PERKINELMER INC (PKI) Earnings Report: Q1 2016 Conference ... · I'm pleased to report on PerkinElmer's strong start to the year in which we delivered solid financial performance

CompanyName:PerkinElmerIncCompanyTicker:PKISector:HealthCareIndustry:HealthServices

EventDescription:Q12016EarningsCallMarketCapasofEventDate:5.51BPriceasofEventDate:54.23

©2014TheStreet,Inc.Al l R ightsReserved Page1of21

PERKINELMERINC(PKI)EarningsReport:Q12016ConferenceCallTranscriptThefollowingPERKINELMERINCconferencecalltookplaceonMay5,2016,05:00PMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

TommyThomas;Perkinelmer;InvestorRelationsRobFriel;Perkinelmer;Chairman&CEOAndyWilson;Perkinelmer;CFO

OtherPart icipants

BillMarch;JanneyMontgomeryScott;AnalystSteveWilloughby;ClevelandResearchCompany;AnalystMatthewMishan;KeyBancCapitalMarkets;AnalystDerikdeBruin;BoAMerrillLynch;AnalystJackMeehan;BarclaysCapital;AnalystMiraMinkova;StifelNicolaus;AnalystRossMuken;EvercoreISI;AnalystDougSchenkel;CowenandCompany;AnalystTychoPeterson;JPMorgan;AnalystBillQuirk;PiperJaffray&Co.;AnalystJeffElliott;RobertW.Baird&Company,Inc.;AnalystBryanBrokmeier;CantorFitzgerald;AnalystDanLeonard;LeerinkPartners;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

WelcometoyourQ12016PerkinElmerearningsconferencecall.

(OperatorInstructions)

Asareminder,thisconferencemayberecorded.

Iwouldliketointroduceyourhostfortoday'sconference,TommyThomas,VicePresidentofInvestorRelations.Sir,youmaybegin.

T ommyT homas (InvestorRelations):

Thankyou,Operator.GoodafternoonandwelcometothePerkinElmerfirstquarter2016earningsconferencecall.

WithmeonthecallareRobFriel,ChairmanandChiefExecutiveOfficer;andAndyWilson,SeniorVicePresidentandChiefFinancialOfficer.

Ifyouhavenotreceivedacopyoftheearningspressrelease,youmaygetonefromtheinvestorsectionofourwebsiteatwww.perkinelmer.com.PleasenotethiscallisbeingWebcastliveandwillbearchivedon




ourwebsiteuntilMay19th,2016.

BeforewebeginweneedtoremindeveryoneoftheSafeHarborstatementsthatwehaveoutlinedinourearningspressreleaseissuedearlierthisafternoonandalsothoseinourSECfilings.Anyforward-lookingstatementsmadetodayrepresentourviewsonlyasoftoday.

Wedisclaimanyobligationtoupdateforward-lookingstatementsinthefutureevenifourestimateschange,soyoushouldnotrelyonanyoftoday'sforward-lookingstatementsasrepresentingourviewsasofanyotherdateaftertoday.

Duringthiscallwewillbereferringtocertainnon-GAAPfinancialmeasures.Areconciliationofthenon-GAAPfinancialmeasuresweplantouseduringthiscalltothemostdirectlycomparableGAAPmeasuresisalsoavailableasanattachmenttoourearningspressrelease.Totheextentweusenon-GAAPfinancialmeasuresduringthiscallthatarenotreconciledtoGAAPinthatattachment,wewillprovidereconciliationspromptly.

IamnowpleasedtointroducetheChairmanandChiefExecutiveOfficerofPerkinElmer,RobFriel.Rob?

RobFrie l(Chairman&CEO):

Thanks,Tommy.Goodafternoon.Thankyouforjoiningustoday.

I'mpleasedtoreportonPerkinElmer'sstrongstarttotheyearinwhichwedeliveredsolidfinancialperformanceandgainedsignificantearlymomentumonour2016strategicpriorities.

Turningfirsttoourfinancialperformance,weexceededourrevenueandprofitabilityexpectationsforthequarterdespiteamacroeconomicenvironmentthatremainsmixed.Wegreworganicrevenuebyapproximately4%whichwasfairlyevenlysplitbetweenhuman,environmentalhealth.Wealsoexperiencedagoodexpansionofourgrossandoperatingmarginsandincreasedadjustedearningspershareby12%or$0.56.Asaresult,wehaveraisedourtoplineandearningspershareexpectationsforthefullyear.

