion diagnostic related to Mirati as aggressive. As you know now, we have done what we need to and we’ll engage with the FDA as they come back with questions. We can’t — we don’t exactly are able to control the timeline. And as you likely know, the actual approval would be very much tied to the approval of the drug itself, which of course we have no control over either. But we are very excited about the progress.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah, I would say to…
Rachel Vatnsdal — J.P. Morgan — Analyst
Great and then…
Robert W. McMahon — Senior Vice President, Chief Financial Officer
To the following question.
Mike McMullen — President and Chief Executive Officer
Yeah, Rachel, I think Bob had to build on that.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah, just to build on that as…
Rachel Vatnsdal — J.P. Morgan — Analyst
Yeah.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
As was recently disclosed, the PDUFA date is scheduled for the end of this fiscal — calendar year. So there is not any material revenue associated with this built into our fiscal year guide, but we’re very excited about the opportunity in 2023 and beyond.
Rachel Vatnsdal — J.P. Morgan — Analyst
Noted. And then for the updated guide, can you just give us a rundown on the updated outlook by end market for what’s assumed in the new guide?
Robert W. McMahon — Senior Vice President, Chief Financial Officer
For the full year or second quarter, Rachel?
Rachel Vatnsdal — J.P. Morgan — Analyst
Both would actually be great.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah. So I think very similar to what we had talked about at the very beginning of the year, the two strongest markets will continue to be our Pharma and chemical and energy market. I think as we look at those, certainly, both of them performed better than we expected in Q1 and our expectation is that those will continue to be the driver of growth for the full year. With pharma probably at roughly double-digit growth and chemical and energy about that high single-digit double-digit growth as well, and then followed very closely by diagnostics at high — yeah, in — at high single-digits.
And then, food, environmental, and academic and government are probably in the low-to-mid single digits, which is pretty consistent with our expectations at the beginning of the year. And it’s slightly different but same directional for Q2 with pharma probably being a little stronger.
Rachel Vatnsdal — J.P. Morgan — Analyst
Got it. And then for chemical and energy, can you just talk about if we see any risk coming from Russia and Ukraine? And then, also if you could just touch on that decline 11% this quarter in Environmental, how much of the headwind was COVID for that segment? Is there anything else underlying in that market that’s really changed relative to your prior expectation?
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah, I would say for Chemical and Energy, as you know, I mean our business is really globally based. And so, as of right now we don’t see any material impact to the chemical and energy market or our forecast going forward. Obviously, we’re watching that closely. And then, I think for environmental and forensics, it’s our smallest market and can be lumpy. There was some impact associated with Chinese Lunar or Lunar New Year in China, but we haven’t seen any impact there. What I would say is we are starting to see some of the disbursements more in our order funnel than in revenue associated with the Infrastructure initial bill here in the United States. So I wouldn’t read anything into it in terms of it changing in fundamental demand.
Rachel Vatnsdal — J.P. Morgan — Analyst
Great. Thanks for taking the questions.
Mike McMullen — President and Chief Executive Officer
You’re quite welcome.
Operator
Our next question today comes from Matthew Sykes from Goldman Sachs. Matthew, your line is open.
Dave — Goldman Sachs — Analyst
Hey, guys. This is Dave on for Matt. It was great to see the strength in BioPharma end markets. It’s impressing given the challenging funding markets for these biotech firms. Any additional color you can give on what you’re seeing in the biotech end market and productivity there?
Mike McMullen — President and Chief Executive Officer
Yeah, Dave, first of all, thanks for the recognition. We’re really pleased with that 32% growth print. And we see the underlying demand remaining strong. And Bob, I think it’s fair to say we haven’t really seen any impact at all from what may be happening in the biotech funding arena.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah, we are very excited about our portfolio and how it plays into that space, and are believing that that strong growth will continue going forward.
Dave — Goldman Sachs — Analyst
Fantastic, and any additional color on the drivers of the strong margin expansion in LSAG, and how sustainable is this margin expansion over the rest of the year?
