Luminex (LMNX) 30 Oct 172017 Q3 Earnings call transcript

Good day, ladies and gentlemen, and welcome to Luminex Corporation Third Quarter 2017 Earnings Conference Call. My name is Carmen and I will be your coordinator for today. Today's call is being recorded. At this time, all participants are in a listen-only mode.

Following the prepared remarks, there will be a question-and-answer session. now Senior turn for Director would to call opening I Scalo, Matthew of Instructions] like the to over remarks. [Operator Investor Relations, proceed. Please

Carmen results. Corporation's to third and good XXXX call quarter operational for the Thanks Luminex and financial and afternoon, conference welcome

today be Shamir, President financial call review agenda Homi following and our Executive and Chief and our Homi that, Vice we'll for call after Harriss and will the Senior standard performance, Currie, President are will corporate Financial the Chief Officer; the On Harriss Officer. review questions. highlights. We'll today. open your

measures Section which a by speak only claims or provided to being unknown materially the statements company's of plans today's of Quarterly meaning and on and not uncertainties, these to Litigation Exchange are be you We will non-GAAP XX-K on replay update XX, from obligation As are hereof within statements. during the are certain the with the such defined website. date expectations could Form beliefs detailed are our non-GAAP with such as no of is that based in conference available may we anticipated I'll XX-Q for documents cause consequently actual the of and and financial encourage of today's now risks Form CEO, forward-looking XXE and SEC included six G. Reform covered, Reports Securities Act President for forward-looking Investor cause call may may directly the over or the extent and reminder, our reconciliation made call of filed covered Securities our adversely recorded the and our months our that course in protections undertake or To some call most differences that which a results subject historical accordance Homi to our for to These December measures as are statements current forward-looking financial available this in is statements. company of review Factors purely of Certain release, measures, beyond the a call. year-ended these financial be and in forward-looking known the on control the and section Regulation and the is to Act presentation website Also, could and earnings to G, XXXX, and differ Regulation those in to statements. Private be any Shamir. GAAP turn Relations the our SEC. on contribute statements comparable be the by the

earnings Thank you, welcome Matt. third quarter call. and to our Good afternoon, XXXX

continue in over over and molecular molecular placed portfolio. execute ex-revenue quarter by this XX% customers. to business Sample-to-Answer have third molecular growth driven XX% XXX systems well under quarter XXX go performance diagnostic systems strong We We over our and another led in Sample-to-Answer seem active by the now we've contract the at our Sample-to-Answer XX

assay made revenue unnecessary molecular in second year, specific as ongoing generating business, obstacles our on overcome this X strategies. In a trend pricing year $XX,XXX the product offering while we've address our needs that addition, VERIGENE and over a call. good lab cost. differentiated These extensive factors and positive a to On progress provide our customers molecular Multiplying $XX,XXX minimizing with solution including now strategies reference. quarter generates ARIES potentially customer in discussed our while VERIGENE contribute approximately is average is a

X now Our for our a platform of VERIGENE platform the is success very we strategy walking X lounge. multi well due ongoing to on VERIGENE focus and essay go-to-market our

second quarter in multiply the trial commencing trials commence XXXX. in XXXX the clinical first will with We of

our of to I a areas multiyear Before business million to $XX we $XX our amount year. to in product to also wanted approximately This extension million LabCorp. the highlight on revenue CF other move

XXXX Technology demand This third our continue not of Group year-to-date year. License X%. offset rate remained quarter comparison. Our positive although system growth for tough earlier in FLEXMAP as XD as Strong year-over-year in posted business strong the by the

We support selectively LTG. in invest opportunity growth of continue to future for

addition, third In with and post balance and of quarterly flow generated is we dividend million million cash cash over payment. strong $XXX our sheet a debt our balance $X no

I'll afterwards Now Harriss, will comments. data the closing financial review return some and with

