Luminex (LMNX) 12 Feb 182017 Q4 Earnings call transcript

Good day ladies and gentlemen and welcome to Luminex Corporation, Fourth Quarter 2017 Earnings Conference Call. My name is Bryan 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. Instructions]. [Operator like of call remarks. Investor now Scalo, to turn Director Senior Relations to would over the Matthew I for opening proceed. Please

Thanks quarter and call afternoon financial Bryan, Luminex results. and conference Corporation's and welcome operational for full and to fourth year XXXX the good

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

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

earnings Thank you, preannounced welcome Matt. On January fourth for we quarter call. and result to our Good XXXX. afternoon XXXX strong X

growth diagnostic our franchise. testing our molecular mainly sample-to-answer Our performance delivered driven over was businesses. molecular in by XX% We

to million, they activity. M&A of X% revenue a We visibility. This Given departure release on total long expect in contribution and this short prepared targets Earlier for of account, include term field LabCorp between provide target CAGR take for issued to and into XXXX five XX%. this range future May better NuSwab the any doesn’t investor financial anticipate businesses. we last month’s I $XXX year revenue focused comments million to and announced between the will field we my $XXX XXXX, of achieve our five In keep future.

clinical supporting Luminex As cannot value our to growth. that the is and molecular comprehensive have the digit platforms efficiency following: we provides positioned in our able solution This to this offering, and offering and a double due unique We XXXX, to the positioning, provide Luminex match, competitors menu. both With well offering right enter right test is impressive customer. exceptional

system. Our next gen our include portfolio will X VERIGENE soon molecular

to say, comprehensive panel and beyond. format clinical fair trial clinical on molecular target the by quarter to XXXX. end other of the continue additional We a will for and studies many second platforms A XXXX and GI its incorporating in commencement VERIGENE system of the follow

group annual profitability. our generate In revenue continue LT license contributing addition, mid-single significant digit while to technology growth, to we expect

introduce our summary, million to additional and the gen work This M&A our about while of even compared continue growth at S&P half continue plan by We by growth midpoint anticipated to $XXX of driver, our platform range. from prior very quarter $XX the opportunity projection. guidance search for this We on to to are which excited conference second million organic guidance end commitment by to approximately departure our call. to next We XXXX. provide core of current year. this about incorporates issued the platform businesses XXXX impact LabCorp details we the our our of growth In million, accelerate X% mid-year further $XXX of revenue a NuSwab second we

As of this today we have updates no further departure. about

digit expect double the approach in which the businesses reminder of the businesses Excluding forward. revenue to would NuSwab our our demonstrate strength we of and XXXX both XXXX, growth from underlying XXXX, going

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

Thanks Homi.

Homi mentioned, with high and XX%. revenues ended X% up note full year we fourth As quarter up a the consolidated revenues year on

quarter for the X% Our million and was LTG year the for stream for year, revenue the and a $XX up and million respectively. quarter $XXX X%

expected lack customer LTG effected a discussed, from an of by had a project. consumable as funding absence the of suspend initially who million to order result was performance $X As the previously of

of franchise the for and the for quarter and year for respectively. our by XX% quarter respectively. molecular $XX driven stream was million revenue was Our the $XXX Performance sample-to-answer XX% continued here which and was million and XX% year, XX% up diagnostic the successes

year of rate related franchise of VERIGENE XXXX. our for growth annual the revenues includes reference, the sample-to-answer For full

under the the the the revenues down larger a to XX% are expectation rental. line of system grew in Royalty high prior consumer half year, those quarter. line and end consumables per in XXXX partners guided for payments. our VERIGENE ARIES by revenue, an with effects partners. revenue sales not our are In during of audit second quarter. majority timing placed of Included systems items in and of XXX reagent contribution the the user and revenue multiplex the from orders XXX full the year. ARIES We and for quarter Turning our quarter, although were prior XXX we to were our systems, previously fourth of both systems, both the of for X% royalty sales increase to VERIGENE the communicated reported of X% over up reflecting of End findings our above communication, minimum placed up wider and including

third automated has XX% that fourth first in our franchise carried margins increase the fluctuations testing up quarter it can were products. fourth a XX% for percentage the quarter, volatile of or and XXXX our quarter of increase XX% we of of in bust Assay of our X% of strong the food boom gross has to than We as respiratory of strong confirm quarter, point do two three products manufacturing I points infectious for dramatic up performances for and the increase into with revenues process menu. business and momentum our quarter than We results. this a primary our can increasing flu did regarding number attributed margins through our on quarter non-automated the to see posted diseases growth experience in of internal the care panel received XXXX. from over respiratory by improvements. sample-to-answer VERIGENE this that driven current less The season testing the a Please the be reason volumes type ARIES for fourth be portfolio impact both a in combination so the and entire improving that points the and for not flu from more tends season. business, quarter and testing remember the percentage questions

