Luminex (LMNX) 8 Nov 202020 Q3 Earnings call transcript

Good afternoon and thank you for joining us. With me today is Homi Shamir, our Chairman, President and CEO.

Following our comments, we'll take your questions.

As a reminder, today's conference call is being recorded and a replay will be available for six months on Investor Relations section of our website. Certain statements made during the course of today's call may not be purely historical and consequently maybe forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the company claims the protections provided by Section 21E of the Securities Exchange Act for such statements. risks only our the and statements. company's current to from or in speak are hereof are anticipated control statements of those differ known on some materially actual based beliefs unknown plans that forward-looking could as beyond forward-looking results date of and subject which cause These are uncertainties, or the to and the and adversely expectations and Form XX-K that on are our Factors the cause detailed XX Commission. December to or Form Exchange with reports the differences such for and could contribute filed Securities quarterly ended and year in our XX-Q encourage We statements. review forward-looking we and undertake documents no you to these to obligation update these this call. non-GAAP financial as certain SEC measures in Regulation by Also, covered defined G maybe financial measures G. with will is included release, extent covered, to available website any are on reconciliation and earnings accordance the a be financial most Regulation of that directly GAAP our which the non-GAAP measures in our comparable presentation To in over I'll Homi now turn the to our Shamir. President CEO, and Chairman, call

and Thank call. earnings our quarter third to welcome you,

and generate in strong our are than and plan margin quarter. with businesses. to pleased diversified help our the very of flow. cash gross to million continued perform performance healthy extremely us in We $XXX delivered margin revenue We operating Luminex ahead with that more a well as robust,

MDx believe we Life can a comes COVID-XX, our total the businesses with from for foreseeable slightly to be the viruses, begun, the during have molecular our identifying targeted PCR-based diagnostic will common our growing continue This that PCR from and and COVID-XX businesses. come correctly which other PCR-based and growth headwind future offset We of tailwind sales segment. XX%. and a testing was the Clinical reminder, seen and [indiscernible] approximately XXX% our XX% our enjoyed Since in the molecular our Tools gold XX% As diagnostics businesses Clinical pandemic businesses, is our market that the for quarter. at businesses. testing with standard by growth Life Prior Science Tools Science most continued within was respiratory

our under work approximately agreement and majority rental to hospital primarily long-term with The us up customer with of that a reminder, XXX years. customers a reagent those reference five lasts as Just are labs. commitment

Given few businesses the expansion tremendous will the in this in for plan me products, molecular year, confident demand our years for ongoing growth our Assay growth let to diagnostic anticipated the highlights strong are target. on order In include placed SARS-CoV-X remain PCR system come. meet testing, you our a that PCR-based the for give with to we which

tests are million capacity, completed ARIES, be anticipate five at expansion to by for that build for per offers line all our us up For year but maximum ARIES assay to this year we will allowing capacity end, combined. our currently

have through We to assay one of ARIES in had shipped end million growth the being shipment almost QX. greater year, this our tests XXX% including than the customers

the tests will quarter. we anticipate, ship approximately addition, we in ARIES In XXX,XXX fourth

end of the so up in for possible quickly expansion December, as QX. by order in of as to eager backlogs be can are We we capacity early completed our catch our

that sale, of in capacity at As specific the quarter. will ARIES result quarter, But order a were all we be of had fact as these third that end ship nine the the of filled of to million the matter of unable COVID-XX-related constraint. approximately anticipate current we

significant have of [ph] our system rental the a system increase seen this and ARIES numbers As in agreement a five-year installed also on reminder, year. typically are we

test manufacturing the also during meet shipped building For X.X NxTAG of assay our while in up demand. this QX, total a to NxTAG capacity we increased quarter, million

we assay demand. XXX% increase COVID-XX, respiratory in have an including almost NxTAG seen For

to ability this Use Authorization. with much having Emergency target NxTAG the so in for when RPP clear up assay demand scaled already SARS-CoV-X includes increases have is that that anticipate the satisfy We further product our we

have and clearances. already to in We expected eagerly this place awaiting

waiting capacity, For to demand product year system VERIGENE, per on that million EUA capacity our working We and currently line, new enough still VERIGENE VERIGENE our assay EUA RSP standalone to SARS-CoV-X II and our evaluate for for tests VERIGENE the flex to the the VERIGENE the we after have we'll SARS-CoV-X with are situation to I no launch for portfolio clear for products and on had we current COVID-XX VERIGENE VERIGENE include VERIGENE FDA. are which II bring our very are currently I related our meet and us two we between saw hard continue able almost will submission assay our target. assays,

