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Padraig McDonnell

Thank you, Parmeet, and thanks to all of you for joining today's call. As you saw in our press release, we had a very solid start to the year, exceeding our expectations for core revenue growth and EPS. Before diving into the details, I want to force for open conversations I had with many of you starting at our Analyst and Investor Day in December at the New York Stock Exchange and provide an update on progress of our Ignite transformation.
We've stated that Ignite is for our customers, employees and shareholders. For customers, we want to create a seamless periods across Agilent products, software and services. For our employees, we want to become nimbler and reduce complexity to enhance our ability to serve our customers. And for shareholders, we want to deliver industry leading shareholder value through differentiated growth.
We have set targets to grow core revenues between 5% and 7% annually, expand our operating margin by 50 basis points to 100-plus basis points per year and deliver double digit EPS growth. Right now, I want to share three notable accomplishments from the Ignite transformational focused on setting new pricing mechanisms, elevating our digital ecosystem, identifying procurement opportunities.
For us the creation of an enterprise strategic pricing organization that will focus on setting our standard approach for pricing across the entire solution set with the customer and not just at a tactical bottoms of product level.
Second, our digital ecosystem, a critical enabler in our evolved strategy we unveiled Investor Day continues to be a key area of investment for us. Already, we have made meaningful improvements to our website, upgrading the user experience on our e-commerce platform by making it easier to find and purchase the products our customers need helping driving top-line growth. In Q1, our progress continues with digital orders growing high single digits.
And third, our procurement teams have challenged our historical approach and are identifying significant cost saving opportunities in many of Agilent's functions. Also related to our Ignite transformation, we are assessing our organizational health. On my first day as CEO, I promised to our employees, we will become a nimbler organization to make decisions faster and accelerate innovation and service of our customers.
As a result, we are removing some management layers and increasing spans of control. This is a continuation of our new organization structure we announced in late November. Through that reorganization, we're seeing our business leaders in lock step on our strategy and transformation. This alignment enables us to make better decisions faster on priorities and trade-offs.
As my leadership team and I look forward, we are focused on growing Agilent. Our foundational element of growth is innovation, innovation that our customers want. Every time I visit a customer in any parts of the world to say the same thing. They want to partner with Agilent for better outcomes. That's what differentiates Agilent, the deep scientific knowledge of our customer facing team members that our competitors simply can't duplicate.
Customers want everything from the ability to parse massive amounts of data in seconds, to automating more tasks so they can focus on complex scientific challenges. In essence, they want to increase their productivity. That's why driving lab productivity is among our key priorities.
You can see evidence of this in our collaborative agreement with Zurich-based ABB Robotics to produce automated laboratory solutions, ones that will help our customers find new ways of improved workflows and make operations more efficient and flexible.
These are customers across multiple markets, including pharma, biotech, energy and food. Together with ABB, Agilent can transform the customer lab operations by making work flow processes for research, development, and quality control faster and more efficient.
The goal is for all instruments, robots, and software to be interoperable, which is crucial to significantly boosting productivity for our customers. Our customers want to buy whole product solutions, not just a single instrument.
To illustrate that, our Infinity III series that we introduced in October has seen great adoption from all our customers. As a reminder, the Infinity III has an advanced automation that simplifies our customers' daily routines. And it's compatible with previous generations, which allows for seamless upgrades and technology refreshes, and that has become a differentiator.
Customers are saying that the backward compatibility combined with the modularity of the Agilent Systems allows them to decide how to upgrade and refresh their instruments. Plus, they're telling us that they're choosing Agilent because of our long-standing quality and technology leadership that's been further enforced with the Infinity III.
And the Agilent InfinityLab, LC solutions are certified by My Green Lab. These instruments optimize lab space and reduce water, solvent, and energy consumption while also minimizing waste.
We continue to see strong momentum and growth in our sales funnel for the Infinity III because of its advanced automation that empowers our customers to be more productive and because of InfinityLab Assist, our automation software that provides onboard intelligence. So our customers are not simply buying a platform, but a whole product solution.
Just as exciting is that the great success of our Infinity III provides Agilent an incredible opportunity for us to upgrade our customers' instruments, and it's already happening across our legacy LC platforms, representing an opportunity in hundreds of millions of dollars over the coming years.
Now, I'd like to highlight some key aspects of the Q1 results. As you can see from our press release, we drove top line year over year growth, while macro market trends such as CapEx spending continue to improve.
A revenue of $1.681 billion increased 1% over the same quarter in FY24. This result exceeded our expectations and was led by excellent growth in PFAS and capturing an outside share of the China stimulus awards. Our instrument book-to-bill was greater than one in Q1, a quarter when it's typically less than one. This is another sign of market recovery, but more importantly, it's a testament to our intense customer focus with products such as a highly successful Infinity III and our success driving our market leading position in China.
Additionally, we exceeded expectation in all regions and end-markets except for academia and government. In our end markets, revenue was led by food, which grew 9% driven by our success in capturing stimulus orders in China. In China, our accelerating share gains were apparent in recording a win rate of more than 50% on stimulus-related tenders. With our long history in the region elevated by our local manufacturing capabilities, we are well positioned to expand our market leadership in China.
Now let me talk about our businesses and some growth factors in each. Our Life Science and Diagnostics Markets Group grew 1% in the quarter, reporting $647 million. Performance was driven by a nice result in our LC and LCMS instruments, which grew high single digits during the quarter on the heels of our Infinity III launch.
Within lgG, we remain focused on the integration of BIOVECTRA, and we are delighted by the response we're hearing from our existing and potential customers who are interested in leveraging BIOVECTRA's unique capabilities and Agilent's expertise. It's clear that BIOVECTRA's capabilities are in the sweet spot of tremendous markets with a terrific growth potential.
The Agilent CrossLab Group grew 3%, reporting $696 million which was in line with our expectations led by services. We are especially excited about the new ACG that now includes services, automation, consumables, and software and informatics. Software and informatics are among our key priorities, and we've had an overwhelmingly positive response to both our InfinityLab Assist automation software and our OpenLab CDS.
The InfinityLab automation software offers remote notifications, trouble shootings, diagnostics, and maintenance that paves the way for a fully automated digital lab. And our OpenLab CDS provides time saving steps in analysis, interpretation, and reporting workflows, while technical controls ensure work quality, effective records management, and enhanced data security. In short, software is an incredible area of opportunity for us that we are poised to capitalize upon.
Already, customers are telling us that the InfinityLab Assist and the OpenLab offer differentiated functionality and solutions in high throughput environments.
Our Applied Markets Group reported $338 million in the quarter, a 2% decline, better than expected related to a strong China's stimulus orders. We are very pleased with our team's ability to compete and win in these tenders. We continue to invest in the Applied Markets for next generation technology innovation, and as I said, support our customers with lab productivity.
Every customer we meet has expressed a desire to partner with Agilent to make better use of their instrument fleets to integrate with front end solutions, and we're happy to help them find ways to create customized solutions so they can deliver products faster.
Before I hand over to Bob, I want to address topics that have been in the news of late. Regarding the recent news around tariffs, we have a diversified supply chain with a manufacturing presence in all major regions of the world. Our teams are already taking action to mitigate the impacts on our business.
In terms of potential reductions to NIH funding, as we've shared with you before, our exposure to NIH related programs is limited to around 1% of our revenue. We currently believe the forecasted impact is manageable and within our current guidance. Bob will now delve deeper on our Q1 results as well as our outlook for Q2. After Bob delivers his comments, I will be back for some closing remarks. Bob.