below corporate indicated, asset VERIGENE our highlight months almost As want now but the triple were margins average, acquired they to have gross when ago. automated that we currently XX%, XX I products approaching we’ve are what margins

in control in of operating and $X XX% clinical operating OpEx expenses. a million, year. the XX%, continue operating SG&A trials expenses primarily our flat integration to and timing was displaying profit expenses of previously. control included revenue We million to gross growth, discussed $X attributable million expansion was healthy $X expense expenses a but as decline down by the R&D related driven or prior profit margin, of Overall Operating

effective a As to make Cuts to passage of the the tax the XX% ’XX. adjustments XXX% several estimates The fourth and of quarter and Tax compared result tax were we the of as for fourth XXXX was rate quarter. Jobs fourth required our accounts the in in to quarter Act,

year. appropriate to year-to-date quarterly tax rate As represents effective for at the expectations full a reflects the arrive that current the rate adjustments reminder, necessary typically

approximately based tax incorporates allowance financials, Canadian and $X million with of to is approximately see and the release U.S., million evaluation one-time earnings which to U.S. can and benefit current tax $X XXXX tax by driven $X current $X expectations Included effective million million of the liabilities distribution charges of by you Dutch our of in of re-evaluation assets offset tax As adjustments related for Cuts from and taxed adjustment year differed for $X.X for our one-time expenses differed reform the revenues adjustments acquisition driven our tax allowances. Dutch jurisdictional by previously foreign tax impacts in benefits by expectation expenses expenses. the prior acquired of U.S. overall quarter valuation our U.S. of losses Job related The and which impacts and and the on Act, were expense rate repatriation losses. million associated quarter by offset Tax book from tax Nanosphere not related to our U.S. tax partially XX%, included on

a accretion on $X.X adjustments Excluding a year. significant profitability of quickly from the Obviously have would expense, tax significantly just with share, net or the had the effect up effects reaching million income $X.XX prior Nanosphere the been improvement. acquisition our to

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

of expect $XXX at As $XXX Homi mentioned, We revenue our between and million three buckets. to XXXX. we in for look deliver revenue distinct million

The revenue partner that approximately business of delivered first our is $XXX XXXX. during million

consumer growth smaller revenue in which our system digits. revenue service the partners Our equivalent roughly and a includes like the our sales, all component our the of markets also parts, categories royalty of of and majority shipping, and of to operate revenue. expectation the includes etcetera. of This It number here rates is mid-single growth

expect to We placements XXX per continue multiplexing XXX between system and quarter.

Second, by sampled putting this we great in rate stream in continued of menu and year achieve position uptick that run the solutions leaving XXXX us our and answer approaching This goal $XX a expect continue growth at expand million as will $XXX driven to our to to our which ARIES revenue rapidly a a and high to ARIES, sustain million XXXX be continue grow rate. include portfolio. growth molecular VERIGENE offerings to was XX% VERIGENE on

non-automated our over is mid in grouping loss contract molecular solutions, XXXX. of third XX% of currently which little NuSwab The result as a a expect we LabCorp the by to

VERIGENE at system If range continue partners rates a be and digit mid revenues both our are expect inclusion the the the you multiplexing of the participate. and range, which in both should to at at to rates. expected to System revenues of as sales. within result healthy growth following: line mid-single direct look our single Consumer function markets Royalties stable items, ARIES of expected digit consolidated grow system should placements a grow revenue we our

stream revenues Asset buoyed affected Cash as revenue portfolio continue margins increase volumes of quarterly NuSwab as the by improve our hold dividend. should expected will our automated flow are currently sample-to-answer the our I generation digits expected in on grow margins be and should to the gross departure are obviously steady. in and LabCorp but single by to is previously. growth mid-XXXX, to to overall Gross expected continue the mentioned aggregate in

quarter visibility a into first XXXX. Finally, the little of

revenues quarter are $XX million and million. $XX to currently First expected be between