We have issues provided in FDA comprehensive to monthly identified corrective These the and raised address letter. warning submitted to plan the evidence implementation. responses responses our the of action

resolve work to close continue through submission. the of impacting while our as of [ph] as collaboratively soon issue warning submission, to are with EUA to address letter we commitment, further remotely the in to our working implementation order any we and possible. the agency out authorization As keep obtain the status And pending FDA we the is warning letter will for apprised those

an EUA front, I VERIGENE later assay RSP SARS-CoV-X our are quarter. flex this R&D the to just On for mentioned, as plus planning we II submit

for years demand hard little on combined is the is high continue are working for why xMAP INTELLIFLEX. plan we There for to SARS-CoV-X RSV ARIES which is add PCR-based around test, kind forward target generation our we will next next be in higher those test. A/B tests system, SARS-CoV-X XMP to related for COVID-XX move multiplex of with assay working our doubt early to while of year. minds; a launch commercial also our level to all come, submission are our Flu the We of certainly the multiplex respiratory interest the And

reporting function. sensitivity to dual in its of the one INTELLIFLEX most addition dynamic system features rate, of In improve wider using the XMP new exciting

later reaction test adds a so will performing same feature of of parameters be system guidance each quarter. and channel, our go dual system for this to reporter's measure that, I to our XXX a to two would of financial turn largest researcher year. already new well, with at actually time, are of rest can addition second work in for as in be additional to partners XXX first With the have will to in observed the work the two experienced us single excited results to Several full that Two twice into With its they which those with the very tests. the our report launch require up for year. running Harriss and platform the partner tell result. over much different getting get opportunity like this multiplex comparable deeper the to to tests about QX next today allow the new This

Homi. Thanks,

revenue a the and XXXX. As year as record the as Homi XX% had total strong profit of our XXX% quarter These revenue of quarter. to XX% over operating third profitability $XX.X led double up diagnostics of mentioned portfolio, the we in results the a Reported digits high molecular operating compared million $XXX.X near of growth quarter of by approximately million, prior quarter of over were XXXX revenue in up third with revenue. third our percentage with significant

Science year $XX.X the and revenue $XX the by from contrast, our over Life quarter pandemic. compared almost we million the was quarter the revenue million, reported and prior demand revenue diagnostics business to mainly to Non-automated respective revenue increased the at quarter, XXX% Tools In XXXX the Looking pandemic. XXX% the Molecular XX%. that COVID-XX up up molecular molecular was Clinical diagnostics streams, driven $XX by was COVID-XX for our be continued over portion impacted up third Diagnostics sample-to-answer adversely million, of third

$XX.X Science for down are Tools X% Homi of the quarter XX% and XX%, the for of the sales million, in of primarily which pandemic million, down quarter, our part was third XXXX. Life Licensed Cytometry With Flow Flow versus revenue due and Cytometry $X.X million, was signs our group in However, up Technology to revenue placed quarter end revenue the improvement. showing orders the $XX.X the quarter we of be fourth will of due and favorable were future discussed, with of $XX and and by unable to quarter, to million orders for the to over quarter. ended we the an filled book system revenue higher of comp which quarter XXXX? service in of third provide As delivery consisting a order

cytometry items revenue be up was with systems. the with for from higher Non-automated and purchases line XX system revenue COVID-XX. of types. or Consumable Several due in an royalties to down $X.X declines the lower from have decreases all Royalty by XX% we was down quarter, via sample-to-answer to sale. end partners. capital have received to quarter revenue system our compared XX% more million of bulk the flow at the quarter placed quarter, was on our reported sample-to-answer $XX.X to sales primarily diagnostic aggregate for systems reports, to We million, million of across our attributable partners user revenue several expectation XX% system indicated our $X.X partners. half than Looking XXXX attributable third molecular of the placements in

shortfalls and Coronavirus As a adjustments. revenue reminder, up XXX% as total battle combined related a with contributions million Total and coupled was pandemic. XX% products royalties assay more our audit base result the to accrual a up than our findings, $XX.X with to respiratory includes self-reported royalty revenue of helping