Robert McMahon

Thanks, Padraig, and good afternoon, everyone. In my remarks today, I will provide some additional details on revenue in the quarter, as well as take you through the income statement and other key financial metrics. I'll then cover our updated full year and second quarter guidance.
As Padraig mentioned, Q1 revenue was $1.68 billion just above the top end of guidance, despite the strengthening of the US dollar during the quarter. On a core basis, we posted growth of 1.2%, beating expectations. Adjusting for the timing of Lunar New Year impacts, core growth is estimated to be just over 3%.
On a reported basis, growth was 1.4%. Currency had a negative impact of 1.4 percentage points, which was over 1 percentage point higher than estimated at the start of the quarter, and M&A contributed 1.6%. Padraig discussed our business group results, so I'll focus on deeper details about our end markets.
We exceeded expectations in all of our end markets except for our smallest one, academia and government. Our business in the food market grew 9%, benefiting from our excellent performance in China's national stimulus program.
In environmental and forensics, we grew 6% as we continue to leverage our best-in-class TFAS workflow solutions to grow our market leading position. We continue to capitalize on the strong demand for PFAS testing that we are seeing globally.
Our 6495 triple quad LC/MS is the most complete instrument in the PFAS testing market with a specific performance edge and small and fragile molecules where many of the emerging PFAS exist. Along with our new offerings in PFAS specific consumables and our workflow deployment services, Agilent provides the fastest, highest quality, and most reliable way for customers to add or expand PFAS testing capabilities in their labs.
Now looking across all land markets, PFAS grew 70% in the quarter, contributing 75 basis points of growth to the company. Pharma was flat during the quarter with low single digit growth ex-China offset by high single digit decline in China. Globally, biopharma and small molecule performed roughly in line with the overall market.
In chemical and advanced materials, revenue declined 2%, with growth ex-China offset by a high 10s decline in China, which was mostly impacted by the timing of the Lunar New Year. Our business in the diagnostics and clinical and market grew 7%, led by strong results in the Americas and Europe. Academia and government, our smallest market, saw a decline of 7% with soft results around the globe.
Now moving on to our regional performance, the Americas grew 3%, Europe grew 2%, and Asia, ex-China grew 2%, all slightly ahead of expectations. China revenue declined 4%, also better than expectations on the strength of our stimulus performance.
For your models, we estimate that Lunar New Year was a $10 million dollar revenue headwind in the quarter, which we expect to come back in the second quarter. This compares to a $25 million favorable Lunar New Year impact in the first quarter of last year. So combined a 2 percentage point year on year impact.
Now let's move on to the rest of the P&L. Gross margin was 54.7% in the quarter, down versus last year, primarily due to mix, currency, and the Lunar New Year timing. We drove operating margins of 25.1%, roughly in line with our expectations, despite currency headwinds. Well, down versus last year, we expect improvement throughout the year as the results of our Ignite transformation continue to deliver.
And below the line, our net interest expense was better than expected, as was our tax rate of 12.5%, and we had 287 million diluted shares outstanding in the quarter. Putting it all together, Q1 earnings per share were $1.31. That was ahead of our expectations and up 2% from a year ago, growing slightly faster than revenue.
Now let me turn to cash flow in the balance sheet. We continue to enjoy a very strong balance sheet and healthy cash flows. Our operating cash flow was $431 million in the quarter, and we invested $97 million in capital expenditures. We purchased $90 million in shares and paid out $71 million through dividends during the quarter. And we ended the quarter with a net leverage ratio of 1.0.
In summary, we had a good start to the year and expect continued steady improvement in the market through the year.
Now let's move on to our outlook for the fiscal year and the second quarter. While we exceeded core growth expectations for Q1, we're maintaining our core growth guidance of 2.5% to 3.5% for the year. This guidance incorporates an element of prudence reflecting the uncertainty over the US federal funding environment, even though it is a small part of our business.
However, we are adjusting our full year reported revenue to be in the range of $6.68 billion to $6.76 billion to reflect the strengthening of the US dollar. If you recall, our initial guidance back in November incorporated only a very modest FX headwind. Since then, the US dollar has appreciated and based on current exchange rates, we are now projecting an incremental $110 million in currency headwinds relative to our prior guidance.
Currency is now expected to represent a 1.9% headwind for the year versus a prior 20 basis point headwind. We have also left our M&A guidance unchanged at plus 2% to 2.2% revenue impact for the year. Full year non-GAAP earnings per share are unchanged at $5.54 to $5.61 representing an increase of 4.7% to 6%.
Relative to our prior guide, currency net of hedging is an estimated additional $0.09 headwind for the year which we are covering. This assumes flat other income and expense, a 12.5% tax rate, and 286 million diluted shares outstanding.
Now for the second quarter, we are guiding to revenue of $1.61 billion to $1.65 billion. This range is a bit wider than we typically use for the upcoming quarter, reflecting the uncertainty around US federal government spending. This range represents an increase of 2.5% to 5% growth on a core basis and an increase of 2.4% to 4.9% growth on a reported basis.
Currency is a 2.1% headwind and M&A impact is expected to be a 2% benefit for the quarter. Second quarter, non-GAAP earnings per share are expected to be between $1.25 and $1.28 representing growth of 2.5% to 4.9%. Year on year currency, net of hedging is expected to be a $0.02 headwind to EPS.
Now I'd like to turn the call over back to Padraig for some closing comments. Padraig?

