BIO - Earnings call transcript Q3 2018 | Bio-Rad Laboratories, Inc.

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Operator

Good day, and welcome to the Q3 2018 Bio-Rad Laboratories Conference Call. At this time, all participants are on a listen-only mode. Late, we will conduct a question-and-answer session and instructions will follow at that time. I would now like to introduce your host for today's conference, Ron Hutton.

You may begin.

Ronald W. Hutton

Twanda. you, Thank

other our the our place you reliance that begin management's would on to our performance, where like plans encourage may actual The Before our materially review to the differ not undue will call, be update everyone from these and financial future SEC, we expectations, I and intend in call about Because not any made making filings caution discuss we risk our and company does results expectations, we plans detail our forward-looking I matters. should in you forward-looking goals, business. during forward-looking statements. factors today. with to And the statements statements

the net Our financial remarks accounting income earnings which per that call I'd diluted results measures principles. the non-GAAP today Financial these GAAP contained under comparable Officer. are of share, Christine to income Investors over to our will in non-GAAP President also generally like Executive Tsingos, measures non-GAAP and reconciliation not Vice Chief that, to and defined are With review accepted should turn include to references release. the

Christine A. Tsingos

joining Good and everyone, Ron. you thank Thanks, for afternoon, us.

CEO; call GAAP sales a for million sales basis. basis of non-GAAP and and year then Annette On the basis, sales and million. period Schwartz, our versus some a the X.X% were Science $XXX.X a quarter of same on on results Group. and review of neutral Net results increased our Clinical to On growth of President third insight Norman today Today Life XXXX $XXX.X X.X%. currency last the Diagnostics John of our are our Tumolo, President our Group; Hertia, we commentary will provide

third $X the from sales ERP was as Europe. were million year, experienced an good of for the quarter X%. and forward the XXXX our across year, Americas of million that growth strength revenue During nearly Asia-Pacific. pulled for in noted we key recovered currency that XXXX recovered product of neutral this the remember for estimated If in of comparing that second When disruption $XX lines quarter last included with neutralized third particular to quarter those of that many earlier we was quarter of sales estimate we the related approximately well as the into demand

quarter Science Let's the the of third Life last look growth growth an of which a were basis of driven of digits. digital to Much and compared by closer. currency was food quarter safety reported $XXX.X demand our continued sales double grew for third at blot, the little basis. on a X.X% year performance segment PCR, increase a million, when neutral all strong in products, on biology, the X% in western and cell

were for strong Life increased the by in anticipated quarter products Science another Life a experienced media growth experienced basis, $X offset million. the quarter was in of on $XXX a product currency currency and compared $XXX neutral a Clinical in year, quarter million the a products of growth, Sales on neutral decline basis. basis U.S. Science demand decrease approximately of On sales Diagnostics sales to the RainDance geographic line. particularly last also We slightly up in reported process our somewhat million and China. most by of X.X%

Asia-Pacific. offset was products, especially growth as in blood well This During growth for geographic by posted the decline expected Europe. as growth good typing autoimmune the the we and Americas, quarter, in in solid testing

compare a As unusual very related you anticipated patterns, was mentioned given tough to of be know, quarter I the ago. many a the ERP third moment

year. one-time million project to new and GnuBIO related last a million comparing Total costs, as second versus $X.X in third and year. approximately employee by reagent the related Research remember last the service, quarter sequential quarter quarter. growth the gross of quarter the impacted $X.X compared to the in million as $X.X as of in compared our a for which QX in sales quarter development decrease as Amortization were lower When $X.X the cytometer. recorded expenses, SG&A year, was quarter quarter contingent expense. million of of target was was the year, accrual well margin product cost with million. third our $X last year. mix, X% The rental or be of restructuring sold the of X% last to second or related when the additional to was gross warranty well compares for the acquisitions estimate XX.X% third tough the consideration related inventory expense third When quarter to as sales, we quarter high benefit this would $X.X margin. goods to related of third in of SG&A than sales. for million for XX.X%, acquisition acquisitions and the the margin quarter expense compare continued annual scenario, flow as result been is improvement recorded same $XXX.X $XX.X million million XX.X% lower our milestone to to in $X to Excluding reported Diagnostics spend period year ago The current that have expenses prior essentially of this included of the an for amortization million flat well period the that for