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah, I’ll jump in there. Yeah, the team has done a fantastic job really drive the margin and if we look at it, it’s a combination of being able to cover our costs from the standpoint of the increased logistics and material costs as well as very strong management discipline in the operating expenses. So it’s a combination of being successful in our price, which we talked about before and covering those costs as well as being able to leverage kind of our infrastructure across all three — all three of the groups. And by the way, I think you also called out the digital investments we’re making. So that’s in particular showing up through the SG&A line as we leverage digital investments.
Dave — Goldman Sachs — Analyst
Fantastic, congrats on the quarter guys.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Thanks Dave, most appreciated.
Operator
Our next question comes from Vijay Kumar from Evercore ISI, Vijay please go ahead.
Vijay Kumar — Evercore ISI — Analyst
Hey guys, congrats on a nice quarter…
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Hey Vijay.
Vijay Kumar — Evercore ISI — Analyst
And thanks for taking my question…
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Thank you.
Vijay Kumar — Evercore ISI — Analyst
Bob maybe one near term question here on the second quarter guide the 200 basis points range that’s wider than your normal typical range, your annual guidance range is 100 basis points. Any reason for that wider range and your comps do hit really hard in 2Q. So I’m curious what’s giving you the confidence to get to the upper end of 8.5%, which would imply sequentially flattish with 1Q trends?
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah, so let me take the second part first. As Mike mentioned in the call. Our demand continues to be very strong and we actually had order growth that exceeded revenue growth, almost 2x and that gives us confidence around the order book going into Q2, really across multiple end markets and so that gives us the ability to deliver the or expected to deliver the high growth in Q2. In regards to the range there are still uncertainties out there as Omicron continues to impact mainly Asia right now and then some other uncertainties. So I think that’s just taking a little wider lens. But we still feel good about the business for the full year.
Vijay Kumar — Evercore ISI — Analyst
Yeah. I appreciate the recognition, I think, but what do we posted a 19% core last year…
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah.
Mike McMullen — President and Chief Executive Officer
So, I appreciate that recognition Vijay and as Bob mentioned, the book of business is really quite strong for us. Also our services business is really strong diagnostics. So the current revenue side of the houses is quite strong.
Vijay Kumar — Evercore ISI — Analyst
That’s helpful, Mike. Maybe on the comment on the acquisition contribution during second quarter, it seems to be sequentially down. Is there any seasonality is that business and what is the guide you’re aiming for — you didn’t note the strong order book for 2Q, is the guide assuming perhaps the order book momentum papers down in the back half?
Mike McMullen — President and Chief Executive Officer
Yeah, no, it doesn’t. There is an element of getting tough tougher comps, but the momentum continues. I would say for Q2, it’s more timing than anything else relative to the M&A, it is down slightly sequentially. But I would say in the overall scheme of things, not material.
Vijay Kumar — Evercore ISI — Analyst
Thanks guys.
Mike McMullen — President and Chief Executive Officer
You’re quite welcome our next.
Operator
Up next we have a question from Brandon kuyard from Jefferies. Brandon, Your line is open.
Brandon Couillard — Jefferies — Analyst
Hey, good afternoon. Mike…
Mike McMullen — President and Chief Executive Officer
Hey, Brandon.
Brandon Couillard — Jefferies — Analyst
Yeah, my acquisition it sounds interesting. It’s definitely a buzzword, would you expect to be making incremental investments with this deal and could you just comment on how widely AI tools are going to used in the instrumentation today and when you sort of expect this to be I guess more of a reality to the future?
Mike McMullen — President and Chief Executive Officer
Hey, Brandon happy to do so. I’m going to actually invite Jacob on the response here because. Yeah, we hear a lot about the buzzwords and when the team first came to me started talking about this opportunity we said well in actuality, there is a lot more than buzzwords here. We actually have some lighthouse customers using using this capability already and as you’ll hear from Jacob it really drives productivity for those high volume labs. So we think for certain segments market this is actually going to be, it’s going to be a reality and Jacob why don’t you build on my comments there, if you don’t mind.
Jacob Thaysen — Senior Vice President, President, Life Sciences and Applied Markets Group
Yes,sure, thanks for the question, Brandon. I’m very excited about this also and bringing the Virtual Control team here into Agilent and it might be a buzzword, but we have really seen that it really makes a difference. And first of all it fit very well into Informatic strategy where we all about digital, I think Lonza created that both scientifically and productivity wise for our customers.