WhileAndywilldiscussourfirstquarterfinancialresultsandendmarketsinmoredetail,overallourmarketsareperformingsimilarlytothelatterpartoflastyearandareinlinewithourexpectations.Whiletheconditionsofafewmarketsegmentsareabitmixed,theseareareasthatforthemostpartimpactarelativelysmallportionofouroverallbusiness.Forexample,duringthefirstquarterourrevenuefromindustrialmarketsdeclinedlowsingledigits,duesomewhattotoughprior-yearcomparisons,butalsotoweakercustomerdemand.

Fortunately,thiswasmorethanoffsetbybetterthanexpectedperformanceinthefoodmarket,particularlyinChinaandanumberofemergingmarkets.WealsocontinuetoseepersistentheadwindsincertaingeographiessuchasBrazil,JapanandRussia.However,inthefirstquarterrevenuefromthesecountriesrepresentedlessthan5%ofouraggregaterevenue.

Aswelooktotheremainderoftheyear,wecontinuetobelieveitisprudenttoexpectafairlymoderategrowthenvironmentwithcontinuedvolatilityinbothindustrialandemergingmarkets.

BeforeturningthecalloveroftoAndyI'dliketohighlightsomeoftheprogresswemadetowardsourstrategicprioritiesforthisyearaswellasprovidesomeexamplesofhowourofferingscontinuetohelpmakeaprofoundimpactonhumanandenvironmentalhealth.

AsIreiteratedduringlastquarter'searningscall,PerkinElmer'suniquevaluestemsfromourabilitytooffernovelsolutionsthathelpcustomersunlockinsightsbyleveragingthecombinedpowerofourscientificandtechnicalcapabilitieswithdeepapplicationknowledge.




Inaddition,bydisproportionatelydirectingmoreofourresourcestowardsthehighgrowthareasofpharmaandbiotechservicesandsolutions,reproductivehealth,emergingmarketdiagnostics,andfoodqualityandsafety,webelievewecanaccelerateorganicrevenuegrowthbeyondthemidsingledigitrate,drivesustainablemarginimprovement,andreducetheeffectsofneartermmacroeconomicvolatility.Thisfocushasenabledustotargetsolutionsthataresolvingsomeofourcustomers'mostsignificantrealworldchallenges.

Forexample,inthefirstquarterweintroducedourOperettaCLScellimagingsystem.ThissystemcombinesPerkinElmer'sproprietaryautomatedwaterimmersiontechnologywithdirectLEDillumination,enablinguptofourtimeshighersensitivityandfinerresolutionforphenotypiccellassays.RecentlyourcellimagingsystemshavebeenselectedbytheUniversityCollegeofLondon,CambridgeUniversity,andOxfordUniversityinconnectionwithacollaborativestudytobetterunderstandthemolecularandgeneticmechanismsofdementia.

Inaddition,researchersinBrazilandtheUSareutilizingourOperettaandJANUSliquidhandlingsystemstoscreencompoundsthatinhibittheinfectionandtransmissionofthedangerousZ ikavirus.AnotherimportantofferingfromourresearchimagingplatformisourrecentlyintroducedPhenopticsquantitativepathologysystemwhichallowsquantitativeandspatialimaginganalysis.

LastmonthanarticleintheNewEnglandJournalofMedicineshowcasedhowscientistsattheFredHutchisonCancerResearchCenterandJohnsHopkinsleveragedourplatformtounderstandimmuneresponsetoananti-PD1drugformerkelcellcarcinoma.

Inaddition,asecondstudypublishedbyGenoptix,aNovartissubsidiary,indicatedthatamultiplexihctestusingourplatformtomeasurenotonlyPDL1expression,butalsotheinteractionbetweencancercellsandPD1positiveimmunecellsleadstoabetterpredictionofimmunotherapyresponseformelanomaandpotentiallyothercancersversuscurrentsingleplexihctests.

BothofthesestudiesreinforceourbeliefsthatourPhenopticsofferingissubstantiallydifferentiatedinitsabilitytoidentifyandquantifycancerimmuneinteractions,thereforebetterenablingourcustomersforprecisionmedicine.Intheareaofdiagnostics,wecontinuetoseesignificantopportunitiesinreproductivehealth,particularlyinemergingmarkets.