at to we investment continue X% forward, R&D Going of annual sales. our target

XX% reported income interest expense shares $XXX of and operating income expense substantially in Also change to $X.X and million below holdings related than was tax The other the net used improvement year. benefit in reform quarter primarily securities This of reflects year. in was preferred as million rate sizable cost to investment our Looking other line, for the lower our lower the ordinary and well resulted to during market value Sartorius million during U.S. holdings to last well by our last the fair expected the it's related tax effective tax the higher Sartorius. rate gain income of third compared hedging This of our the the to $X.X year. versus of quarter quarter, driven of of compares results as for of equity added and period investment as same as the exchange last foreign XX%

to for that XX% earnings Excluding last the in to events holdings. effective equities to during Sartorius income the With of with be the more Sartorius discrete $X.XX. in valuation it quarter in increase atypical in Reported is relates of manner multiple full net and change year share quarter the rate were any this the and net year, earnings may This our third charges, a year $XXX reflective and items to expect regulations results significant versus for for per accounting was substantially million occur we XX% our share the coupled review the diluted range. important income base and tax per securities, operation.

non-GAAP income. press As in we look certain detailed and items our unique our results have These and in basis, release. a the well gross both that we to items operating our on impacted chart atypical as other are reconciliation as excluded margins,

than have charges compares This to related purchased XX.X%. non-GAAP the margin $X.X to RainDance a for operation. third excluded third legal of sold, XX.X% In basis margin non-GAAP strong costs prior we of In X.X% as operating we $XXX,XXX to quarter on gross charge and million, the have include restructuring expectation. quarter basis, the to which XX.X%. in third a on adjusted adjustments a gross moving sum quarter million, prior of these a Despite part in of net margin accrual. cumulative Looking related our goods the non-GAAP non-GAAP margin restructuring control, related below of result at X.X% lower the of for The of operating action. was cost XXXX of These move the of well million non-GAAP and the our have quarter reversed on operating we basis. the from the expected a operating of related $X.X R&D, $XXX,XXX excluded results for the $X.X GAAP to to of adjustments a million good margin true-up intangibles a XXXX intangibles as amortization in as expense of the in a of quarter results of relatively acquisition non-GAAP the a expense purchased small of restructuring margin reported topline benefit in third expense of resulted non-GAAP amortization a closure $X.X from

the XXXX, for year-to-date, non-GAAP compared X.X% look progress of representing year-over-year. months margin we first to if However, nine is operating X.X% the good

non-GAAP the equity mind, excluded associated of as investments resulting the which our line exclusions share operating This quarter year. reflects compared effective profitability. $XX.X to the tax compared $X.XX our finally, And non-GAAP of per and of our in these With $XXX,XXX of the venture QX accounting. higher these $XXX items change rate last of tax mix increase We adjusted million items income share for also for loss tax rate million holdings have primarily in net recorded a value below earnings quarterly XX%. we non-GAAP a are geographic of that in on rate per the and various with of in share XX% of million as well to certain equity $XX.X of in and when $X.XX per all method XXXX are, third provision were

million XX, total to cash as short sheet, million compared end investments XXXX. at balance the $XXX $XXX of to September and Moving the were of term

We improving continue progress cash to flow. make on our excellent

dividend to of and the which year million expenditures million net result sales. operations $XX first points system. million was in of sale. was EBITDA, paid of or The to for is year. operating exceeds compares EBITDA inventory to in $XXX nine XX.X% the last XX.X% Year-to-date Net in adjusted or flow positive includes margin XXX our $XX the generated as global in million, of ago $XX.X reflects progress in the XXXX third quarter, $XX cash optimizing operations quarter generated the were the toward $XX cash nine of nearly is continue XXXX, third management Sartorius adjusted and This from adjusted year-to-date our and million. first year we compares capital of months both $XXX million XX.X% year-over-year. of million, improvement period. EBITDA Cash improvement significantly the basis second quarter model make last which collections all quarter the This and from over For during for just months

year will year-to-date likely $XXX amortization And $XX end to low the finally, was the million, CapEx spend CapEx million $XXX million forecasted our quarter for and the of of at for the approximately Given depreciation full be expectation $XX.X million. range.