Here, the first product realization, which is already been prototype we aiming to what a part of the — that is very prone for AI right now and that is really the manual interpretation of commercial growth that Mike also mentioned and usually labs are spending highly trained chemist to go out and do manual peak integration, which is that tedious process and you can imagine if you have a high volume lab that’s a lot of investment going into this area and active Virtual Control here have already proven with the customers that they can take a substantial part of that work and actually automated — automate that. So we’re very excited about that we’re going after the LC/MS business for us.
We have a substantial installed base, and we actually believe that we can implement this year in the second part of the fiscal 2002 and now. Long term, we do believe that it’s a great opportunity to provide those algorithms also across our analytical platforms and also for all applications like QC beliefs and predictive maintenance and other things. So even though it’s the buzzword, there is a lot of real products behind this and I’m very excited about it. Mike?
Mike McMullen — President and Chief Executive Officer
Thanks, Jacob.
Brandon Couillard — Jefferies — Analyst
Thanks a lot, just one follow-up for Bob. Curious, just elaborate a bit more about the book-to-bill in the first quarter and then a couple of just housekeeping was the moving the year impact kind of in lines with plan and in the last quarter you talked about $15 million of kind of delayed orders were all those recruited in the first quarter? Just kind of update on that.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Brandon as usual your notes are quite, quite accurate and — so let me address a couple of those things. So the Lunar New Year impact came in, kind of as we, as we anticipated, which should come back into Q2 that transit time or that $15 million that came in, but we haven’t seen really the improvement. So that’s still opportunities in the second half of this year. Our end of the quarter coincided with the large snow storm in the, in the U.S. but the shipments were out and we still were able to deliver. In terms of the the first question was about Lunar…
Mike McMullen — President and Chief Executive Officer
Again yeah. Yeah. Okay.’
Robert W. McMahon — Senior Vice President, Chief Financial Officer
I think that both — I think going to both, Brandon we missed something?
Brandon Couillard — Jefferies — Analyst
So just to be quantify the book to bill.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Okay. Yeah, quantify the book to bill. Yeah I knew that there was something else, I was trying to avoid that one on purpose, because we’re not going to provide that. But what I can tell you is that the growth rate of our orders was twice as much as the revenue growth and I would say our backlog is the highest it’s ever been.
Mike McMullen — President and Chief Executive Officer
And Brandon, this is Mike. I would just add one comment there is one word in my script that really wanted to make sure they emphasize here throughout the quarter. So this wasn’t just a calendar December year-end kind of story. We saw this order strength throughout the entirety of our fiscal Q1.
Brandon Couillard — Jefferies — Analyst
Got it. Thank you.
Operator
Our next question comes from Puneet Souda from SVB Leerink, Puneet. Your line is open.
Puneet Souda — SVB Leerink — Analyst
Yeah. Hi, Mike. About — thanks for taking the question. So the first one is just a follow-up on the, on the order book. I’m wondering if you can quantify that, obviously that’s been growing strongly and maybe just help, help us understand once do you have the strong order book you have confidence in the rest of the, I mean the guide throughout the year based on what you’re providing.
But maybe just talk to us about the sort of the cadence wise in terms of supply chains, obviously we’re hearing, we have a number of questions that we get on supply chains frequently. So I’m just wondering what’s your level of confidence on the supply chain and turning those order books into orders.
Mike McMullen — President and Chief Executive Officer
Yeah, so first I’d say that the supply chain environment continues to be quite challenging. On the other hand, I remain quite confident, because our team has found ways to continue to navigate through those and meeting the expectations of our customers time to delivery times in fact, Bob, if I recall correctly, our order cancellation is actually lower this year than prior year. So, while I don’t want imply that it’s all sunny out there in terms of the supply chain, we’ve been working on this thing for a while. I mean many quarters ago, we were working on this quarter and the second half of this year. So while the environment remains challenged externally, I remain confident our ability to actually get product to customers when they need it.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah, Parmeet to your — Puneet to your first question on the quantification, we’re not going to provide that other than what I had answered…
Mike McMullen — President and Chief Executive Officer
Drop that one, Bob.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
But we did file the 2x order growth rate versus revenue.