Padraig McDonnell

Thanks, Bob. Before we end the call, I want to take this opportunity to highlight more of the Agilent's team's tremendous work. This quarter, the World Economic Forum named their factories in Shanghai, China, and Penang, Malaysia as Global Lighthouse Networks. This recognizes Agilent's for its breakthroughs in scaling AI, 3D printing, robotics, big data analytics, and industrial internet of things. I was delighted to be able to accept those award in person this year at the forum in Davos, Switzerland.
Shanghai and Penang are two of our four Agilent manufacturing sites that have earned this prestigious distinction. In 2022, the Forum named our Singapore and Waldbronn, Germany sites at Lighthouses. Still today, Agilent is the only analytical and clinical laboratory, technology company in the world to be recognized by the World Economic Forum.
Also during the quarter, Newsweek ranked Agilient number 10 out of 600 on its 2025 list of America's most responsible companies, up seven places from 2024. This is our sixth consecutive year on the prestigious list and is a recognition of Agilent being a leading sustainable lab partner to our customers. We are proud to be among the US based companies who are making a positive global impact.
At Agilent, we're only at the start of our ignite transformation journey and already we're seeing early benefits like the ones I described at the start of this call. In less than 9 months, we've made incredible changes that are improving our customers' productivity in an era when the pace of science is faster than ever.
We're also becoming nimbler for employees to better serve our customers. The outcome we're enabling is faster decision making so that we can accelerate innovation and create differentiated growth, and that in turn leads to industry leading shareholder value.
What we are doing at Agielnt is turning a good company into a great one. We are committed to continuous improvements and adapting to changing market dynamics. Thank you for joining today's call. Let's move to Q&A. Parmeet?

Parmeet Ahuja

Thanks, Padraig. Regina, if you could please provide instructions for Q&A now.

Question and Answer Session

Operator

(Operator Instructions)
Rachel Vatnsdal, JPMorgan.

Rachel Vatnsdal Olson

Great, good afternoon and thanks so much for taking the questions. So first up, I just kind of wanted to dig into some of this prudence that you mentioned in the guide. Obviously you're talking about some of the progress that you guys have seen on your order book, but you're also acknowledging some of that headline risk that we've seen on the funding side the last month and a half or so.
So could you quantify for us, what level of headline risk have you really embedded into not only the fiscal 2Q guide but the full year guide at this point? And then have you seen any impact so far from customers and what are you really seeing from your sales teams that are boots on the ground?

Padraig McDonnell

Yeah, so thanks for the question, Rachel. Our guide is a prudent one, as we see a lot of changes happening. I will say from our customer base and particularly in our pharma base, activity has increased, the sentiment is increasing as we talk to our customers. Of course things on the macro side are changing with NIH funding which we're less than 1%, and of course tariffs which we can mitigate.
So I would say our guide is a prudent one, but we'll be able to monitor that as we go through the next quarters. But Bob, I don't know if you want to add more detail.