Homi. Thanks,

not prior two mentioned, revenues, Homi for and revenues quarter up the of in period were XX% period. for quarters X% the year. As year-to-date the included year-to-date present VERIGENE-related the Obviously,

royalties. decline of payments reduction year, Royalty X%. up in in the the partners our bulk illustrated royalty the For XXX orders quarter, but of from our timing was was we ARIES the audit purchases quarter we the offset expectations per the revenue effects XXX half as unexpected system their our well within down both ARIES quarter and increases to sales revenue included about user but to and sales prior contribution not systems timing is XXX of rental in and contribution communicated was the VERIGENE second of are majority with of for total lighter and minimum affected placed from in by our were but down Also this year, VERIGENE the have reported a minimal. base consumables including were the multiplex system systems those partners. are are End large for under placed of Consumer not revenues although effects the and quarter-over-quarter. guided quarter. almost to by by by $X of the These in systems, findings prior revenue XXXX million flat

to up attributed XX% several be two Assay quarter of increase for decline from X% nonautomated the margin revenues a quarter, gross for in of quarter a in factors. posted points XX% down with automated and This We products. the products our the were percentage our increase XXXX. XX% can third

to in the of revenue First, the quarter portfolio current our sample from XXXX of quarter. increased X% answer third XX% revenue in

As automated of below have indicated, currently our we've margins products. aggregate remaining the products well our

expansion, in will other below subsidize margins streams. volume further worked of to remain revenue our further aggregate we and Although margin they the diligently improve still increases well those

overall other assays Secondly, decline well. contributed to as than mix the changes

Our of of related from in in improvements gross royalties improvements product quarter revenue to to highest line quarter we fell the and to adjustments margins the margin. adjustments margin necessary And current utilization XX% the some in XX% in quarters, cost inventory in items, impaired finally, but revenue. to drive consumables made standard future labor

timing revenue and expenses. had attributable a the profit XX%, We by improved was Overall, expansion continue down our flat as clinical displaying quarter, decline X%. profit $X.X previously. $X.X to expenses R&D operating of OpEx gross to trials SG&A driven the operating discussed growth, during of and expenses in or control million, by control Operating million primarily

the we With $XX for During commitment our dead to million analyst the asset released asset to the in share of be deferred and the CF the not that subsidiary. the have XX.X of of would made $X.X likely been and year. of quarter not Canadian respect felt at commitment, previously than $X.XX million was $XX our it up utilized, and we're consensus. extension the for remainder income deferred consensus, The million the net a therefore, a the called LabCorp result prior LabCorp would more the release of tax as tax so line or of this extension assets. we range Adjusting release, of with center from million XX% remaining guidance which

reported consensus favorable consensus percentage to well adjust the gross points, Our assets. by over but basis, OpEx line but about for margins by on Canadian is the in fall VA our a income when is release consensus Net of is short three on $X million. of tax we above

with strong in receivable, and no with in million and million accounts million. on solid of remains $X of DSOs quarter, debt We $X.X over the investments. the payment cash sheet dividends balance $XXX of generated over cash even Our

into we million. to million fourth expect Looking the between currently $XX and be fourth revenues following; $XX quarter expected the are quarter

roughly franchise first year hold gross automated improve and boosted continue should flat margins of is LTG cash MBX generation component flow be consumables Gross is should growing revenue increase to stream highest current should finally be volumes the overall for automated year. revenue and the segment, with the half expected by expected our to favoring Our to the on the steady continue. margins our as

for I'd Homi to it to some Now comments. back final over like turn

our Harriss. Thanks, now business just strength of the LTG our its showing will in in offset MBX We and group Sample-to-Answer term feel group. comps particular, tough is momentum the near true the

achieve XX% over growth We the $XXX of confident revenue million we'll are midpoint range guidance XXXX very XXXX. of

done through please the pipeline while in Operator, entire closing, open This development double-digit internal in XXXX. business external our bottom our and meaningful drive model line. line our across focus in investing will on We questions. continues to never This comments. be business. formal wisely end losing the So, product goal remain for committed to means, both diversified

[Operator instructions] from Peterson question Tycho with And JPMorgan. of first the our line is