Puneet Souda — SVB Leerink — Analyst
Got it there. And in terms of cell analysis, Mike, I mean that franchise has been growing. You highlighted Lonza, the Cocoon Platform, couple of other capabilities, maybe can you — I know at one point you had sort of quantified that business, I’m wondering if you can do that again. So what — and what sort of growth rates you’re seeing there and what’s the expectation this year given the acceleration you’re seeing in oral and biomolecules? Thank you.
Mike McMullen — President and Chief Executive Officer
Yeah, thanks for that question. We love to talk about cell analysis. It’s been a really great addition to the company over the years and we continue to grow and expand that. So first of all, I’d say that business remains very healthy. We’re seeing really good strong end market demand, and Bob, I think for the year, we’re expecting double-digit growth out of the cell analysis business. and really excited. The fact that in addition to the manufacturing expansion that a hide and seek could be that kind of gives you indication of our confidence in future growth, and I believe we’re close to Bob and Jacob, close to north of $400 million for this business this year.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
First half of this year.
Mike McMullen — President and Chief Executive Officer
Yeah.
Puneet Souda — SVB Leerink — Analyst
Yeah. Got it. Super helpful, guys. All right. Thank you.
Mike McMullen — President and Chief Executive Officer
You’re quite welcome.
Operator
Our next question comes from Patrick Donnelly from Citi. Patrick, your line is open.
Patrick Donnelly — Citigroup — Analyst
Hey. Thanks for taking the question, guys.
Mike McMullen — President and Chief Executive Officer
Hey, Patrick.
Patrick Donnelly — Citigroup — Analyst
Mike, maybe one on China, between the tough comps…
Mike McMullen — President and Chief Executive Officer
Sure.
Patrick Donnelly — Citigroup — Analyst
You alluded to here, obviously a few layers there. Can you just talk about I guess the core performance kind of stripping that out a little bit, what you’re seeing there, what you saw through to your point there throughout the quarter? I guess the cadence and then the expectations going forward there as well just between the different markets there. Just curious what’s going on.
Mike McMullen — President and Chief Executive Officer
Yeah, it’s interesting. Sometimes you can kind of diverted on the headlines out of China because our business remains quite strong, and we’re seeing good strength in Pharma. It’s really been a key driver for us, which Bob highlighted in the script, but also our Diagnostics business, DGG grew I think over 40% in the first quarter. Services growth in the mid-teens. So other things that I’ve talked to you about, which is in addition to continue to grow and strengthen our instrumentation portfolio market share in China.
We’ve also been talking about our ability to grow our ACG business in China with that large installed base and the fact we’ve historically viewed ourselves being under-penetrated in Diagnostics and Genomics and really starting to see traction on both those growth vectors. So again, we feel really confident about the state of the China business because not only the order book we have but also these other areas of recurring revenue are really growing well for us. And we’re — we continue to invest for our customers in China as I mentioned in my call script. So I think it’s a lot to like about the opportunities in our business in China.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah. Patrick, just one other thing. While we grew 3% as we mentioned. If we add back in kind of the Lunar New Year estimate, it was high single-digits, which was in our — in line with what we had expected. And our expectation is that that’s going to be for the full year as well now. Q2 will be stronger than that, obviously as it comes back and we also saw mid-teen, mid-to-high teens growth in orders in Q1.
Patrick Donnelly — Citigroup — Analyst
Okay, that’s helpful. And then maybe just on the academic, government market. You’re not alone obviously in calling that out as being a little sluggish to come back. Maybe just what you saw there in January, Mike. I know you called out the remote learning maybe caused a little more of a pause even as we got into ’22. And then, just expectations there going forward. Do you expect the market to kind of normalize a little bit and what are you hearing from customers on that front?
Mike McMullen — President and Chief Executive Officer
Yes. Thanks for that, Patrick. We saw — we see the Omicron impact is transitory. And we saw that in the U.S., for example, and we expect to — I think Bob even called out on the script back to normal kind of levels of February. So we actually expect the environment to improve over the year. I think we are flattish for Q1. But Bob, I think we’re going for mid-singles or so growth for the full year, so that would imply a pickup in growth in this segment later on this year.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah. I mean for everything that we see, Patrick, funding levels continue to inactivity within our order book continues to be strong. So it’s — not as strong obviously as the Pharma and C&E areas, which are leading the growth in the Diagnostics, but we’re not seeing any fundamentally different performance in that market going forward.