Robert McMahon

Yeah, hey, Rachel, good afternoon. And to your point around the prudence we did raise -- increase the range for our second quarter guide to roughly $40 million in between the low and the high. It's typically anywhere from $25 million to $30 million. As I mentioned in the prepared remarks, our NIH funding is roughly 1% at the maximum. And so given the strength that we had in the first quarter and the fact that we're not raising guide, we feel that we're well compensating any potential downside. And to Padraig's point, we haven't seen any of that materially impact our business, and the activity in our customers.

Rachel Vatnsdal Olson

Perfect and then just on my follow up. And I hate to ask specifically on FX, but I think it's a question that a lot of us have on the line here. Can you just walk us through how much of the EPS number in the fiscal 2Q number especially is impacted by that FX, given how much rates have really moved within the quarter? And then, same idea just on the margin front, especially around that 2Q and for the full year at all, what would that look like without these FX impacts? Thanks.

Padraig McDonnell

Yeah, that's a great question, Rachel. So let me give you a little more data. So for the full year that incremental $110 million is a $0.09 impact for the full year as I mentioned before, and that really is roughly a 50-basis point headwind to the overall company that we're covering.
If I look at it for second quarter, it's about a $32 million headwind in the quarter, roughly 2.1%. And it's $0.02 to $0.03 in the quarter and roughly the same kind of impact from a profitability standpoint.

Operator

Matthew Sykes, Goldman Sachs.

Hi, this is Evian for Matt. Thanks for taking my questions. So the first one, can you talk through the opportunities within PFAS, given the 70% growth you saw in the quarter? How much of this demand is coming from Europe following the packaging regulation and then also what do you think the growth contribution going forward could look like for this market?

Padraig McDonnell

Yeah, thanks for the question. So the demand for PFAS solutions remains extremely strong. During Q1, the solutions growth accounted for 75 basis points at a company level. And while most of the volume came on the environmental side, we're seeing actually exceptional growth in food and chemical materials as well. And the opportunity in Q1 grew 70%, but also if you look at that compared to Q4 was 50%. It was a big step up in growth rates.
And with the environmental market still accounts for the largest part of the PFAS revenues, we saw increased customer purchasing in the CAM markets with water discharge in some of those areas and really we see all regions doing well. We saw a little bit of a pause in China which had a great sequential quarters of growth in PFAS, but that's normal as labs tool up on the equipment side.
Europe was very strong, and we expect that to be very strong. And this is a market and this is an area where it's going to continue to morph and grow depending on new regulations and expanding into new modalities. And I will say, at the core of this is our 6595D triple quad, which is the leading sensitivity in the markets, which helps with emerging PFAS characterization and of course our ability to offer consumables, and workflow deployment services are really important as customers get set up quickly in their labs.

Robert McMahon

Yeah, and Evie, just to build on what Padraig was saying, we ended last year approaching $100 million in revenue and first quarter, we're well over that piece as you can imagine. So it's a -- I think we're uniquely positioned given all the things that Padraig just said, and it's becoming an even bigger component of our growth story going forward.

Okay, great, thank you. And then can you talk through how much of the growth in instruments is due to true and market recovery versus replacements being driven by the Infinity III launch and then any updates on how that launch is impacting your overall win rates.

Padraig McDonnell

Yeah, I mean, if you look at our core on the LC and LC/MS side of pharma, which is -- we grew high single digits globally and ex-China we grew double digits actually on that. And what we're seeing is a continued improvement in farmers' willingness on CapEx spending, undertaking opportunities in PFAS and GLP-1s as well.
Infinity III has gone extremely well for us. We're seeing significant rise in win rates, and we're seeing, of course, that the productivity gains that this system gives out is resonating with customers extremely well. And as we look at our -- refresh of our install base, whether it's 1100s, 1260s or 1290s, there's a lot of opportunity there. Some of that is actually spurred by end of supports and on the 1,100 side in some areas.
So we're seeing our tech refresh momentum has really started around the Infinity III. So, a really good momentum.

Operator

Patrick Donnelly, Citi.

Patrick Donnelly

Hey guys, thanks for taking the questions. Padraig, maybe just on China, I know you talked about seeing an outside share from the China stimulus. I know when we chatted a month ago, you guys were pretty positive on that piece as well. It felt like you were getting more than your fair share, given where those dollars are going. It felt like a little more, GCs and industrial.
Can you just talk about what you're seeing there, the traction. It feels like there could be some nice upside there. I know there's more tenders coming as well, so it would be helpful to talk to China's stimulus and the impact around GCs and the industrial piece.

Padraig McDonnell

Yeah, no, thanks, Patrick, and we did saw a really nice uplift to our excellent performance and winning outside share of pretenders and the national stimulus program. The total stimulus demand for Q1 was around $35 million and we recognized all of that in the quarter. We won 50% of all stimulus orders.
And with this round, our China team is now expecting the next round of stimulus to come later in the year. That's yet to be quantified. It is going to be broad and I think it's going to be slightly more fragmented in the type of customers, but the size of that round is really not clear as of yet.
So, but I think at this point, we're not assuming that all stimulus we booked in Q1 would be fully incremental for the year. I think that's important to say. We expect that some of that is likely pulled forward and our thinking is about 50% of that is pulled forward. And we did not see a meaningful improvement in the underlying business in Q1.
I'd say it was -- what I would say the China market is stable, and we're otherwise maintaining our expectation on the base business resulting in a modest increase for FY25 expectations, and while we're increasing our expectations for the year, the total remains within our low single digit guide range.