outlook continued quarter, the topline. pleased the the are to on we Moving with momentum the fourth for

QX. the compare for will be the nine of first a Bio-Rad was the of neutral last in substantial year. neutral see of in quarter and with Group, would the is Science, growth of and lineup BioPlex fourth X%, continue growth process the growth Life of for Diagnostics grew that months solid of fueled while compare U.S. nearly fourth a With In Science by fueled resurgence said, $XXX with we that in the made market. revenue XX% and especially has XXXX blood being in our world into to all the year-to-day at currency quarter difficult year For new of year-over-year that currency moving not XXXX around surprised assays the good Life be strong year. media. group, decline the This toughest record our our funding products exceeding to we remembering coupled instruments more Remember XX% that of Science part research quarter than around With we technologies outpace our Life a sales typing mind, have market million. are sales for to inroads in

first of sales While reagent today, our impact And nuances, we guidance are range. it operating takes competition the these target recorded to the talked the in X.X% year year $XXX cumulative are months must time thinking U.S. a implies all for fourth year. in quarter revenue the about the guidance reported our million range. the across Diagnostics in has our for continue lines. face When lower typing growth less to full expected to sales needle. move tough in Knowing the absorb of to our the ramping margin gross still full $XXX product annual This as compare, for we've we the of margin, reiterating business growth and million than nine tough for X% revenue we blood we about, of the many

of which model. in the As costs continue in lower flow the U.S., I Europe of is earlier, expected the to incur our and mentioned high of to in instruments as a transition level this margin new blood reagent operating result typing inventory product costs changes advance significant placements incurred we mix, revenue

show not believe to improvement While quarter should our the year-to-date margin level the closer fourth historical be will XX%, we enough the in results. it around to overcome

the As be in compared basis, of of we On to the our to operating earnings XX.X% operating be basis, margin quarter the on a non-GAAP but margins estimated and on cautioned of are the to down X% XXXX margin when X% target GAAP we XX%, call, revising full margins on which such, basis previous range range significantly improved estimate X.X%. the X.X% to is target full a XX.X%. compared to year previous a year our second in still non-GAAP to as we XX% from operating to

outlook XXXX we share in call. take now, And your February prior practice we in our are earnings and for question. quarter fourth thinking our has happy As years, to been the during will

Operator

Our line of first Jefferies. Brandon with the comes Couillard from question

open. is line Your

Brandon Couillard

Thanks. Good afternoon.

Christine A. Tsingos

Hi, Brandon.

Brandon Couillard

does much quantify guide. year of effect the Christine I quarter, operating the the terms then impact inventory us charges? the the the the for that you full year-over-year chance of in could which guidance the And currency, the parts margin include bridge for placements, impact the just gross updated moving terms of you in year? margin instrument confirm of could in gotten of the you has for between the in third the of guidance FX, currency terms year, suspect help to decline of terms margin in the Any worse

Christine A. Tsingos

about, impact terms then let terms true and continuing what's added so months is change between European costs the impacting various that's and that nine and in impact, of specific find is upfront either transition say I margin half operations much of a FX. of continue headwind Brandon, we of can becoming don't impact negative it that face. gross more And Well, us while the of to really is the have you to half will I mix talked more the how it call. have we other if outlook categories But FX Okay. me of related I'd as investment we concerned as as do rental to with cost the to placements. it that reagent the about far is the part is behind these relates if in breakout, the is just in associated or for with in a see, the and I