Patrick Donnelly — Citigroup — Analyst
That’s helpful. Thank you, guys.
Mike McMullen — President and Chief Executive Officer
You’re quite welcome.
Operator
Up next we have a question from Jack Meehan from Nephron Research. Jack, your line is open.
Jack Meehan — Nephron Research LLC — Analyst
Thank you. Good afternoon, guys.
Mike McMullen — President and Chief Executive Officer
Good afternoon, Jack.
Jack Meehan — Nephron Research LLC — Analyst
Was hoping you could elaborate on the pricing actions you’re taking in the market, how do they compare to kind of normal periods, and what areas of the portfolio have you had success when it comes to pricing?
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah, I’ll take that, Jack. And I think we mentioned at the beginning of the year that we were estimating roughly a point of growth associated with that. It was about half of what we had seen normally to cover the increased costs. And what I would say is through Q1, we’re ahead of schedule which is good.
Jack Meehan — Nephron Research LLC — Analyst
Okay, and then the other area I was hoping to get an update on is NASD. So over 45% growth in the quarter. Maybe just any update to what your guidance is for the full year. It seems like you’re tracking ahead of schedule here, and just when the new line opens up just what sort of pace you expect to be able to take advantage of that capacity?
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah, I was going to say we — the team continues to do a fantastic job and continues to drive even more revenue and product out of the existing capacity and it was a great first quarter and slightly ahead of our expectations. We had expected double-digit growth and that continues to be our expectation before the new train Train B comes online at the end of this calendar year. And the order book continues to be strong, that team continues to actually build the order book for ’23 in building that demand for that Train. So we are extremely excited about that business and are looking forward to not only bringing that up but also looking for other ways to expand our capacity.
Mike McMullen — President and Chief Executive Officer
Absolutely.
Jack Meehan — Nephron Research LLC — Analyst
Thank you, Bob.
Operator
Our next question comes from Derik De Bruin from Bank of America. Derik, please go ahead.
Michael Ryskin — Bank of America Securities — Analyst
Hey. Thanks for taking the question. This is Mike on for Derik.
Mike McMullen — President and Chief Executive Officer
Hey, Mike.
Michael Ryskin — Bank of America Securities — Analyst
I want to ask a little bit on the — Hey. I want to ask a little bit on the Diagnostics and the Clinical end markets. In particular, you called out sort of the expansion of LC/MS into some of the applications here, and you’re seeing new vector of clinical growth here, I was wondering if you could elaborate on that. Just sort of what are the specific drivers you’re seeing there and where some of that uptick’s happening?
Mike McMullen — President and Chief Executive Officer
Yeah, thanks for the question. I’m going to pass it over to Jacob for some more details here, but also — I would also just remind, we also had a very good print on the pathology side of our Diagnostics business. But I think you’ll hear from Jacob LC/MS is an indication of some future traction where we’re already getting some good growth. So, Jacob your thoughts there?
Jacob Thaysen — Senior Vice President, President, Life Sciences and Applied Markets Group
Yeah, absolutely. We have closed the year having a good LC/MS Clinical business in U.S., but over the past year, we have also expanded ourself into China, have really good reactions. We both have our own product line there or direct sales, but we also have an OEM partner. So in that sense, we are both addressing the customers that we know, but also a lot of customers that we want to get access to. And that’s been quite successful and hence we are right now looking to expand the portfolio even further.
We have the Ultivo of course with our LC connected, and we’re looking to other parts of our portfolio both within LC/MS but also beyond LC/MS here over the next period of time. But we do see China as a great opportunity, but the next time we will also enter into other areas like Europe and other places.
Mike McMullen — President and Chief Executive Officer
And Jacob on the Ultivo, I think the customers love the combination of performance and the size of the footprint. It really fits nicely into the diagnostic lab.