Patrick Donnelly

And Bob, are you rolling out second tender into the guide or that the upside?

Robert McMahon

Yeah, that's a good question, Patrick. We have not -- we're staying consistent with how we did it in the beginning of the year, which is we have not rolled any incremental into the guide. So that would be a source of upside, Patrick, once we understand more about what the scope and timing of that will be. We do believe that based on the folks -- our team on the ground that it will happen in the second quarter of the -- second half of this year, whether that shows up in our, second or third and fourth quarter, or by the end of the calendar year is still be determined.
But needless to say, we are very optimistic given our strong performance in this first cycle and the fact that we have a strong ability to produce all of our products in China for China.

Patrick Donnelly

Yeah, no, that's okay. And then maybe just on the NASD business, can you talk about what you're seeing there? I know last quarter you talked about high single digit growth expectations, maybe some potential for double digits. So we'd love to hear the latest thoughts there. Any color commercial versus clinical would obviously be helpful as well.

Padraig McDonnell

Yeah, I'll kick it off, and I'll hand it over to Simon. So very much as expected in Q1, demand continues to be very strong. No change in guidance for the year, which is guiding at high single digits and of course nudging to low double-digit target. But, Simon, you want to add more color?

Simon May

Yeah, I think you said it well, Padraig. Demand very much in line with expectations. Revenue profile also in line with expectations. The full year outlook remains absolutely intact. I think we still have a dynamic in NASD which bodes very well for the future, where we've got a lot of process qualification work for molecules that are headed towards the commercial space.
And that coupled with the order intake patterns that we've been seeing for quite a while now, make us very enthusiastic for the future. So confident about the '25 guide and even more confident and enthusiastic about the longer term.

Patrick Donnelly

Yeah, thank you guys.

Operator

Tycho Peterson, Jefferies.

Yeah, hi, good afternoon. This is Jack on for Tyco. Appreciate you taking our question. I guess there's one on the replacement cycle. Appreciate the color on Infinity III, kind of the influence there. I guess any other data points that spike out to help us understand where we sit today, and kind of better understand the shape and pace of the replacement cycle and how it could play out over the next two to three years.

Padraig McDonnell

Yeah, I mean, LT replacements, it happens at different times within different install bases and so on. What I will say about us in terms of Infinity III, it really has kicked off that replacement cycle. What we've seen is that typically, the replacement cycle is about 9 to 12 months and because of our install base and a lot of 1,100s out there that are some of those are coming to end of support, it really has created momentum around it.
So we expect that to be a steady replacement cycle. We don't expect the super cycle in any particular quarter, but as we move forward, our install base will move with it. What I will say as well, we've made significant improvements in our life cycle management process. So how we can look at where the install base is, how we can inform customers for better productivity and so on. And the good news is Infinity III has all those capabilities.

Robert McMahon

Yeah, hey Jack, maybe just to build on what Padraig is saying is, I would say we're in the still in the early stages of that recovery. We had a very strong performance in Q1 with the uptake of Infinity III. The feedback continues to be very positive, and I would also look at -- when we look at the average age of our installed base, is still older than normal and so we're very excited about this.
I would also say that order growth outpaced revenue growth in the quarter. So again, another positive instance, and that's on top of overcoming Chinese Lunar New Year, that's across the board. So, certainly early days, very positive with all -- for all the things that Padraig was talking about in the call, and I think there's a long runway here for us to be able to take advantage of not only our own installed base but also competitive installed base as well.

Tycho Peterson

Appreciate it. Thank you.

Operator

Jack Meehan, Nephron Research.

Jack Meehan

Thank you. Good afternoon. Padraig, you mentioned, I think early in the script some changes in the management layers within Agilent. Is there any additional color you can share on what you're doing and then is there any associated savings attached to that that you would call out? Thanks.

Padraig McDonnell

Yeah, thanks, Jack. So first of all, we layered -- let, we talked about our new organizational structure at the Investor Day and at JPMorgan , and one of the key elements of our customer centric strategy we introduced was becoming more nimble. That's going to speed up decision making and also increase innovation. And these changes are absolutely critical to our strategy and we we know they're going to deliver many benefits to our customers.
So what we're really doing is we're looking at layers in the organization where we can flatten a little bit, increase our span of control so we can improve our decision making and also get a better coverage in our management layer. And while I would say the focus of this is truly strategic, it really is leading with our strategy. There will be some cost reductions associated with these changes later in the year, and that's where you have those baked into our guide.

Robert McMahon

Yeah, hey, Jack, just, if you recall when we talked about the Ignite savings. At the beginning of the year, we talked about some being in the second half, more and more in the second half. This was -- that's where you'll see the activities that we're going through right now.

Jack Meehan

Okay. And then, great. Can we get an update on BIOVECTRA. It looks like that M&A added $26 million sales in the quarter. Has your target for the year changed at all? I think I heard $145 million in the model, and can you just talk about how things are going there? Thank you.

Robert McMahon

Yeah, I'll pass this one to Simon to take.

Simon May

Yeah, thanks for the question. I'd say overall, as we are going through the integration process with BIOVECTRA, we're increasingly excited about what we're seeing there. I think the more we get under the hood, the more the capabilities that we have there are resonating with our internal experts and also with our customers. We think it's still very early inning and we're absolutely in the sweet spot there with those capabilities and relative to where the puck is going with therapeutic modalities.
We were slightly soft on revenue in the first quarter. The focus there is really very heavily on bringing certain aspects of the operation up to the Agilent NASD standards with process and quality, and that's progressing really well. But then with regard to the full year guide, we're holding to the previous guidance and no change there.