InthefirstquarterweopenedanewlaboratoryinChennai,India,whichbroadenedourdiagnosticsofferingstorespondtoIndia'sgrowingdemandforeasieraccesstotechnologiesthatscreenforandhelpdiagnoseprenatalandneonatalconditions.Thelabwillprovideacomprehensivemenuofdiagnosticscreenservicestohospitals,maternitynursingfacilities,diagnosticlabsandclinicians.

Innewbornscreening,globaladoptionofourgoldstandardautomatedscreeningplatform,theGSP,continuestogrow.Inparticular,ourGSPpilotsaregoingwellinChinaasthecountryrampsupitsautomatedscreeningcapabilities.Inaddition,asadditionalcountriesexpandtheirtestingmenus,moreofthemareimplementingourmarket-leadingskidtests.

InChina,ourHaiwanbusinesswonanumberofgovernmenttendersinthefirstquarterascustomersworkedtomeetthenucleicacidtestingmandatecomingintoeffect.Weareproudthatthroughthedeploymentofourindustryleading[cheetah]molecularbloodscreeningsystemhospitalswillhelpensurethesafetyofChina'sbloodsupply.

Consistentwithourstrategytofocusoureffortsonourverybestopportunities,lastweekweannouncedthedivestitureofourUSprenatallaboratoryscreeningservicebusiness,NTD,toEuropeanScientific.ThroughthisdivestiturewecannowbetterconcentrateourdiagnosticeffortsondevelopinginnovativematernalfetalhealthtechnologiesandsolutionsfortheUS.OutsidetheUS,wearecontinuingtoprovidekits,technologiesandservicesthroughavarietyofchannelsfocusedonimprovinghealthoutcomesfor




babiesandexpectantmothers.

Withinfoodtestingwegrewour[Perkin's]franchisewiththeacquisitionofDeltaInstruments.DeltaisaNetherlands-basedmanufacturerofinfraredanalyzersandflowcytometersfordairyproducts.Thisacquisitionbroadensourportfoliotonowofferthemostcompleterangeofanalyzersusedformeasuringnutritionalcomponentsandsomaticcellsinmilk.

WearealsoexpandingPerkin'saddressablemarketorganicallybyleveragingourcorePerkinElmertechnicalcapabilities.Mostrecently,Perkintransformedasingle-useanalyzerintoaninlinesolutiontomonitorproductqualityforamajorconsumergoodsmanufacturer.Consumersalreadypurchasedalargequantityofinstrumentsprimarilytotestmoisturelevelsduringprocesscontrol.

WhiletheDeltaacquisitionwassmall,wecontinuetolookformoresubstantivebolt-onacquisitionsinourhigherprioritymarkets.Wehaveasolidpipelineandhopetocloseoneofthosetransactionsduringtheremainderoftheyear.

However,asyousawinourpressrelease,duringthefirstquarterwebroughtback$150millionofstockaswebelievewehavethecashflowgenerationandleveragecapabilitytobothboltonstrategicattractiveassetsandreturncashtoourshareholdersthroughdividendsandsharerepurchases.

Anotherkeystrategicpriorityforusisdrivingproductivityandoperationaleffectiveness.We'vebeenaggressivelydeployingleanprinciplesthroughouttheorganization.Withinmanufacturing,weareupgradingourprocurementpracticesandimprovingcross-sitecollaboration.Whileearlydays,ourleanapplicationsandoperationsarestartingtofreeupmanufacturingcapacitywhichwillenableustoin-sourcekeyassembliesatveryminorincrementalvariablecosts.

Inaddition,we'reusinganin-sourcinginitiativetoacceleratevalueengineeringandfurtherreduceproductcostbydrivingcommonalityandcomponentstandardizationacrossanumberofimportantproductlines.Furthermore,wehaveconsolidatedthemanagementoftransportationactivitieswhichisyieldingimpressiveinitialresults.Theearlybenefitsfromtheseactionshavealreadystartedtopositivelyimpactourmarginsandareresponsibleforsomeofthebetter-than-expectedfinancialperformanceinthefirstquarter.