Brandon Couillard

pull is of heavy least year that, Thanks. third the I'm just contributing curious, starting quarter seen given that that this is in I instruments factory we've might on placement to from beyond it timelines been inflation mix if just those. revenues mix, be the there placements at half the Can well you blood the place would the of – and have I took like ramp suspected else something these of really some as sort the reagent as of instrument or first COGS instrumentation kind issues? help ops would the sort are through whether that guess have typing of us or or understand as BioPlex XXXXs the some to with going

Christine A. Tsingos

answer – not me let days and customer this it bit complete a the in. starts the interpreted welcome takes they're about John installation I generating want that indeed, to then instruments and little to get the – any revenue. placed (XX:XX:XX) certainly and we've Hertia revenue do They after about flow. reagent I of and XX exempted that don't to to So be pipe

The which to as are additional instruments feeding lot as lower as is big need that costs we I of cumulatively, it a that business. and our typing a certainly and will in the But reagents initial price to the business we needle we the these as into we're are versus it when think which And those other install incur one warranty continue offset revenue. nonetheless, are Those of just you initially reagents and the them the again, think flow a ways. placing and taking beginning additional U.S. later to move life blood produce instruments you bearing on cycle. product these higher is cost as in of what the are of you true difference manufactured a well bringing upfront in takes timing, the is the other et reagent cetera. cost about the the market, the that Europe – the at U.S.

to BioPlex add of the seeing U.S. know world? or So if what typing and you're don't want you for John in the businesses around I the XXXX anything blood the Hertia,

John Hertia

expected three of longer placements the they It's up stronger ramp in is days have instrument where XX months to because the both product do the blood the reagents running typing the institutions and than the some sensitivity think online little time for come BioPlex simply the and to results reagents. XX a in the to six take from of The time of been to all to they're fully in before time it validation could get they validation I the of U.S. the cross of up line. results to

kick ramp definitely so bit little And longer takes it's that a beginning up to in. but

Christine A. Tsingos

That's point. a good

Brandon Couillard

how then you. next one your two to anything your and your Thank the XXXX with And I margin of that proceeding Thanks. reach guess, margin the kind guess, expansion in view out play of targets That's I would to ability respect pace you changed those Christine, and to expect, years. helpful. last over

Christine A. Tsingos

I that there XX% we're changes well. question, that by I anything years XXXX of of seeing doing we Brandon. goal out our the end tight really our that today don't And XXXX. always very our process a do Yeah. the now And bottoms-up a of is right target forecast. of great think the as hitting No, think that's in we're

being I of anticipated, that than pace in the little instruments and would being same placing at of business think to on XXXX a bearing cost well we're XXXX. wanted the the U.S. higher down these margin we for bodes be, said, Hertia the and benefits we're margin the we'd but business, just is anticipated. that it But more progression year out, with have we the clearly pointed than shy good expansion puts pressure today that margin is even means first where in the as higher higher mining John the time that – road. that But

are see still specific flow projects we XXXX actions more other The being are results. that our those on can than taking are our you think vision, that say, that's now working going cash to that worked and starting we're place to beyond on right of what's we're we're topline, of in with many XX%. benefit I operating way the part targeting are those still But I and still of and those that factors long the our guess in me in a the and see can you for winded on

strongly think originally have than that rolls of trajectory in we goal. bit a but would in is out believe anticipated, The I still identified. different little terms it how nonetheless, we is everything,

Brandon Couillard

there in. of very jump the Thank some you. That's Thanks. it I'll let helpful. and leave newbies

Christine A. Tsingos

not? want outlook to know any don't if the add I Norman, or And commentary to you XXXX

Norman D. Schwartz

And No, happen. obviously of that we're plan. diligently we've irons in meet the got make fire lots that to there still working to

Operator

Thank you.

line from Goldman Patrick Sachs. Donnelly comes the with question next Our of

open. is line Your

Patrick Donnelly

in when us see maybe question. going Great. I about Christine, think higher trying currently corporate inflect expectations? to when margins the to on you pull the can to for of really see feel margin we continue margins? another the for do that terms placements gross increased reagent reflect throughs out dilution? the you this level when going Thanks to these impact couple placements, just placements? help on you're guess Or instrument of gross a on those like gross get given taking relative your instrument quarters on Is