Operator

Vijay Kumar, Evercore ISI.

Vijay Kumar

Hi guys, good afternoon and thank you for taking my question. I guess, Bob, when we report -- again on your book to build commentary here being about one versus seasonally being built sub 1X. Is that being driven by stimulus or perhaps timing of the Chinese New Year? Maybe we talk about this book developments and what is that signaling.

Robert McMahon

Yeah, hey, VJ, it's Bob. Yeah, actually the Lunar New Year didn't have a big impact on that. Actually, I would take that as a sign of the continued recovery, particularly in the instrumentation market. We did have an impact or a contribution from the Lunar New Year, but the real big area is both LC and LC/MS.
And so typically what we see is just because of the way our fiscal year is, that our first fiscal year because January is the last month of the quarter, the instrument book-to-bill is typically lower than 1, and so the fact that it's above 1 is a very positive sign from our perspective that that recovery continues.
And as we were saying, it's really been led by some of the new products in the unique attributes of our LC -- the Infinity III portfolio, and has given us -- allowed us to have renewed conversations with customers and so forth.

Vijay Kumar

Understood. And maybe one for you on, I think I heard you mention you've identified a few $100 million worth of replacement opportunity. I guess, what is the average age of the fleet and when you do that math, what is incremental of the few $100 million versus a normal replacement cycle, and when you think about the tax rates on services and chemistry, do you feel like that part of the business is growing mid to high signals or where we on services and consumables.

Padraig McDonnell

Yeah, I'll take the first piece, and I'll hand it over to Angelica to give more color on the services and consumables, but we're older than the median, I would say at the age of the install base. Sell base is very large, very disparate, a lot of different equipment in it, so we expect that we're going to see the pace of that change, continually improve throughout the year and that there's a huge opportunity there in terms of opportunity for replacements.
And also when that comes, of course, we have a tax rate with the new Infinity III both on the services, on the on the consumable side so. I would say as well, just to mention that we did see an improvement at the year -- end of year orders. It's not back to pre-COVID days, but there was a sequential improvement in terms of December orders in terms of budget flush versus the previous year, which again was in large part about install based change.
And I would say, when I talked to lab managers out there and we talked to high-level procurement people, there's a lot of pent up demand for instrument changes, lab managers are really pressing that, and we do see that the purse strings loosening a bit within our pharma customers. But Angelica, on services and consumers.

Angelica Riemann

Yeah, great, thanks Padraig. To add to what you've already said, it is going to -- the replacement cycle is going to occur over a period of time and it's probably going to be a mix of some incremental placements of new instruments as well as replacing some of the aging instruments on the lab bench.
And what that really allows us to do is continue our focus on increasing our ability to connect services and consumables as those new instruments are being put into service and we know that that motion allows for greater and longer customer lifetime value both in how the customer is using that instrument, but also in terms of the continued revenue stream that that generates for Agilent. So there is upside and incremental opportunity for sure.

Operator

Brandon Couillard, Wells Fargo.

Brandon Couillard

Hey, thanks. Good afternoon. Bob, can you just help us understand what's going on with gross margins, down over on 30 basis points in the first quarter? Was that in line with your expectations? How much did currency affect that and what are you expecting kind of the next few quarters?

Robert McMahon

Yeah, Brandon, you know what I would say is, if we looked at the bottom line, operating profit was in line. Gross margin was a little lower just because of some of the mix of products. It wasn't anything material and I would expect that to improve throughout the course of the year.
If you can imagine, with a large stimulus in China that did have some pressure on our margins at the gross margin level but very profitable at the operating profit margin, and currency did have an impact as well in Q1, and that impact was roughly, 20 basis points - 30 basis points in the quarter for the total company.
And I'd expect some of that to continue throughout the course of the year. We do get some benefit because we do hedge, but still the drop through of that is greater on the gross margin. So the one thing I would say, Brandon, to offset that is we were actually pleased with the pricing Padraig mentions about the pricing. It actually was trending a bit higher than what we had expected in Q1 and are expecting that to continue through the course of the year.

Brandon Couillard

Okay, that's help. And then it be great if you could get an update just on the pathology and genomics pieces and how those performed in the first quarter. I think genomics is actually up in the fourth quarter. So if you could share an update, be helpful, thanks.

Padraig McDonnell

Yeah, I'm going to pass this one to Simon.

Simon May

Yeah, I would say genomics was puts and takes in the first quarter. We saw some negative impacts from the funding situation in the US with academia and government, and then on the flip side, we continue to see really strong traction with our Magnis automated NGS Prep System, that's on a very strong growth trajectory. And the Avida Chemistry as well is a still a pretty small vehicle, but the customer adoption there is looking pretty strong.
So as we look to the full year, I still think we see a path to return to growth in genomics, but again, the near-term headwinds at least with academic and government funding slightly outweighed the positives from Magnis in the first quarter.

Padraig McDonnell

And the diagnostics and clinical overall grew 7% and the pathology was flat year over year, but we see very steady growth rates as we go through the year on that side.

Operator

Puneet Souda, Leerink Partners.