Sotosummarizeourfirstquarter,Iwouldnotethefollowing.Solidfinancialperformance,particularlyintheareasofmarginexpansion.Goodprogressonfocusingourinvestmentsinthemostattractivegrowthareas.Theadvancementsofimplementingamultifacetedapproachtoimproveoperationaleffectiveness,andlastlythereturnof50%ofourforecastedfreecashflowthisyeartoourshareholders.

Aswemoveahead,ourstrongfirst-quartermomentumreinforcesourconfidenceinthegrowthinvestmentswearemaking,ourabilitytomeetourfinancialtargetsandoursuccessinservingourcustomersaroundtheglobe.

I'dnowliketoturnthecallovertoAndy.

AndyWilson (CFO):

Thanks,Rob.Goodafternoon,everyone.

Consistentwithpreviousquarters,I'llprovidesomeadditionalcoloronourendmarkets,afinancialsummaryofourfirst-quarterresultsaswellasdetailsaroundoursecondquarterandfull-yearoutlook.

Startingwiththefirstquarter,wewereverypleasedwithourstrongstarttotheyearassolidexecutioninanumberofkeyinitiativesaffordedustheopportunitytomakeameaningfulinvestmentacrossanumberofnewgrowthopportunitiesandstilldeliversolidfinancialresults.Forthefirstquarteradjustedrevenues




were$539million,representingorganicgrowthofapproximately4%whileFXnegativelyimpactedrevenuegrowthbyapproximately2%or$10million.

Adjustedearningspersharewas$0.56,up12%fromthecomparableperiodayearagoand$0.06pershareabovethemidpointofourguidancerange.Thestrongoperationalperformancecontributedapproximately$0.05pershareofthebeatandwasprimarilytheresultofvolume,favorablemix,andpriceaswellastheincrementalimpactfromourleanandproductivityinitiatives.

Non-operatingitemscontributedapproximately$0.01pershareversusourguidanceandwerecomprisedofalowersharecountandfavorableFX,eachofwhichcontributedapproximately$0.01,butwerepartiallyoffsetbyapproximately$0.01resultingfromaslightlyhighertaxrateinthequarter.I'llgointoabitmoredetailonseveraloftheseitemslaterinmypreparedremarks.

AsRobmentionedearlier,thetrendswesawthroughthelatterpartof2015largelycontinuedthroughthefirstquarterof2016.Lookingatourendmarkets,wecontinuedtoseehealthydemandfrompharmaandbiotech,stableacademicandgovernmentspending,aswellasstrongdemandforfoodandenvironmentalapplications.Ourproductmixwasalsobalancedwithconsumables,reagentsandinstrumentsallgrowingmidsingledigitsorganically.

Lookingatourgeographicresultsforthefirstquarter,ouroverallperformancewasbalancedasweexperiencedhighsingledigitorganicrevenuegrowthinAsia,midsingledigitgrowthinEurope,andlowsingledigitgrowthintheAmericas.

IntheBRICeconomies,firstquarterorganicrevenuesincreasedhighsingledigitscomparedtothesameperiodayearagodrivenbystrongChinaresultsmorethanoffsettingcontinuedweakdemandinBrazilandRussia.Overall,ouremergingmarketdemandhasremainedresilient.WearepleasedwithoursolidresultsinChinaasorganicrevenuesgrewdoubledigitsinthequarterwithbroad-basedstrengthfrombothourhumanandenvironmentalhealthsegments.

Ourhigh-endbloodscreeningbusinesshadanotherstrongquarteroftenderwinswhile[hallion]instrumentplacementscompletedinthesecondhalfof2015arenowbeginningtodrivereagentdemand.Ontheenvironmentalside,strengthinfoodandenvironmentaltestingsolutionswerethekeycontributorsofenvironmentalhealth'ssolidperformanceinChina.

Astoouroperatingresultsforthequarter,adjustedgrossmarginswere48%,up30basispointsdrivenprimarilybythesuccessofhigher-marginnewproducts,successfulpricingandleaninitiativesandvolumeleverage.Wecontinuetobeencouragedbythetractionweareseeingfromourleanactivities.