Christine A. Tsingos

they market but have moment drag John to need related pick additional installation, can not up to just much costs crossover Hertia's to on take And validation months. Yeah, typing can with is it they of XX take said ago go the bringing and kind of through and from it I several Patrick, U.S. a complete. only need studies if and labs feeding the to comments John as blood days, the that's that six that up

and expect reagent full I QX, yet the some the through XXXX the start So talk We're while with that start to XXXX, about in as move of instruments of in a placing I if the of specifically that. margin XXXX year recovery not higher reflective that's we to benefits then stream, cumulative but and reagent expect the beginning prepared we do help about we we that would get the don't labs level, of gross think think revenue. their see of validation those, would, on to impact really spending corporate U.S.

we'll XXXX on So give more when call quarter insight specific we outlook. fourth the our have

Patrick Donnelly

before that of nimble next these it will be? to facility you ERP opportunity is we between that? going guess thoughts that's consolidations, come think now And what a costs Okay, like little inflects expected, about helpful. I forward little progression than are still year the be talked – a down? Is Brandon on asked coming that, about you kind little margins kind here pull there your those How you're I you guys initiatives maybe little confident different but things level you when as there there. guess targets, lower have of gross of of can to the XXXX higher, like move forward bit starting costs a some issue gross when in the are procurement, sound offset this the we said, about to systems, margin of bit the progression, some to or think a you've on lighter you about

Christine A. Tsingos

working manufacturing some especially Other that of that the situational has but that into optimization market, there about, some with European taken, typing Norman help XXXX the charges talking and they to but takes that blood pull on can year charges, kind anticipate in identified, gross our the the those U.S. we've and repeat. So of you mentioned through obviously Hello? temperament are would been to we margin that or I don't a own was that so we've the you're this model working time, projects something course plan. timeline tremendous not or to not were that I've with just when operating in their as in it of It's especially as a more been us the after think confused of overcome. forward. change acceleration been a you. inventory-related It changes situational of That's about. change. kind in of some – situational, dealing things change easier with we But asking that the course practice example, Maybe that just also pretty will environment we've totally isn't force baked regulated something have have for

Operator

Mr. Donnelly, see mute? your line is open. if Check are to on you

Christine A. Tsingos

the then Patrick in Twanda. question he and right, next more to go get can needs if if he can on back all the That's queue – clarification. We has

Operator

All right.

next comes of Meehan question of Jack Our Barclays Capital. from the line

line open. is Your

Jack Meehan

Hi. was in the Thanks. the gross gross more considered did front, adjusted anything whether on on margin one I the going Without one-time have quarter. within the margin. curious you margins overkill I

XXXX But higher on the else I there and things was talked gross would dynamic that move of the into the for curious anything front. understand margin whatnot. the mix of was roll kind whether off as cost One you about we just service.

Christine A. Tsingos

Yeah.

your is dollars call even the maybe Jack, It's to third to non-GAAP continue in our for if we is because QX an is to we it out So I'll part on talked it that if one-time specific that identifiable I'd larger we call. we would charge it and And right event, the – the more as that about a use another such probably and business only willing and of pretty a had though inventory words of but running kind you in took will. be that something size million you optimize couple thing will, also Europe. charge and the there was situational, quarter not

Jack Meehan

Norman, for perspective, I is COO? update the Maybe a just from process hiring a curious, of any terms management was in there

Norman D. Schwartz

a other at looking slate the actively continuing got and so we're that's we're on we've that. work Yes, and fresh candidates being to moment developed at

Jack Meehan

about from Great. good ask the based. media. The a come relatively fourth is the of year-over-year and thought quarter? in I the quarter, And seemed Life might have was I then What Science perspective, maybe how level one the just looked revenue contribution process revenues there pretty that swing broad just the to