Puneet Souda

Yeah, Padraig and team. Thanks for taking my questions. The first one, if you could just elaborate a little bit on the China stimulus. We were expecting more orders and maybe more continued orders. And so I'm just trying to understand, so why you're expecting it in the second -- in the rest of the instrumentations and growth from stimulus potentially in the second half. Maybe, can you elaborate what you saw, what are you hearing from the ground in China?

Padraig McDonnell

Yeah, so the stimulus order was within the food area, within the Chinese customs and government departments, and it was very broad based in terms of instruments. It actually had most of our platforms in it as we won 50% of that seamless order, which is around $35 million, and it was recognized -- essentially all of that was recognized in the quarter. That's a very extremely high win rate.
And of course we think it's not all of that is incremental. We believe about half of it is kind of run rate pull forward, half of that is incremental, but it shows when these stimulus come in, the Agilent team can really win it's over oversized share of it. And as I said before, we're expecting more stimulus, which we haven't baked into the guide in the second half, but rest assured when that arises, the Agilent team will be there to help customers.

Robert McMahon

Yeah, hey, Puneet, to build on what Padraig is saying, I actually see this as a really positive that we were able to not only get that revenue in, the orders in and actually deliver it. It's a real testament to the Agilent team and so it actually gives me increased confidence that when the orders come in, we will get more than our fair share in the second half of the year.
So, I think we still feel very optimistic about not just this year, but if you remember this is a multi-year kind of stimulus program and so we feel very good about the momentum that we have. I wouldn't look at it quarter to quarter. I look at it, year over year.

Padraig McDonnell

And just maybe adding one point. I mean, what is absolutely crucial for those orders to come in is having met in China capabilities and having our ability now to make all our platforms within China for China is a really a significant advantage for us.

Puneet Souda

Got it. That's -- thanks for clarifying that. And then, question on the margin side, with Ignite efforts. Can you elaborate the margin contribution you talked about pricing on one end, number of cost efforts, and also reducing some of the management changes that you have in place. So I just wondering if you -- how should we think about the margin contribution if you have a target this year from Ignite. Thank you.

Padraig McDonnell

I'll start off and I'll hand it over to Bob. So yeah, no. Of course we have a very well defined program as we go through the year. Actually Ignite is a three year program and you know what we said is, over the three year, 70 basis points to 100 basis points plus in terms of margin expansion, and of course all of this doesn't happen all at once, right?
So we've seen early benefits both from the procurement direct and indirect procurement side. And from pricing in terms of what we're seeing, but of course we'll see more in the second half and as we go into next year. But Bob, I don't know if you want to get more color on.

Robert McMahon

Yeah, I was going to say, we're on track with what we had talked about at the beginning of the year, Puneet, which was, 50 basis points to 70 basis points this year. We're going to have to work harder for that because of some of the currency. But, pricing has held up here in the quarter and we're on track as Padraig mentioned for some of the other areas.

Operator

Douglas Schenkel, Wolfe Research.

Douglas Schenkel

Thank you for taking my questions. When we cut up with you guys in January, it sounded like similar to the rest of the peer group. You had a strong December in terms of the instrument budget flush, especially in the pharma end market. And I guess I'm just wondering if, one, I want to confirm that was the case, that the end of the fiscal year came together strongly?
And if so, it would be interesting to hear if there's anything interesting that occurred in terms of a particular rebound in specific instrument categories, specific geographies, specific end markets? And then kind of building off of that, was January normal?
Or did you kind of go into the second topic I wanted to cover, given the change in administration, if December felt a little more normal, did January feel maybe less normal given all the uncertainty in terms of pharma regs, academic funding, food and water testing? Any commentary on all of those things would be really helpful.

Padraig McDonnell

Okay. Thanks. So I'll start off and I'll hand over to Bob. So it was -- certainly, as we talked before December, it did play out as we expected. We did have that strong, strong momentum. And what was driving that overall demand, I would say, particularly around Infinity III, but also, we talked about PFAS testing and including also what we're seeing in the GLP-1 areas.
And January, a new administration comes in, a lot of changes. And of course, we're mitigating those changes as we go through it. The only area where we've seen some softness is really in academia, with NIH funding where things have really slowed down a bit. But of course, that's a very small part of our business, and it's not within the guide on us.
In pharma, when we talk to our customers, actually, there's a lot of questions. You see a lot of discussions around IRA, et cetera, what changes might happen about international pricing index, et cetera. But I would say that hasn't impacted on the pharma side. We're seeing -- we're still seeing a steady business coming out of that side. But everybody is really watching that.
On the PFAS side, just going back to the pharma side as well. People were talking about FDA -- changes within the FDA. I think that hit more of the medical device companies areas within that expertise, but we haven't seen anything on us yet. And within PFAS, that business continues to be strong. We still see it in January, which there's been no change in that as it happens. So it's an area we're going to continue to watch very, very closely. Hugely dynamic. But I would say January is a steady progression from December.

Douglas Schenkel

Thank you very much.

Operator

Dan Leonard, UBS.

Daniel Leonard

You mentioned a couple of times that you saw an improvement in pharma CapEx. And what I'm curious about is how much of that improvement was narrowly relevant to QA/QC versus broader and inclusive of R&D functions in pharma and other product categories in your portfolio like [Excel] analysis?