AdjustedSG&Awas25.1%,down80basispointsoverthesameperiodayearago,drivenbyproductivityactionsandtheongoingsuccessofourindirectspendinitiatives.Asweguidedforthefullyear2016,ourfirstquarterreportedresearchanddevelopmentspendingwashigherbyapproximately$2millionascomparedto2015,drivenbycoreinvestmentsinourfourstrategicinitiatives,alongwithR&DfundingsupportingVanadisasweannouncedlastquarter.

Overallwewereverypleasedwithouroperationalperformanceandexecutioninthefirstquarterof2016asweexpandedadjustedoperatingmarginsbyapproximately100basispointsontopofourincrementalR&Dinvestments.Lookingbelowtheoperatingline,first-quarternetinterestandotherexpensewas$11millionandourfirst-quarteradjustedtaxratewas21.5%.

Thehighertaxratewasaresultofthegeographicdistributionofprofitsandhadanegativeimpactonadjustedearningspershareofabout$0.01inthequarter.Westillexpectourfull-yeartaxratetonormalizeoverthebalanceoftheyeartoapproximately19.5%.




ConsistentwithourcommentsinFebruary,wecompletedthebuybackof3.2millionsharesoftheCompany'sstockforatotalconsiderationof$148millionduringthequarter,leaving2.7millionsharesremainingforrepurchaseunderourcurrentBoardauthorization.Thetimingoftheacquisitionoftheseshareswasmodestlyacceleratedandwillhaveapositiveimpactofapproximately$0.01persharefortheyear.

Turningtothebalancesheet.Wefinishedthequarterwithapproximately$1.1billionofdebtandnearly$210millionofcashandweexitedthequarterwithanetdebttoadjustedEBITDAratioof2times.Operatingcashflowforthequarterwas$32millionascomparedto$38millioninthesameperiodlastyear,dueprimarilytothetimingofpayrollandbenefitexpensesaswellashigherworkingcapitalrequirementssupportingfuturenewproductintroductions.Fortheyear,weremainconfidentinourabilitytodeliverouradjustedfreecashflowcommitmentof$300million.

Turningtooursegmentresultsforthefirstquarter.Environmentalhealthorganicrevenuegrewapproximately5%,withhumanhealthincreasing3%ascomparedtothesameperiodayearago.Fromanendmarketperspectiveourhumanhealthbusinessrepresentedapproximately62%ofadjustedrevenueforthefirstquarterof2016,withdiagnosticsrepresentingapproximately29%ofadjustedrevenueandlifesciencessolutionsrepresentingapproximately33%ofadjustedrevenue.

Firstquarterorganicrevenuegrowthfromourdiagnosticsbusinesswasdrivenbyhealthymidsingledigitgrowthfromourcorediagnosticfranchises,partiallyoffsetbyamidsingledigitdeclineinmedicalimaging.WecontinuehowevertoseeincreasingdemandforanumberofnewCMOSapplicationsastheteamcontinuestosuccessfullydiversifythemedicalimagingportfolio.

Organicrevenueinourlifesciencessolutionbusinessgrewlowsingledigitsinthequarterwhilecoreresearchgrewmidsingledigits.Pharmaandbiotechcontinuetobethekeycontributors,bothgrowinghighsingledigits.GrowthwasbroadbasedgloballywithcontinuedstrengthfromourOneSourceservicefranchise.

Wecontinuedtoexperiencesoliddemandforcoreproductswithparticularstrengthinreagents,whichgrewatadouble-digitrateinthequarter.We'vealsobeenverypleasedwiththedemandforournewproductintroductions,includingourhighcontentscreeningplatform.

Movingtoourenvironmentalhealthbusiness,whichrepresentsapproximately38%ofadjustedrevenue,wearepleasedtoreportthatrevenuesgrew5%organicallyforthefirstquarterof2016.Ourresultsbenefitedfromthetimingofstrongdemandinourfoodandenvironmentaltestingsolutions.However,weexpectthisgrowthratetomoderatesomewhatinthesecondquarter.

WecontinuetobedelightedwiththeperformanceofPertenandthepositivecustomerfeedbackwe'vereceivedontheirnewinlinetestingsolutionformoisturemeasurement.AsRobmentioned,weexpandedourfoodanalysisfranchisetotherecentacquisitionofDeltaInstruments,aproviderofanalyticalequipmentandsolutionsforthedairymarket.