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

Harriss. Thanks

proud line. pipeline to investing means, So business model in in be We both in growth further remain profitable while more solution while on XXXX. and we late am progress in bottom the transforming development This done drive sample-to-answer the have in businesses. wisely became our in business. will diversified particularly company. we never joined build on across committed I leadership to to company focus I in on made our entire loosing closing, highly the organic continues meaningful focused our position continuing XXXX of through our MBX, Since the LTG inorganic

in million to result, grown tenure a revenue As my $XXX during has XXXX. $XX our million

digit double growth. business, We are solid which now diversified a need

We questions. the strong remain sheet open This value. comments. acquisition to while M&A a shareholder with focused on for our line ends have formal opportunities balance we Nanosphere that for search building we attractive like please us allows the Operator, demonstrated

our come with [Operator BTIG. Ji And line Sung Thank Nam from you, sir. Instructions] first will the question of

line Your is open. now

for taking there lot because the can me, of question. thanks be you I don’t a hear Hi, seems know background noise. if to

Yeah, we Ji. you hear can Sung

Okay, fantastic.

a NuSwab. that this done are saying I was happen Is just to at pretty on assuming So just know deal wondering the about point and you updates your [inaudible]. before much no a you are there LabCorp clarification or that

view, point some by we to more not are are they for big to and we tracking hear months we into saying, more, over next our their sure the From portray for expiring NuSwab we them, some ago the they with a commitment. are buy They the did them sell the and $XX keep committed as not six if is months, in because entered of next share. Ji agreement million LabCorp Sung over ranking further No, want buying our – by from to want year been things June. to of it’s so end way, XX do which

So but to we is what a market to customer. ago, half try a We to support follow want, business potential in going sent almost they good revenue a this the guidance revenue, this our future. our they follow the stage are and depart if year and at

Where sample-to-answer driver if And am guidance be for could next and correctly, is of assumption was bit driver? kind kind looking Thank of platform, helpful. I that? for year, year of the of Okay, a next it that’s for contemplate a the kind at growth then for you. acceleration your wondering key the what key

we raise being one. driven well to Look, is one, two VERIGENE very there for continuing have by grow, gastro are and EP clearance. to I at A been three installed least respiratory, the they they that done assays XX% IBD have know continuation and grow a there; key like the mean in as year the continue XX%, drivers assay. now of is you where are some It’s culture, a system us blood field but of the which those raise. IBD major and six We a next

customer. We’re getting fairly a up good ramping feedback that’s with how

the a have we opportunity. about matter fact, kick came excited I are a the opportunity meeting sales very, sales off They team. of from both, ARIES very a meeting, As and that back done for VERIGENE

those we XXXX. by the So during saying, we sales see numbers us keep – growing close net running we we and quarter that by rate be of $XXX sample-to-answer will the a end XXXX to very rapidly be of million the believe to of as will first

in three trials, forget by a think Chicago few we ago. to and major ones I also things days been X. XXXX very And rise So the six and way I’ve you to during looking don’t that strongly on are are us going know clinical on have VERIGENE a three the

the which We VERIGENE are area. is busy very there,

so Thank you much. Fantastic!

will And come Morgan. you. Tycho Peterson JP of the question Thank next line from our with

line now Your is open.

you – as Steve kind both revenue Maybe the Its guys guys. if and taking updated consumer customer then did VERIGENE per revenue missed thanks system give to build of sorry for Hey to how question. out? and on continue active revenue this, Tycho, per kind ARIES do expect for per but menu you or the trend system I you the ARIES for and of just

$XXX,XXX. at but conference. per think VERIGENE York update now, I customer its talked We We is here, not did New presented. we get we presented Steve, the Yes an that

not have it’s quarter and [inaudible] $X,XXX couple mistaken, previous $X,XXX rate to I the if so am close moving. from the thousand, of think started is things or I up

a re-rental I open with seeing of pleased XX from or like of I are them XXXX the purchase contracts in the agreement XXXX. is for is customer a We’re a contract during a quarter. contracted, those sign We that had in company numbers when which XXXX agreement. XXX Contract we customer. during fourth sign when saying. are contracted Obviously that am very different what that’s and either me say

Just about for we something. contracted have XXXX comparison, XX during

I XXX%. I number are multiplication contract those that when more of sure went am not up the close going focused are more money of out will on am and So out this utilization we forward, continue, them to Again, to because looking we eventually see we’ll make and system.

the keep quality of So saying, let’s all on contract. more quantity the on and the less

gross being Nanosphere maybe How or over year are And next roadmap the then Harriss I progress you obviously the of Got VERIGENE it. there. the lot or mean thinking gross a so? made on margins about margins.

