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Original Source: FD (FAIR DISCLOSURE) WIRE
. Peter Dworkin, Applied Biosystems, IR . Tony White, Applied Biosystems, Chairman, President, CEO . Dennis Winger, Applera, CFO . Quintin Lai, Robert W. Baird, Analyst . Mark Stevenson, Applied Biosystems, Pres., Molecular & Cell Biology Division . Ross Muken, eutsche Bank, Analyst . Derik De Bruin, UBS, Analyst . Laura Lauman, Applied Biosystems, Pres., Proteomics & Small Molecule Division . Tycho Peterson, J.P. Morgan, Analyst . Paul Knight, Thomas Weisel Partners, Analyst . Robert Smith, The Center for Performance Investing, Analyst
. Peter McDonald, American Technology Research, Analyst . Lenny Klevan, Celera, Pres., Applied Markets Div. . Dan Leonard, First Analysis, Analyst . Kathy Ordonez, Celera, President . Bill Quirk, Piper Jaffray, Analyst . Joel Jung, Celera, VP, Finance . Bruce Cranna, Leerink Swann, Analyst . Tom White, Celera, Chief Scientific Officer . Peter Lawson, Thomas Weisel Partners, Analyst
ABI announced 3Q07 revenue of $530m and non-GAAP EPS of $0.36. Expect FY07 revenue to be up high-single to low-double digits.
A. Key Data From Call 1. 3Q07 revenue = $530m. 2. 3Q07 EPS (non-GAAP) = $0.36. 3. 3Q07 GM = 56.4%. 4. 3Q07 capex = $16.5m. 5. 3Q07 DSO = 57 days. 6. 3Q07 inventory = $145.2m. 7. 3Q07 end cash and short-term investments = $448.5m. 8. FY07 revenue guidance = high-single-digit to low-double-digit growth.
S1. 3Q07 Overview (T.W.) 1. ABI Highlights: 1. 3Q07 revenues up 8% to $530m. 2. Non-GAAP EPS up 6% over 3Q06. 3. Operational revenue excludes: 1. Net effect of foreign currency. 2. Licensing fees related to settlement with Bio-Rad Laboratories in 3Q06, and Ambion revenues in both periods. 4. Operational revenue grew approx. 5% over 3Q06. 5. DNA sequencing grew 3% over 3Q06, up 4% YTD. 1. Confirmation of perspective that market has stabilized and is growing modestly. 2. Sequencing instruments continue to benfit from ongoing expansion and adoption of DNA forensics.
6. Consumables growth driven by increased use of ABI installed
base of over 14,000 sequencers and promising launch of BigDye
[ex-Terminator] purification kit. 1. Example of strategy to capture more revenue from customer workflows, and from preparing samples prior to analysis on co. sequencers. 7. Next-Generation Sequencing Initiatives: 1. Commercialization of advanced genetic analysis platform progressing as scheduled. 2. On target to provide initial instruments to early access customers by mid-calendar 2007. 3. Plan additional unit placements in fall 2007. 4. Running customer samples on platform in co. labs, and presenting data at various scientific conferences. 8. Real-Time PCR and Applied Genomics grew 13% over 3Q06, or 10% excluding Ambion revenues and prior-year licensing fees related to settlement with Bio-Rad.
1. Real-time PCR growing in all sectors as application for genotyping and gene expression. 2. Instruments: 1. Growth in quality and safety testing applications in applied markets, especially food and environmental testing. 3. Use of real-time PCR expanding globally, with Asian markets particularly dynamic. 4. Strong consumables growth in real-time PCR and applied genomics benefited from uptake of TaqMan assays. 9. Ambion revenues increasing above market growth rate for RNA reagents. 1. Ambion products being well integrated into workflow solutions provided to address customer applications. 2. Positive impact consumables culture at Ambion having on continued development of total consumables business
strategy. 10. Core PCR and DNA synthesis declined 9% from 3Q06.
1. Primarily due to expected decline in PCR royalty revenues.
11. Mass Spectrometry: 1. Double-digit growth quarter, up 12% YonY. 2. Growth balanced across all application areas.
3. FlashQuant workstation: 1. First-of-its-kind front-end MALDI ionization system designed to run with the 4000 Triple Quad and 4000 Q Trap. 2. Promises to greatly speed up compound screening and drug discovery for small-molecule analysis. 12. Global Services:
1. Grew 14% over 3Q06. 2. Good order growth from new service plan and specialized services.
S2. 3Q07 Financial Highlights (D.W.) 1. 3Q07 Results: 1. 3Q07 amortization expense related to acquired intangibles reduced income before taxes by $2.8m. 2. Sales were $529.9m. 1. Adjusting for Virex settlement, organic growth was approx. 5% without the impact of Ambion. 3. 3Q07 GM was 56.4% vs. 56.2% in 3Q06. 1. Increase primarily due to favorable impact of foreign currency and improved vendor pricing related to enzymes. 4. SG&A expense increases reflect costs related to acquisition of Ambion, higher employee-related costs, and certain strategic investments to support growth.
5. Increased R&D primarily attributable to Ambion and development
of advanced genetic analysis platforms. 6. 3Q07 EPS, non-GAAP, were $0.36, up 6% from $0.34 in 3Q06, including benefit of $7m in licensing fees related to Bio-Rad settlement. 7. Net effect of foreign currency on 3Q07 EPS was favorable $0.03 vs. 3Q06. 8. Cash flow from operations was $107.1m. 9. Capex were $16.5m. 10. At end 3Q07, AR were $406.8m. 11. DSO was 57 days.
12. Inventory was $145.2m, representing 3.2 months of inventory
on hand. 13. At 3/31/07, cash and short-term investments were $448.5m, up from $343.7m as of December 2006. 1. Increase largely due to contributions from earnings. 14. Board determined group has sufficient financial resources to pursue internal and external investment opportunities as well as to repurchase shares. 15. Board authorized repurchase of up to 10% of outstanding shares of ABI common stock. 1. Anticipate purchases to be made from time to time depending on market and business conditions. 2. Outlook: 1. Expect high-single-digit to low-double-digit revenue growth in FY07, assuming current exchange rates.
1. Includes FY07 impact from March 2006 acquisition of Ambion.
2. Expect revenue growth in DNA sequencing, real-time PCR, and
applied genomics sector, mass spectrometry, and other product
categories. 3. Expect revenue decline in core PCR and DNA synthesis. 4. Quarterly YoverY revenue changes may differ from annual expectations due to a variety of factors, including timing of customer orders and disbursements of government funding.
5. Expect effective annual tax rate used to calculate non-GAAP
financial measures will be approx. 30%. 6. Expect non-GAAP EPS to increase at a rate equal to or slightly above annual revenue growth rate. 1. Includes incremental impact of Agincourt expenses and stock-based compensation, and increase of effective tax rate from 29% in FY06. 2. Total impact of these items on FY07 non-GAAP EPS is expected to be approx. $0.10. 7. Total pretax impact of FAS 123R expected to be approx. $14m, with EPS of approx. $0.05.
QUESTION AND ANSWER SUMMARY
OPERATOR: Quintin Lai, Robert W. Baird.
QUINTIN LAI: Hi, good morning. So could you give us a little bit feedback on what you're seeing in the end markets? We've heard some of the other life science tool companies talk about a pickup in U.S. pharma spending and academic kind of being in line with '06 patterns?
TONY WHITE: I guess I would basically agree with that. We have seen some encouraging signs in the pharma market and I think some of our results for the quarter reflect that. And unfortunately, …