Lookingatsegmentmargins,environmentalhealthmarginsexpanded470basispointsasstrongmix,prior-yearrestructuringactionsandsolidoperationalexecutionwerekeycontributorstothisperformanceinthequarter.Humanhealthmarginswere21.2%,adeclineof80basispoints,largelyduetoplannedgrowthinvestmentsandmix,partiallyoffsetbythepositiveimpactofpricinginitiativesimpactedattheendoflastyear.

Lookingaheadtothesecondquarterof2016,webelievewearewellpositionedtodeliveranothersolidfinancialperformancewithcontinuedstabilityinamajorityofourendmarkets.Forthesecondquarterof2016,weareforecastingreportedrevenuestobeintherangeof$570millionto$575million,whichrepresentsorganicrevenuegrowthofroughly4%.




Secondquarter2016adjustedearningspershareisexpectedtobeapproximately$0.65to$0.66.Forthefullyear,wenowbelieveourorganicrevenuegrowthwillbeapproximately4%or$2.32billion.

Lookingatmarginsfortheyear,wenowexpectgrossmarginstoexpandapproximately70to80basispointsandoperatingmarginstoexpand60to80basispointswithR&Dcontinuingtorepresentayear-over-yearheadwindofapproximately40basispoints.Regardingouradjustedearningspershareoutlook,weareincreasingthemidpointofourfull-yearadjustedearningspershareguidancerangeby$0.10.The$0.10increaseiscomprisedofourfirstquarteroutperformanceof$0.06pershare,coupledwithanestimated$0.04persharefromamorefavorableforeignexchange.

Asinpriorquarters,themethodologyforcalculatingtheimpactofforeignexchangemovementsonouroperatingresultsisbasedonanaverageofFXratesoverthelastmonthofthequarter,andwewillcontinuetobetransparentastotheimpactofforeignexchangeonouroperatingresultsaswemovethroughtheyear.Andfinally,theimpactfromtheaccelerationofoursharerepurchaseinthefirstquarterisexpectedtoessentiallyoffsetthedilutionfromthesaleoftheNTDLabServicesbusinesswhichwasalittleover$0.01.

Asaresultofthesefactors,weareincreasingourfull-yearearningspershareguidancefromarangeof$2.65to$2.75,toanewrangeof$2.75to$2.85withamidpointof$2.80.Asalways,whenassessingouradjustedEPSguidancerangeyoushouldfocusonthemidpointasthemostlikelyviewofhowweseeourresultsplayingout.

Thisconcludesmypreparedremarks.Operator,atthistimewewouldliketoopenupthecalltoquestions.

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)

OurfirstquestioncomesfromthelineofPaulKnightwithJanneyMontgomeryScott.

BillMarch (Analyst-JanneyMontgomeryScott):

ThisisactuallyBillMarchonforPaul.Howareyouguysdoing?Maybeifyoucouldintermsofcapitaldeploymentwiththeaccelerationofthesharebuybacksinthequarter,maybealittlebitofinsightorcoloraroundwhatyouseefortherestoftheyear?


SoIwouldsay,asImentionedinthepreparedremarks,ourviewiswewouldhopefullybeabletogetsomethingdonefromthestandpointofabolt-onacquisition.Imentionedthefactwefeelgoodaboutourpipelineofopportunities.Andsothat'sourfirstpreference.Butclearlyifweareunabletogetthatdone,let'ssay,overthenextnineto12months,thenIthinkwe'dprobablylooktocontinuetobuybackshares.


Gotit.IntermsofChina,Iknowheadingintotheyearyouweresayingmaybeit'sgoingfromdoubledigitstohighsingledigitsgrowth,maybeanupdateonthatoutlookandhowbothsidesoftheportfolioaretracking?


SoIwouldsaywecontinuedtoseeverystronggrowthinChina.Chinaforusinthefirstquarterwasup




sortofmid-teens.Anditwasverybroad-based.Sobothontheenvironmentalsideaswellasthehumanhealthside,wesawadouble-digitgrowthinthequarter.

Andevenwithin--ifyoulookedinhumanhealth,itwasbroad-basedbetweensortofdiagnosticsandresearch.Sowecontinue,Ithink,toenjoytheadvantageofbeinginsomeveryattractivemarketsfromthestandpointofthefundingoftheChinesegovernment.Andagain,Ithinkthiswasreinforcedwiththeirrecentfive-yearplan.