Jacob Thaysen — Senior Vice President, President, Life Sciences and Applied Markets Group
Yeah, exactly. We spent a lot of energy on both making it a site that fits where we are going into the LC stack, but more than that we also made it more easy to work with. So it’s actually an ease of use solution. So we’re very excited about that, and even better the customers are also super excited about that. I do want to mention also that we also have a strong Clinical business within the flow cytometry with the ACEA business and that continues to drive the growth and particularly in China, where we see a lot of demand also as you might recall, the flow cytometry from the ACEA business is really focused on decentralized lab also against with ease of use and we see a lot of interest in that and I do expect also that U.S. will be a future market for this year.
Michael Ryskin — Bank of America Securities — Analyst
Great, I appreciate that. Any color you can give us just real quick on sort of how meaningful LC/MS is within that 15% of your exposure is just give us a sense of the scale of that relative to Genomics and Cancer Diagnostics and Pathology.
Jacob Thaysen — Senior Vice President, President, Life Sciences and Applied Markets Group
Bob, do you want to take it out, do you want me to?
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah, yeah, I’ll take it. It’s, it is still relatively small, but growing very fast, which the market itself is quite large and so the opportunity here is really in front of us going forward.
Michael Ryskin — Bank of America Securities — Analyst
Great. And if I could ask a quick follow-up on…
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Sure
Michael Ryskin — Bank of America Securities — Analyst
Just on the capital deployment side and on M&A, obviously you’ve done some small deals in the last couple of years and you continue to invest in new technologies and you’ve got some — you’ve had M&A deployed into sort of Life Science Solutions and Cell Analysis. You’ve had things in liquid biopsy and now artificial intelligence, so you’ve got to showcase that you can deploy capital in a variety of different end markets but just looking at where the balance sheet is now. Any thought on what draw on acquisitions to a sort of scaling up to do a bigger deal and what excites you what markets, would you be looking to what is sort of, how would you go about setting where to deploy that capital?
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah. Yeah sure happy to address that, Mike. So, which is by the way the recognition of the variety of where we deploy capital, but there is a consistent theme across where we deploy capital which is high growth end markets, which will drive increased to the overall deal of core growth of the company in places where we can leverage the scale and the capabilities we have as a company to really make those business even more successful. So I think there is a timing and kind of underlying theme behind all those acquisitions.
So that will continue to be our thesis in our approach as well as staying focused in the private sector, which we think there is really fits well the Agilent model and the often the potential acquired companies and and leadership team really find the Agilent culture a good place to be and they also see how well we’ve done with previously acquisition. So we’ve got a track record as well that they can point to. I’m on record saying that we want to deploy our balance sheet as part of our overall growth story is part of what we’ve been calling our build and buy growth strategy and as you may know, the largest deal that we’ve done to date has been was the acquisition of BioTek but we believe we can do multiples of that deal, and we look to deploy capital, if the right opportunity comes along for us.
Michael Ryskin — Bank of America Securities — Analyst
Okay, thanks.
Operator
Our next question comes from Thomas Peterson from Baird. Thomas, tour line is open.
Thomas Petersen — Baird — Analyst
Hey guys, thanks for taking my questions.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Sure.
Thomas Petersen — Baird — Analyst
Just wanted to circle circle back on Pharma and just wanted to know if you had seen any benefit within Pharma from both on-shoring activities and manufacturing redundancies and kind of — if so where is this tailwind band and what are your expectations for any potential durability year?
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Great question. So I think it is actually a story both for the Pharma as well as elements of our Chemical Energy business and I’d say right now, not yet material in terms of order book or revenue, but we believe it’s coming. There’s a lot of discussions with customers that are, that are building new capacity, I would say it’s probably more of a ’23 kind of event.
But I think it speaks to the durability of growth that we think we have in ACEA’s two largest end markets, so we are hearing lots of discussions about dual sources of critical components on-shoring our previously off-shored critical supply chain elements. So I think the continued supply chain challenges the world is seen is only putting more emphasis on that direction. So I’d say right now, it’s in the longer term planning phase. As you know, the analytical laboratory instrumentation is off in the last thing is added when they — when they bring on new capacity, but we believe it’s coming, but it’s not material yet to the company’s performance.