that, obviously room primary result manufacturing a from The also since lower us there. the of improvement that volume. at one, should improvement is doubled, efficiencies more process and them there aren’t get streamlined acquired than we of has as helps and cogs a for you volume more So lot number manufacturing Nanosphere a and there obviously there. little come which numbers. improved The We’ve

see we out, So Obviously see to you but we they’ll should should improve – increase. volumes certainly have margins as additional there max the continue headwind.

putting way yet the the we improving on mentor more cassette. in one VERIGENE some X fully When expanding $X X but that little not Steve. margin continue better again inline. VERIGENE automation instrument we million gross which already see, and Chicago, sales we much will And position And be will few their invested facility, to thing, carry on to but $X for also over in a are facility, by years, synced the will a have million the

X. the both time. it products, the when there I XX% higher now here we year as XX%. higher VERIGENE Yes. the Last a year margin room X to a ended like of to almost lot gross and XX% QX bring or margin doubled bought close mentioned, VERIGENE was in Harriss and we see And and So we gross it

capital mentioned M&A. stone Got successful deal. hunt Nanosphere from allocation, it and of is kind of then just lately a really you obviously

So of you. and are are looking what long of kind assets far kind you how at

been mean spending like at acquisition looking I and Look, you acquisition a of things, will looking Nanosphere. strategic that I’ve we time my be are know most at

from that Nanosphere but we to we not growth. diagnostic, keep revenue reasons. for do of we the in grow it like, announce But technology, my even can a them had few them be and when having that gun like while very Some head, some and of area far but we eventually materialize [inaudible]. we But the bearing only at gun to fast a we our local looking be to them are head right not one it. not find we so could will don’t be a can can have LTG we the did a even we right rather some the which way by one, searching and It’s

leave All right, thanks it I’ll at guys. a lot that,

Steve. Thank you,

Daniel question our Citi. the Thank you. from with And come next will line Arias of

line Your open. is now

Bryan guys, on Dan. Kipp behalf actually of Hi this

quick conversations clinical differing then differing in and until system new waiting thinking about the out? with the X. VERIGENE running come comes supposed with going in How and Just light any data are that’s and about we out, VERIGENE beta on now? the up question sites the purchases that’s data how customer’s guys Do you maybe potentially to of a customers just right thinking have a upcoming should or

customers We system. any Bryan. the using Sure yet have don’t

sites XX first The will that will in on the somewhere second XX be the trial or the which use happening. will clinical be customer quarter system be will who

moment X replace rental, philosophy. I reagent together or like to slowdown there, of time VERIGENE etcetera. strategy again, we any when we the a bout contract. our and would Even them, the assays a said is try will in anticipate get similar months. people depend as that’s those systems our for at whatsoever our what few VERIGENE to who we But be don’t by just our maybe At have system to it, then eventually and most during customer, Beyond XXXX launch then but we the because will sell two pricing comes, approved, is SA very

seasonal just XQ, back in on guess we there half in commentary surprised Is I’m given XQ numbers. headwinds about be cadence just the then that historically Helpful LabCorp. we’ve I embedded seen in any and around the the thinking slowdown that should from

year? current the In

In XQ ’XX.

is we there Yeah – certainly. are

We are really. seeing

heaviest fall budgets fourth are the in patters seeing quarter first use capital off The the then are up as are We purchase they expiring obviously revenues. folks consumable and often quarter. that in times the

and year of to first it’s last and the decade, If sell half as to expected touch you in very systems a so look progress repeat of consumables. in they half past going Base the purchases to that continue are at year consumer large respect first a over the year to comp this year-over-year, new the we continue aren’t in you recall had our to to with partners have new new customers. royalties as assays set

less that protein or further and science establishing research Our life partners a that great more own market it protecting doing in job are market. and

Our molecular to diagnostic franchise continues grow.

Our assays, traction. get continue the to genetic including not assays non-automated

VERIGENE both place. Both well assays automated market very Our in growing. are are the ARIES doing and

the headwind purchases you significant half of to last in that – year. it fact macro one, is we real the So helps. only didn’t second the Hope first the the that want pretty year had half repeat consumable in of some first call quarter if

Helpful, thanks guys.

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

is line opened. now Your

Hey thanks. afternoon Good everybody.