Gotit.Thanks.Haveagoodnight.


Thanks.

Operator :

SteveWilloughbywithClevelandResearch.

SteveWilloughby(Analyst-ClevelandResearchCompany):

Hi,goodevening,guys.Thanksfortakingmyquestion.First,justonfreecashflow,itwasdownalittlebityear-over-year.Justwaswonderingareyoustillexpectingroughly$300millionoffreecashflowforthisyear?AndthenIhaveafollow-up.

AndyWilson (CFO):

Yes,sure.Letmetellyoualittleaboutfreecashflow.Firstoff,theprimarydriverofthedifferenceyear-over-yearwasthetimingofourpayroll.Thatwillnormalizeinthesecondquarter.Wedidhavesomeadditionalworkingcapital.Asyouguysremember,wehadaverystrongfourthquarter.Therewasalittlebitofbuildofworkingcapital.

Someofthatwasinsupportofnewproductsthataregoingtobecomingoutinthesecondhalf,butasIsaidinmypreparedremarks,wearestillcommittedtoafreecashflowof$300millionwhichisessentiallyonetimesouradjustednetincome.AndonethingI'dliketoadd,justasaclarification,whenIwasdoingmypreparedremarks,Iwashandedanote.Isaidourfull-yearrevenuesweregoingtobe$3.23million,thatshouldbe$2.32billion.Justwantedtomakethatclear.

SteveWilloughby(Analyst-ClevelandResearchCompany):

Thankssomuch.JustfollowinguponacommentfromRob,Rob,youmadeacommentaboutthepotentialtoexpandrevenuegrowthbeyondmidsingledigits.Iwasjustwonderingifyoucouldprovideabitmorecolorthereasthatwouldobviouslyimplyastep-upfromwhattheCompanyhasdonehistorically.


Ithinkthisgoesbacktoaconversationmaybewestartedacouplequartersagowherewesaidstrategicallywhatwewanttodoisdisproportionatelyinvestinthose.AndIthinkwe'veidentifiedfourkeyareaswhereweseebothmoresignificantopportunitiestogrowthetoplineandtheprofitabilityoftheCompany,andwherewethinkwehaveverystrongsharesandcorecapability.Justtogiveyouanexample,ifyoulookatabout75%ofourrevenueinthequarter,itwouldhavegrownhighsingledigitsandlargelyintheareasthatwe'vesortofidentifiedasthosehighergrowthareas.

Sowe'vegotasituationwherewe'regoingtocontinuetoinvestinthoseandhopetomakethosea




biggerportionoftheCompany.Andthenobviouslyovertimewethinktheoverallgrowth,organicgrowth,couldhopefullyaverageuptoahighernumber.Now,thiswon'thappeninthenextquarterortwo,butwethinkaswelookoutinacoupleyears,ourgoalhereistogetfrommidsingledigitstomaybehighsingledigits.

Operator :

IsaacRowithGoldmanSachs.

Unidentif iedPart icipant :

Thanks.It'sactuallyJoelinforIsaac.CouldyouguysprovideanyupdateonthetimelineofthecommercialrolloutofyourNIPTinitiative?AndthenanycommentonwhetherthedivestituretoEurofinsplayedintothestrategyinanyway?


SoIwouldsayinreferencetotheVanadis,it'sstillveryearlydays.We'veownedtheCompanynowforprobablyfourmonths.WhatIwouldsayis,firstofall,we'reverypleasedwiththeindividualsintheteam.We'reontrackrelativetoourmilestones,giventhatit'sonlybeenfairlyearly.

AndIwouldsaytheoneareawhereIthinkwecontinuetobeverypleasedwithiswesawsomegoodsynergiesbothontheimagingside,withourimagingpeopleoutofHamburg,aswellasinthe[chemage]andsampleprep.Wethink--wewerepleasedthatoverthelastcouplemonthswewereabletoconfirmwhatwethoughtweresignificantopportunitiestogetsomesynergiesfromourcapabilitiesaswellastheirs.SoIwouldsaystillearlydaysandthisisprobablysomethingthatwillnotbeasignificantrevenueuntillate2017,early2018,butindicationsontrack.