Thomas Petersen — Baird — Analyst
Great, that’s super helpful. And yes, maybe just to finish for me, just any updated thoughts on the one Agilent commercial organization transition anything that surprised you relative to expectation sort of how that incorporation gone internally.
Mike McMullen — President and Chief Executive Officer
Yeah. So, I’m going to have Padraig to jump in here with some additional specifics. As you know, I’ve asked Padraig to take on this role, and in addition to his leaving the overall Agilent services business, but we’re just delighted at the start of this new structure and I think you know, I would say the proofs and the results and we’re off to a good start with the fact that we had such a strong Q1 order books throughout the quarter and Padraig I know it’s been just a few months where you’ve been pulling your team together and but I think you’re already starting to work with customers differently and maybe you could share some of your thoughts here.
Padraig McDonnell — Senior Vice President, President and Chief Commercial Officer Agilent CrossLab Group
Yeah. Thanks, Mike. I think we’re starting to see the benefit of an enterprise approach to both sales and service. And the associated functions and of course, selling the complete Agilent solution to customers, which includes instruments services and consumables would aligned sales approach is really giving us a lot of scale where customers — We’re also seeing doubling down on our investment in our digital interaction with customers and we continue to seek strong momentum with accelerating digital growth of about 25% so great, great start Mike and then more to come.
Operator
Our next question comes from Dan Brennan from Cowen. Dan, Your line is open.
Daniel Brennan — Cowen — Analyst
Hey Mike, and thanks for — Thanks for the questions and congrats.
Mike McMullen — President and Chief Executive Officer
Sure, Dan.
Daniel Brennan — Cowen — Analyst
I was hoping to go back, I was hoping to go back to see any Mike could you and Bob unpack, kind of unpack the customers there Chemical, C&E, I mean can you just kind of give us a flavor for what you’re seeing. And I know the question was asked earlier about the impact of what’s going on, but just wondering, as you know, as oil price spikes in the past, kind of, what’s — what kind of impact have you seen. If the oil price spike in C&E?
Mike McMullen — President and Chief Executive Officer
Yeah, I’d say if you look at the 3 sub-segments of the C&E marketplace. We often talk about the the Chemicals Energy and advanced materials market. I think it’s the Chemicals in Advanced Materials market segments that are driving the growth here now theoretically when although be it’s now much. It’s a very small part of the total number of these days high oil prices would tend to lead to more investment in that Energy segment.
Portion of the, the whole market segment by — I can’t remember the exact percentage, I know it’s evolved a bit over time, but I think of most interest to us is how does the world view global growth where PMI is, so yes, I think the highest correlation of growth in this segment believe to PMIs and the global growth — global growth outlook, but we would, and could be some more money to invest in on exploration perhaps if more price of the stay high, but it’s really also — but really driven by the PMI view that’s why they still remain positive and that’s why we’re optimistic about ability to grow this overall market throughout the rest of this year.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah, Dan to build on what Mike we’re saying, if we looked at those 3 big areas over 90% or roughly 90% of our our C&E business is actually chemicals and Advanced Materials and since so the energy piece is an important component, but that demand around new types of chemicals, advanced materials and so forth is really what’s driving it. And so whether it’d be batteries and other, other areas around these is the — is the growth driver today.
Daniel Brennan — Cowen — Analyst
Got it. Thanks guys. And then, just related to the oligo business in NASD business. Just can you remind us, that we, from the perspective of like in within your high single-digit growth for Pharma. How many points of growth should we be thinking that business is contributing.
Mike McMullen — President and Chief Executive Officer
Pharma grew it, it was roughly 2 to 3 points of growth for Pharma in Q1…
Robert W. McMahon — Senior Vice President, Chief Financial Officer
And then for the year. Sorry. Yeah, sorry. Bob, I misspoke. So for the year. I think I think you’re talking low double now for Pharma. So what’s assumed from the oligo business… Yeah.
Daniel Brennan — Cowen — Analyst
And then that low double.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
A point or 2?
Mike McMullen — President and Chief Executive Officer
Yeah, I think the what matters here is the the Pharma growth was strong with the Biopharma NASD but also across the rest of the company’s portfolio as well so. So it’s an oligo a wide story yeah.