Your line open. is

you these assays? will do the of launch be how timing bit prioritizing What what on here? multiple update and trials you're menu prioritizing can you on you expect actual can -- give Homi, color just to assays a more or look the little how the like

we to Yes, planning as investor preclinical last year. I had mentioned trial when some next week also we're start wave,

culture, like of end of after year that and with FDA we hopefully we two soon the go get would the enteric some have we all the by that things next start all of our the them to to are cleared that shorter. assay respiratory assay and hoping two-blood soon will we positive gram gram longer, FBI the negative cleared when XXXX, the and we'll But QX, after basically FDA. approval, During customer by start our the some with the in add before them but of only these for we're

currently during this I continue nicely mentioning grow compelling customer proposal we have VERIGENE. especially quarter, hopefully new close very the our in XX to we think when active this customers as demonstrate the and have to customers to it's XXX call, number

clinical talk our it next year. will will impact in about expenses effort I conference. So, to during year, it a but for next trial on side Obviously, the R&D about year, to next call we'll we'll don't that three little impact and lot but am talk continue next the your of sure bit a put basically I want

but just seeing don't CapEx two of are of the versus And what then here. can exposure, ton you Okay. to your change patient number questions part customer One, I necessarily on budgets? percentage outpatient? just you two, the a you VERIGENE shifting in us customers any in direct And then remind behavior have know gears on PAMA, does

forecast I've neither not any trajectory PAMA sales folks influencing of that going forward. our of seen the have is I from

in is So, in our majority not it's much they're there. thinking really any not complaining, is It's the folks, we're hopefully the forward. of yeah seeing listening, this hospital. respect not relatively hospital, of any they're sales in that but changing high many of influence Concerning going usually the a not how number,

on swaps, thinking Okay. you're And just update on what can lastly you just then there? new

No new exactly by targeting seen middle beyond saying, secure the next know. after now be that. news. end XXXX do be don't I will -- depart with something will to plan. happen what will let we but keep CF stage soon at as that, anything know, you of us as this our happen that we're else not the till [suburb] If we know and I'll planning Obviously, That's and LabCorp moment new to from we're of year. very differently, I'll

you. Thank Okay.

Thanks, Tycho.

Brian of Blair. Thank comes line And the next you. Weinstein with William our question from

open. is line Your

is this for Brian on Guys, today. Andrew

question First or you've that? negative on had revenue, a royalty some quarter growth. looks where in on revenue row like slightly pressures second color this why Any the the is

audits perform guess themselves, up amounts want are that go the through might but base flows that based payments and time. partner you minimum come to time paid from end-user relatives So, to on that we ebbs the redefine revenues were reality of actually negative submitted and growth. Royalty I sales are and X%, revenue that

royalties were basis sequential royalties and base expectations base year-over-year, So to continue. be are that'll continue a and quarter-over-quarter up, up on

in back due just then you're of said manufacturing. pushing some And you things the VERIGENE that the quarter couple to with X, market launch kind then and last Great. on that

in it This quarter comfortable it's Any more track. it back market sooner? what's bringing makes going back on in seems color like on the on that you

reimbursement. by issue. in other to had system. we're were in here, strategic It It's more in we We where to as was in in very the the got influenced ready nothing decision forward clinical the it is and performing how confidence labs having because months again, move but we the that's things performing ready as now system are There we're well trial. wasn’t three some with are well we some that. level, said, things the market. we was see And as of to It only and our the go previous small I just why the other ago,

guys. Okay. Thanks

you. Thank

Thank comes of line Arias you. And next question the Dan from with our Citigroup.

is Your open. line

at Good for to afternoon, here, XX,XXX I takes customers that VERIGENE? but Homi, you what using ramp that long how this Thanks. you're pull-through the time guys. to get about point that experiences vary is know the to it level when on individual think

Yeah so Dan, is Harriss. this

think I it depends.

we have were is customers commitment accounts a course we're the number What referring have that XXX,XXX So, made them accounts. to over signed the there plus we of of annualized that when deal. annual up their these

commitment annual for customers that $XX,XXX. stands those today So at over average

year startup is they commitment to those $XX,XXX in up plus ramp is And reagents average of of buy it there annual so, period. on are a time from standpoint. the a for time to volume but them There first one accounts, deals that made for takes obviously