Hey Bill.

anything I go guidance report respiratory new recurring I to guess Palmetto to GI Homi first in So concerning asked to the around back there past. want question, draft and from the assays? theme Is about CMS I’ve the

Florida from the The them mid from since news. hear we have, we due in somewhere There they will more area discussed territory. York are further getting the They it that we Not territory news The is New to. are differing Florida it. conference, filed. now,

’XX repeat Thanks missed then two stage that. guys. off your in that’s thank molecular tax overall first you, rate comment could the quick on pricing okay, automated And it, just ones, just you Got me then forgive I for helpful. and trends Harris

Sure.

taxes in things rate respect With expected other in for pricing, tax been to U.S. pricing be to to really mid The and XXs state me taxes to jurisdictions, to other is the high expected XXs. little end the up bit U.S. rate tax higher has because our first. let mid but rate the in have the XXXX. a the regulatory stable. and the rate than federal So high effective Obviously we add pretty in answer

We have a term agreements are finding number agreements reagent with ourselves that longer to further. our of rental we having not discount

We a established have number large of GPOs long very GPO the agreements over pricing or with well term. there is established well

So our how for we other reimburse haven’t seen assets. announcement any eminent real decision downward Palmetto's are the pricing than pressure on of they on multiplex

It should us… be positive to

Should be.

And pricing. due to our flex

field think the reasons the in fast we our are so like growing the winning flexible like our pricing. in pricing, So one customer of is

So an for us. I be going advantage to think it’s

you. it, thank Got

You bet.

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

is line now Your open.

Thanks.

So I’m going also are culture about be first about blood wins general? you is accounts those curious you to how that to systems now. talk more on then what are the Are that sample-to-answer and things the those or are Are new competitive or hearing respiratory multiplexing of in see you customer starting under seeing to you're placed focused used? this that potential Can are XX about you focused type contract.

are CD also GTP you this board. to buying, the only. and for they they respiratory we the showed all the win buying refer for being press are here, But are earlier are for of buying buying our over They across they culture, to are slide our over. I don't our system are they are statistic but can and ARIES there some They for not they're competitive are that any sure. I blood have assay. broad for all used. evening the buying you are the system conference Brian, of them see across a People

then on think Okay, margin XX%. said as and year ready to the for with steady about next would year. to some gross to that that despite calls profile you you and the expect might are as margin you to well growing think margin NuSwab, you sample-to-answer Harris five expansion XX% your able be I on be then margin, and only get at target XX% gross

can thanks. – to you we out as start you see can’t margin some sample-to-answer why more additional margin get expansion of addresses we where kind potentially of So see

to so Sure, to us opportunity we better and is where absolutely achieve based can answer that, the are, conservative give a assessment to better if long first, is long we our term term it. to that goal the on an

Now revenues with note respect those, sample-to-answer lower are the near current and so to those math. have faster you percentage significantly growing higher streams are that on we a lower than they up we the our that margin other term than margins, of revenue, but Yes, grow numbers improve margins, higher average. end as margins comprising item corporate a with total can our its

mixed stream. changes holds So that XX% around other entire revenue as across we improve math you the the the margins there, but it absent percentage, becomes a steady bigger

you margin was gross range broad kind roughly it? a And of had what the NuSwab give if to on

corporate average. than Higher

Great, thanks guys. Okay.

Brandon line [Operator you from come of will Instructions]. Thank our Couillard the Jefferies. question And next with

open. now is line Your

sense Homi like XXX of like give X customers, looks afternoon. what number based boxes and between terms installed active ARIES, a relative you sample-to-answer could have good us you of VERIGENE Thanks, in more per the customer. of the to than

and majority with those But ARIES ASR, majority had we the of system Yeah, and a are as the VERIGENE, system. the in field. successes the LTBs and have IVB by placed are the of XXXX more clearances VERIGENE of new more VERIGENE. But and revenue systems used even sure of couple of being from majority seen the coming of we

and couple Thanks, a for Harris.

the $XX Just million as XXXX NuSwab then... to headwind we make sure I ’XX versus year and for got so this about thinking it’s the right, about

Yeah. neighborhood. the in that’s Yeah,

expense year, growth. additional VERIGENE Then clinical how trial terms can X we you know the be looking in at just planned for the operating line given activity the for of

trials Yeah, be so changes flat. operating roughly will clinical expense in absent

operating So about. the will will Homi of six only those expenses the see variation talked be performance the and of related that trials to of you costs clinical varying

million, costs $XX you I year so single expenses, the digit we of you don’t than millions guide that operating trials. but can For in with clinical what is less associated the mid tell obviously think

thank good, you. Very

in no Officer to Thank to back Chief conference I’m Executive pleasure and you. queue. showing It’s over some questions President the the Homi Shamir, And Mr. my for further and comments remarks. Sir. hand closing

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

you day. program have for all Ladies wonderful and on and disconnect. our thank gentlemen, participate we today’s This Everybody will conference. your may conclude a