Daniel Brennan — Cowen — Analyst
Great. And then maybe just one final they can just see LC market, Mike? It’s only here what’s going on. I know part of your business. What competitive trend there are like in LC?
Mike McMullen — President and Chief Executive Officer
All I can tell you about what’s going on with my business, which is it’s going very well. So we’ve got — we had — we continue to see very strong business momentum. The market demand is very robust. You may have recall in my script, I tried to call out demand in our chromatography systems remains very robust. We saw double-digit growth again in Q2 — Q1 ’22 of double-digits over the prior year, backlog strong, orders growing faster than revenues. So there’s a lot to like about what’s going on with the LC business.
Daniel Brennan — Cowen — Analyst
Great. Thank you, guys.
Mike McMullen — President and Chief Executive Officer
You’re quite welcome.
Operator
Our next question comes from Paul Knight from KeyBanc. Paul, please go ahead.
Paul Knight — KeyBanc Capital Markets Inc. — Analyst
It’s always tough to ask a good question late in the day, Mike.
Mike McMullen — President and Chief Executive Officer
Come on, Paul. I know you’re up to it. I know you’re up to it.
Paul Knight — KeyBanc Capital Markets Inc. — Analyst
As I look at this 32% biotechnology growth, which I — seems extraordinarily good, would you attribute this to the cell and gene therapy market in light of specifically biotech instruments? What’s behind that really high growth rate?
Mike McMullen — President and Chief Executive Officer
Bob, why don’t we tag team on this, but I’d say it’s really being driven by none of the NASD business we talked about earlier, but our core LC, LC/MS business. I mean there already is some contribution from cell and gene therapy, but it really is coming from this LC, LC/MS business along with really, really strong growth of services and consumables as well. So I’d say it’s really a broad based story, but really around our core instrumentation platforms along with services and consumables.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Yeah. Spot on.
Paul Knight — KeyBanc Capital Markets Inc. — Analyst
And then…
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Do you have any notes for that?
Paul Knight — KeyBanc Capital Markets Inc. — Analyst
Sorry, Bob.
Robert W. McMahon — Senior Vice President, Chief Financial Officer
Go ahead, Paul. Sorry.
Paul Knight — KeyBanc Capital Markets Inc. — Analyst
You mentioned LC/MS more than I think is typical. Is this a result — are you seeing a result — a benefit yet from the Avantor JV? And in addition, I know CrossLab you mentioned higher connectivity. I think you’re implying you can get some share there. If you could talk to those two topics.
Mike McMullen — President and Chief Executive Officer
Yeah. Sure. Happy to. ACG has been — well, we know it’s been near and dear to our overall growth strategy for a number of years and we’re very excited about the new relationship we have with Avantor. I’d say it’s still very early days. So not yet a material contributor to the top line revenue, and that really was all — so it’s proceeding according to plan. So I’d say there is more to come in that regards.
And then on the connect rate, in fact, we called that out on purpose to say we continue to see higher connect rates with our consumables and services business and we think that bodes well for future growth. And Padraig, maybe you want to just comment a bit on what you’re seeing on the services side on the connect rate?
Padraig McDonnell — Senior Vice President, President and Chief Commercial Officer Agilent CrossLab Group
Yeah. Well, overall the attach rate for both service and consumables are in the high 20s, but we believe we have significant headroom for growth going forward as we target into higher technology spaces. And on the services side in particular, we have a strong demand for contracts and that’s driving a lot of connect rate with new instruments as well, Mike.
Mike McMullen — President and Chief Executive Officer
Yeah.
Paul Knight — KeyBanc Capital Markets Inc. — Analyst
Thank you.
Mike McMullen — President and Chief Executive Officer
I think we had double-digit contract growth and probably more than 10% of Agilent revenues now under service contracts.
Paul Knight — KeyBanc Capital Markets Inc. — Analyst
Okay, thank you.
Operator
Those are the questions we have time for today, so I’ll now hand back to Parmeet to conclude today’s call.
Parmeet Ahuja — Vice President, Investor Relations
Thanks, Emily, and thanks everyone for joining. With that, we would like to wrap up the call for today. Have a great rest of the day, everyone.
Operator
[Operator Closing Remarks]