I think helps. how it, hope that's have that to about So

Yeah, that there that's top you up business. so, on of say okay. And much seasonality you for work the start the like the versus would Maybe have step is it to safe is with to that as just we if say due assay line VERIGENE? up that XQ, how volumes through looks momentum to the

to there's So, component a certainly seasonality.

increase we've accounts. You helped the continue quarter. of ARIES to utilization utilization expect our there, would expansion experienced lift but upwards a average last has five-point we over of the ARIES a ARIES add and drive venue The

so, And per system, account, per quarter. per sorry,

to annualized basis we expansion continue the for ups so, because menu. So, of ARIES the step and in see sorry utilization of

I obviously is the and new component. gain then the a ARIES and respiratory respiratory It's to is is the of We instance, primarily continue seasonal systems. VERIGENE. to there is respiratory is is for component to accounts, to because nonautomated component both accounts and referring There for to break a component you're a There ARIES there there tough VERIGENE seasonality out assume. respiratory

blended difficult additional respiratory of but it's So, instance. a to could of placement of And that VERIGENE the that the there a do increase to to result, number need of that, a be can totally flex you well portion testing it's as systems a function for certainly some attribute very seasonality. quantify

on pretty I the could too. I relative since one just line, to the performance line. helpful That's earnings if have on more bottom Okay. Maybe good consensus

guidepost XXXX I and here guys forecast. as earnings you guess on providing expectations? when So, push your towards thought are we Any to you'll put some

key gross We revenue first fully and really then for Obviously haven’t mix get more higher franchise far. is our us predictable. stable, thus on to margins answer and the the our sample

by it's there hate are still pennies certainly statement we'll we wouldn't year. As it start time earnings from grow get our expect ultimately a you changes move the right that down miss and to changes, is think it's we and income ourself do insignificant do time. to and meaningful as know What number to I in there. out we'll to a they difficult put now next couple to because them way, to expect I it but that a as grow, relatively

Very good.

Okay. Thanks, Harriss.

Thanks.

question And from of you. our Quirk Thank the with Piper Bill next is line Jaffray.

is line Your open.

thanks. Great, everybody. Good afternoon,

Bill. Hey

you're beyond G.I. multiplexing question Homi, or draft like line and respiratory anything hearing things biomarkers? First update around proposed for regarding reimbursement any CMS'

has Palmetto, we'll but solution had think to customer. value We and and of how year-over-year we will solution, superior that I the patiently We decision, news in our to pricing the our anything. opinion position we're with a that, submitted to since or call whatever over We be last business. especially provide for the draft since the again this see we continued No, and have the Luminex value waiting not grow XX% the flex economic in with at business there. as ourself our

even we decision, I dare any might if of get don't reimbursement, So, would I think we the out even have get decision, impact positive impacted negative really, news. think further whatever but say debt. will the they be reduce I we'll will this to don't that

We are that. waiting for

workflow around happened effect contact improvement And and to it appreciate in of that. you've mentioned that you're obviously X, Okay. in tell some if just on the Can just if one any of you certainly designing changes forgive but I the VERIGENE then about turnaround Got and have the past, that get me does the and that the competitive it. this time I'm competitors us question a the the reduce thinking have to of turnaround time. into trying

just better fall So a where to going are understanding there, get the of trying there? chips to

the something but it now be could and respiratory, about priority. not again stage from willing This current we top speak improvement the am to I are not in some that that's

what that reduce Our of the will one, way the -- better to most efficacy the not respiratory point now view them it's from able time value, a two top we'll and some deliver our we're different in but priority of we're customer. be having it's really be this in current proper and pathogens than inventory, to better we've of first and what for apart approach that to Through system there. additional pricing, is seen that's really hours our polymer a to turnaround to solution provide currently the is

approaching. how that's So we're

lastly if stronger touch reponse to And curious we me, a this indications about bit upcoming from looking season traditional little because business. point? touch it. like the perspective? Are a How season any are at flu they customer's of your and weaker are stocked at or seeing customers treating it then just this your am for thinking respiratory of parts mentioned a the Dan's you Got it several season, just does question, I in appropriately,

intake beginning know the this to a We careful slightly, see more pushing is but speaking be I I don't little see I where what am me here. need You're eventually we up. ended now it's some, bit QX, into