our realized reflecting of assay $X.X up XX%, XX%. percentage related again was sales. $X.X respiratory total Our of XX% or XX% from points manufacturing the million Service scaled third margin million in than up revenue while or scale up comprised products and rose quarter. other X revenue economies was to the more Gross

quarter. by a from in fluctuate and to sequential As gross product to Sales $XX.X driven expenses of over driven reflected the XX% were can activity, prior the as a in R&D by margins higher related sales were mix previous million calls, growth expenses our function primarily COVID-XX we assays sales development. resulting expense indicated other R&D X% previous and decline moderately year, our and up higher our marketing Operating increases expenses. in

of XX% margins improvement in million year, million XXXX to by operating a revenue. revenue $XX.X grew of $XX.X the and or third profit, growth strong expansion to of Our the the XXXX prior gross third from over significant which quarter quarter contribute of in

be tax worldwide Our the affected profit distribution can significantly by across and loss our of subsidiaries. rate effective

between the changes be XX% effective the of consolidated foreign mix XX% jurisdictions. to in XX% the second rate to expect a result We full-year our earnings to in in of XXXX, to and our compared range quarter US XX% estimated forecasted tax of

our dividends NxTAG of Our deliver as that ETR of When EUA range. and million revenue the determine for losses each we aggregate communicating actual be took of while for Assay. on income visibility of that million is not and exceeds And a taxes from the Assay initially anticipated the function our tax expect expectation for consolidated the $XXX SARS-CoV-X, by is we plus year. Net of entities. above and the We of respectively. rate ETR a in and our regions revenue, over. taxable the reflects guidance cash benefit then VERIGENE payments I, updated expected liability. the from and our top purchases by to of of and million, how million can finish such from to This Cash credits After expectations the began actual does and COVID benefited up certain lower CapEx although $XX.X also FDA jurisdiction, operations some finally million statements ETR to between relevant adjusted generation contribute were $XX.X generation generating exceed tax million, $X.X SARS-CoV-X $XXX the clearances to $XXX EUA quarter our $X.X flow timely million. high-volume loss actual we we financial RPP credits in since absorbing XXXX, jurisdictions, our company would this investments the end

have products yet not two cleared. been those As

We expectations our million. to year approximately full are adjusting $XXX

Importantly, anticipate we do eventually. clearance

upon are mix, our Finally, quarter quarter highly margins gross mix margin quarter roughly and product for as fourth you for expenses to remain expected know the as well. current to third comparable based flat remain are expectations gross dependent the should the operating on

well to for growth growth and be XX% expansion completing this than for result a XXXX. activities, positioned capacity more year translates to into as we of our heading of ARIES All the expect

would our expectations earlier extraordinary to usual. the than thought helpful revenue, find little for it Given we ourselves we provide times longer-term a in, be

execute requiring $XXX new EUA We here. million strong year will Obviously, primary currently a of the those The like key to deliver including we FDA final another approval completion expansion Luminex. our per to million primary [indiscernible] success. EUA basis. extremely minimum for ability to launches on be enabler here. We Obviously, for expect around in a product launches, be it revenue. including XXXX to capacity five those our turn also enabler our new go-forward to are confident ARIES the But requiring year comments. of to With I'd be product anticipate some will in test are a from Homi that the over and of

Harriss. Thanks,

As be of million. earlier, expected will bottom factors now flow. Harriss our our cash expansion XXXX This line and said to we to at additional three tremendously $XXX above three and updated expectation on revenue expected opportunity. primary contribute We base increased

in Multiplex effect at this longer-term us the from and and is of reflected beginning with our strong demand remain testing product. of hear basis. our clear last demand the day every news from call, will that prediction the and I our believe PCR-based In in said on Coronavirus particular, this see solution. We to sample-to-answer we as a loud expected is the we customers this this the the it future. for First, PCR-based for foreseeable And

placed we at XXX of year-to-date, site, last of most is than Second, reagent almost rental this higher them year. agreements, sample-to-answer XX% all the approximately under customer system

significantly also system This seeing rates contribute historical and placements installation installation to of system are expected We growth. agreement. long-term revenue are under our than continued higher to

expansion per targeting for mentioned I end manufacturing this and the five of an ARIES as which reach we year. on ongoing us capacity more of customer million tests basis will the to year Third, allow annual sell are earlier, our our automated capability, of

three least contribute of could at growth. a that also to opportunities see rate additional higher We