Christine A. Tsingos

it's So question. good a

process $X think I about media million was year-over-year. up

despite X%, outlook. into kind will be move down tough back why of fourth It be we the and that that expect with their because it that's we of X.X% As little I to growth quarter, year-over-year think it roaring QX of first when the compare. came good reason year a another was quarter bit last topline we're keeping

year-over-year. about that some decrease a $X we if we all million operation, Science I kind through X.X%. sales I'd grew though year-over-year shutdown exclude And and because our we really that of think media million that thing you offset $X Life the RainDance $X of of process see still of is did, other of of the remind exclude sales about The shouldn't million

Jack Meehan

BCR-ABL of the clinical FDA with approved? been Thank the of are just test working in for Great. Final curious, one be here having if think I'm down is Antonio latest on terms updates is it if I'd droplet you've one timeline I of in can in at digital terms in squeeze for AMP, you. the San there approvals? getting some I what any

Annette Tumolo

take This is that. Annette. I'll

we ball the the know a come, would wish – we crystal to I exactly submission So to expect we're we I had but when and process, have FDA are so in talking our it anytime. clearance time all the

this continuing we're regular our dialogue them process. on So with

Jack Meehan

watch The Annette. Thanks, continues?

Annette Tumolo

Yeah.

Operator

Our comes of Bank. from with next line Dan Leonard Deutsche question the

is line Your open.

Dan Leonard

couple me. A you. from Thank

low-single-digit at than periods? that had this So revenue length us of in Hertia is higher business help maybe you Can that John this is what about lifts something something all into its for the you expected. means some put trajectory better forward talked Diagnostics around And framing at instrument placements question, the you forward? a the going line out

Christine A. Tsingos

So about with one jumps business. obviously mean I XXXX in to that, ready not of talk our this is part even before yet. we're on just But Dan, John that,

forward. Diagnostics, everything several terms if Science. needle I Life certainly you averages that we the U.S. And the needle. have opportunities one and big within of businesses help just We sizable Certainly is the of growth, year-over-year be think contributor. going some in within them overwhelming one no outpace should is single industry of in will, But able to move typing averages the a company have it's blood and mover many

I Dan, or that looking something if – don't know, if you're your question So answers different. for what

Dan Leonard

a I of little bit if for was – can but it but leave there. I framework looking

Secondly, of in Italy, couple countries that Christine, went how went? live a SAP believe in comment on QX. you Nordic Can I you Spain, with

Christine A. Tsingos

Yeah, it the no, and We Europe implementation it not Southern Nordics, primarily less the of at was more a live was did much for than complicated because asking. went the operations manufacturing. complex and thanks beginning past July the commercial

charts it. new prepared to deployment processes It that for and just with team so think always does but people get used ball. the far was well name to were The catching is I and not time systems so and those and pretty you good. screens the take

well of learned took we'll that deployments improve ball the how and they I prior advantage think lessons world. of. into those, at pretty we pleased so continue to SAP able the the from A And right to we're were but European come lot catch

Dan Leonard

a Okay. buy that my the final you back on Great. the stock Just or Did on any quarter ago? you any do buy back you question authorization announced update to the in buyback. year plan any forward? going And then

Christine A. Tsingos

Sure.

kind in know a we've of been So almost period. we day it as the announced you probably blackout since

we now, being trading the I the week not we're quarter. Though buy we during potential value that's said, share will think the there, and didn't us. buyback and lost next vis-à-vis any anticipate it's with on movement internally the So execution. that price window in open so the discussing The

Dan Leonard

Okay. Thank you.

Operator

this to questions Thank call at no you. Tsingos to closing the showing like remarks. I Christine time. over I'm turn further for back now would

Christine A. Tsingos

questions thoughtful we interest look Bye-bye. taking Bio-Rad, everyone you thank Well, we the hopefully your us appreciate and Great. to your to today. Okay. join soon. you for We seeing in forward time appreciate

Operator

concludes and call. participating. today's you that Thank for Ladies gentlemen,

Everyone wonderful disconnect. now may have a You day.

Bio-Rad Laboratories (BIO) 1 Nov 182018 Q3 Earnings call transcript