So, But point the don't from we've view, means that want orders. to not my cases was us really but with there want mean don't again, a to predict of into it I turnaround some or what to here, us. dive seen customer to quick I

or we that's to flu the wanted that's view it what we're of probably what upside and gain deliver that, and to an We continue of we'll the for deliver but to season my, will fact more be really year this out quarter here. focusing respiratory

color Thanks a Understood. for it. Homi, the lot appreciate

Bill. Thanks

our And Leonard Thank next you. from Dan question is Deutsche instructions] [Operator Bank. with

line Your open. is

Thank the you're operating about can about and first think line on expense Homi we going what finding My opportunity you question, opportunities that talk you. how should forward?

Let's the talk We've trying about when organization. but to and add well to we're integration people the very finished am here XXXX, look be integration. forward, careful to again not going I the sales I

continue here the to one same sales continue almost but flows our the will we'll territory overall to in maybe area. So, run carry same two, or

that Now nicely some year we'll very moment. you obviously as at planning we're account taking know, grow the to into have next LabCorp

of certain lose company LabCorp, nicely. will We without will a amount but be the very growing from very, LabCorp,

again, number up of to margin. see you'll of more Nanosphere more and out improve year ARIES next gross especially improved bigger sample growing the but that Obviously, efficiency and get will on the we other the efficient anticipate gross also becoming is the and the and volume trying the margin that. will Nanosphere the we're So be number, side reason to answer,

that. going. where the we're We We're we we're feeling and year know our the finishing overall, for right in are that behind next So planning just direction.

look good have we'll and also this to have say continue continue if at will we'll it some Luminex, visibility after and grow, lose it we this earning. we I year overall a and lose I stage But mind next So, that revenue saying of to that in to will improve, the LabCorp fairly take even grow that. if LabCorp Luminex reduce that we you believe keep at

have $XX,XXX menu the where to Okay. through that ARIES? time the And on full box, per just a quick and when ARIES expect you a follow-up, complemented remind trend me on you pull over can you

account. the obviously step So of should a addition portfolio up per with there now, Dan the Group modest any time it on assay depends be A

We of the sometime, had an time next With of you'll ARIES big that's of year per talked a ago excess obviously, assay. in originally, long recall clearance boxes pretty XXX,XXX. about

revenue menu it at be I think we that talking utilization ARIES today, but last you we're account, third you least overall, bit about with sure generated utilization the almost math over at is number account look XX, would little expansion. could and especially that's one a of the menu by XX% per may from but when quarter for the year well the per all about with have not the the third for ARIES been account, account but that look increase and at annual that quarter is increased overreaching per when per

we have to the and accounts as we number would menu to up of would as expand continues the step to So expect expect that grow it obviously further well. we

once are we more thing. again stable little there get a we dangerous a averages obviously performance because So, --

had less we add So, are over accounts that XX a quarter, that accounts are we and year that. a well

trend So, expect continue up. it what to the all to need, depends on averages but they we

And keep business the to one am thing sales in all we're money. the making Dan, the saying saying force, more here I and of time I it

unless a revenue we're way can them. giving generate substantial not sure a rental So, we are way or we from system

to there pleased although will to improve, that as will grow. see I the I continue improve and I'm certainly very, some So, very number with actually hoping room will there move still number Nanosphere continue but am forward. number to continue is the the we

XX% will that feeling year-over-year we're momentum feeling see we're and at The growing portfolio good. the very it. we continue So, it

at see If last the the we the week all winning. that you are we you accounts we've after done look here, filing presentation had done that

time of the force got customer some Some I a positive very feedback and sales them we're of and very, a where competitive we accounts, are going. them speak and with lot new of

with will think ARIES that as So, us well. I help

the Okay. Thank for all color. you

for like our you. to Homi concludes Shamir I for today. to Q&A final this would Thank this session the turn back And remarks. call

near We your call look Have person to the today. a you very attendance in forward in and Carmine future. day. thank for you seeing you, our on earning great Thank everyone

we the that, And ladies with gentlemen, and program. conclude

You may a day. disconnect. Have wonderful