INTELLIFLEX. be anticipate launch and expect a in successful our to partnership grow expect single-digit mid-to-high we revenue to we both by growth will we million First, still $XXX the approximately Cytometry of of Life streams. will Flow rebound revenue of decline. of This Remember, as COVID-XX have part Science xMAP impact begins fueled that

pursuing on several years. next Second, clearances ARIES for FDA additional we and VERIGENE assay are the over both II

users million $XXX we anticipate have continue to this long-term we more Third, this including as to cash, M&A for going continue we than substantially grow in potential activity. meaningful cash, forward to seek

very in two and Just INTELLIFLEX. we last we reference near a in more as $XX very the both three than are excited In prospects cash closing, exciting long-term generated free flow. quarters, in ARIES, about growth million engine with and our VERIGENE

improved our your that, strong double-digit a to positioned also diversified our I would while helping to to profitability all the continue continue over and We With turn cash like question. customers are businesses, across deliver well growth to flow. rate, it for operator

Jefferies. Our Brandon first with Instructions] [Operator question from Couillard comes

Your line is now open.

lot down And and getting even a of new could I you And Peter good we're Thanks, utilization This any guess provide XXXX on third maybe detail Brandon. for placing and quarter? for the VERIGENE afternoon. beyond, Thanks utilization ARIES around your what about for taking you us is rates sustainability. guess I shape anything in boxes. Could at on help question. thoughts is comes bit, if you're a

sample-to-answer So would appreciated? or look as to be out color reps thoughts how do we there we XXXX, think any about

both So weren't over ARIES to the of the a quarter, similar VERIGENE was on utilization were there. and changes XX,XXX. rates just lot ARIES second

make a lot. ARIES

To XXX.

Okay, XXX.

not And XXX the ARIES, the any solution. its almost when at we to that, mainly ago in the have remains We around from said don't XX. I'm I while VERIGENE, FDA. doubled you mistaken, yet we have if get year in same, sales, we VERIGENE anticipate because - as the COVID-XX were call look obviously, a

XXX. Now let are Harriss number. the we I'll for right look around

II bolt-on it the VERIGENE able to to to eventually risk climb. a see to and we're EUA this we of I we that the hoping and by get the submit quarter the end the to obviously VERIGENE further. And submission drive forward, VERIGENE continue on Going

sorry. Yes, was VERIGENE XXX,XXX ARIES at per customer, was XXX,XXX.

the So VERIGENE increased done number the between on quarters. that and where of max it's assays has XXX,XXX. of several roughly out ARIES the XXX,XXX, over around manufacturing past of significantly, because ARIES we've

you delays. the the mentioned mean be I coming based then causing cautious guide that's confirm guess year third And else down little on to of great. you're I the step could more EUA And being a quarter. quarter? here it a in not seeing there solely anything despite this you as there's Okay, just guess full bit in bit I

for VERIGENE in base Yes, I it at guidance XXX, when the that. provide waiting plan and I especially slow. huge have will least of on for was are we this the that customer a hit Although the NxTAG, okay? Obviously, also during our we NxTAG get VERIGENE time period,

are this we soon to get there. as we I. too I at product we NxTAG, to not stage manufacturing the the upgrade are VERIGENE So we we go the the Hopefully ready approve call the and it, and And ready in similar to as as manufacture in waiting FDA long to are the in said it.

embedded that pending, case? those guide that of the then any are Okay, XXXX in are those in

None at this where of ARIES. are across expansion the the the stage, really the street XXXX we is from embedded

nothing so so correct? is that's embedded Okay, XXXX, in far pending

Yes.

Thank excellent. All good. right. Okay, Very you.

you you I would that's look be higher. what if number those said, even the at the be I may script if said, That's what one get

Okay, Thank you. very good.

Thank Instructions] like any I'm this closing the [Operator I'd no remarks. Shamir back the at to to you. time. because queue showing for in turn call Homi questions

and to the calls. earning or attendance We on forward for Thank our you in see everyone near look see you, very operator, your future. you in thank Zoom

your Ladies conference. and today's This thank program. for gentlemen, on does you your conclude participation

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