Padraig McDonnell

Yes. So I'll kick it off and maybe hand it to Simon on this one. So we're, of course, we have heavy fleets and a lot of capabilities when QA/QC and development for QA/QC. So we saw that across the board on that side. I would say in R&D, you see a lot of shifts in terms of where customers are spending money. So we did actually see a good continuation of positivity on that side.
But in the pharma QA/QC and the development areas of labs, we've seen continued, I would say, steadiness and incremental strength driven around a replacement of fleet and driven by the Infinity III. But Simon, I don't know if you want to add anything to that?

Simon May

Very little. So there was a reference in the question to sell analysis tools. And as I look at that overall, I'd actually say on the academic and government side, we've had some impact there in cell analysis with our lower-end instrumentation, where although at company level, the exposure is very minimal within cell analysis, it's a little higher.
But generally speaking, the funnels are robust in biopharma across the entire continuum. We're seeing really nice adoption of our NovoCyte Opteon platform, the spectral flow side cytometry and the Citation C10 is also performing really well. So a few puts and takes in cell analysis.

Daniel Leonard

Okay. That's really helpful. And then a follow-up question. I think, Padraig, you mentioned in your prepared remarks that you've taken specific actions in response to the tariff talk. Can you elaborate on that?

Padraig McDonnell

Yes, no problem. So we have a very diverse manufacturing capability around. And if you talk about the three areas where tariffs we talked about in Mexico, we have no manufacturing. In Canada, we do have manufacturing. We buy a vector, but it's about 30%, I think, is put into the US. And of course, in China, we have in China for China on it.
So we believe the overall impact is about $5 million. And we actually believe that's very mitigatable down to much less than that, and we're working on it. Just to give you a sense of it, we were able to shift our supply chain pretty quickly in areas from, say, China back into the US. and into Singapore as well, which really is very mitigated.

Operator

Michael Ryskin, BofA.

Michael Ryskin

Maybe a little bit of cleanup. But you touched on this a couple of times in terms of the academic and government. I just kind of want to make sure I understand the timing of it. If I'm just going to go back to the slide deck, the negative 7 in the quarter. You called out softness globally and the anticipated slowdown in government spending impacts willingness of some customers to spend.
So as this thing you started seeing back in November, December, is this -- I'm just trying to think of the timing of what was happening in the quarter as it relates to election and operation all of that. Any clarity there would be helpful.

Robert McMahon

Yes. Mike, this is Bob. What we saw actually was a pretty consistent performance across all the regions. So they were all down. So that's what we were talking about when we did see globally. We did see maybe a slight more in January incremental softness towards the end as people were trying to figure out the NIH activity. I wouldn't say that that necessarily is super material for us. And as you know, the academia and government can be kind of lumpy at times.
So the one area that I would say got a disproportionate impact actually was China, and a lot of that is some of the impact of the timing of the Lunar New Year. And so I think that they were the most negative for the full Q1. And that is -- we have a slightly larger exposure in academia and government in China than we do relative to the rest of the world. So I wouldn't read too much into it. Hopefully, that kind of clarifies kind of what we were seeing.

Michael Ryskin

Yes, it does. It does. And I think, I mean, just right now in response to an advanced question you're talking about cell analysis specifically. Is that just another area where you have overlap where it's concentrated in a handful of different parts of the portfolio? I imagine there's not a lot of GCs going into academic and government labs.

Simon May

Yes, that's a true statement. And again, in cell analysis. The way I'd characterize it is that we began to see hesitancy in academia and government in the run-up to the election last year, people were kind of in wait and see mode to see what happened with the election. Now what we're starting to see, of course, is that the impacts are real.
And just to say the getting cell analysis, we've got proportionately higher exposure there in academia and government in many, if not all, other parts of our portfolio. So your statement there about the relative impact is a true one. And we don't see that elsewhere.

Operator

Eve Burstein, Bernstein Research.

Eve Burstein

Yes. This has been asked a couple of ways, but maybe just to follow up on Mike's question for academia and government. You said you were starting to see a little bit of softness at the end of January. How is that trending into February? Can you just give us a take now, where you stand today?

Robert McMahon

What I would say is that's why we have a little wider guidance in the Q2 guide between the low and the high. And we have -- I wouldn't say it's any materially different than what we saw in January from a trends perspective. It hasn't deteriorated. But where we're just being prudent there from a standpoint of what potentially would be there. And then for the full year, we're not changing our guidance.

Eve Burstein

Okay. Fair enough. And then we've talked quite a bit about the LC replacement cycle. Within GC, is there an opportunity for an up cycle here as well? You've mentioned several times that in LC, different customers, different applications are going to improve at different times. But how do you anticipate GC playing out through the rest of the year in terms of improvement pace timing? And can you just give a little color there?

Padraig McDonnell

Yes. No, that's a great question. And of course, GC replacement is a different timing than LCs because of the technology. But I'm going to ask Mike Zhang to give some color here.

Mike Zhang

Yes. Thank you, Padraig. Obviously, we have a strong leadership in the GC market, and we're a very, very strong installed base. And we actually have introduced a new GC/MS to the market, and we're seeing very strong response from customers. So we are very -- we're very optimistic about the opportunities. But certainly, it will be -- again, it's -- over time, it's a long-term opportunity. So we're very excited about that.

Operator

And Mr. Ahuja, I turn the call back over to you.

Parmeet Ahuja

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

Operator

This concludes today's conference call. You may now disconnect.