IwouldsaywithregardtotheNTDdivestiture,thatwasreally,Iwouldsay,somewhatdifferent.Ithinkwhattoalargeextentdrovethatwassortofastrategicdecisionthataswecontinuetolookatserviceswithour,I'llcallitregulatedserviceswithintheUS,ourUStestinglabs,itjustdidn'tseemlikeastrategicopportunityforusforanumberofreasons.Oneisfairlysignificantregulatoryandcomplianceinfrastructurerequired,sowehadalabthatwassortoflessthan$20millioninrevenueandwasrequiringafairamountofinfrastructurearoundtheregulatoryandcompliancecodes.

BysellingNTD,iteffectivelyeliminatesallourexposuretoeitherfederalorprivatepayerreimbursement,sothatwasabigconsideration.TheotherthingwasaswethoughtaboutitourcustomerswouldbebetterservedbyaCompanywithabroadercapabilityand,quitefrankly,astrongercommitmenttotheUSservicesmarket.

Andthenfinally,IthinkmaybethisissomewhatrelatedtotheVanadisdevelopmentsisasweultimatelydevelopnewproductsandnewcapabilitiesinthatmarketplace,wewanttobeabletoofferthattomorechannelpartners.AndsoIthinkitwasascombinationofallthosethatledustoconcludethatitmadesensetosellNTDLabServices.


Andthenmaybeturningtofoodsafety.Howareyouguysthinkingabouttheunderlyingmarketgrowthratethere?Andthenjustgivenyourinvestmentsandthecommentaryonthetuck-inpipeline,whattypeofmarginsshouldwebeexpectingfromthesebolt-onsandmaybefromthisbusinesslongerterm?


SoIwouldsaywefeelverygoodabouttheopportunitiesinboththefoodsafetyandthefoodquality




analysisarea.Andaswe'vesortoftalkedaboutinthepast,[Pern's]beensortofgrowinghighsingledigitsandweactuallysawalittlestrongergrowththanthatthisquarter.

SowecontinuetobeverybullishonthefoodareaandweareexcitedabouttheDeltatuck-in.Whileitwasn'talargeacquisition,itdidbringussomegoodcapabilityaroundflowcytometryandthereactuallyisusedforlookingforbacterialinfectioninmilk.AndwhenyouthinkabouttheconnectionwithPern,theybothhavesortofcommoncustomersaswellasaverycommonbusinessmodel.Sowethinkthemarginsinthosebusinessescanbesortofhighteens,low20%s.

Operator :

MatthewMishanwithKeyBanc.

MatthewMishan (Analyst-KeyBancCapitalMarkets):

Goodafternoonandthankyoufortakingmyquestions.


Sure.


Hey,IthinkyoucalledouttwodifferentgrowthratesinLSS,oneforLSSasawholeandthentheotheroneforcoreresearch.AndIwasthinking,what'sthedifference?

AndyWilson (CFO):

WithinLSSasawholewehavecoreresearchandinformaticsandservice.Thecoreresearchgrewatamidsingledigitrate.Whenyoucombinethethreepieces,itgrewatalowsingledigitrates.Informaticshadaverydifficultcomparisoninthefirstquarterandthat'sreallywhatdrovethedifferencebetweenmidandlowsingledigit.


That'shelpful.Andasyoutalkaboutpotentiallysimplifyingthebusinessandfocusingonfourkeyareas,Iknowpreviouslyyou'vetalkedaboutradiochemicalsbeingaflattodownbusiness.What'sthesizeofthatnowandhasitcontinuedtodeclineorhasitstabilized?


Soitcontinuestodeclinealittlebit,sortoflowsingledigits.Iwoulddescribethatasabusinessthatdeclinesfromavolumeperspectiveandwecontinuallytryandgetprice,soweoffsetsomeofthevolumedeclinewithprice.It'sabusinessthatprobablydeclineslowtomidsingledigitsonsortofanannualbasisandrightnowit's$80millionto$85millioninrevenue.

Operator :

DerikdeBruinofBankofAmerica.

DerikdeBruin (Analyst-BoAMerrillLynch):

Hi,goodafternoon.


Goodafternoon.




AndyWilson (CFO):

Hi,Derik.


Sogoodmarginexpansion,goodprogressthere.I'mjustcuriousasyoustartthinkingaboutontheoutyears,I'mmakingtheassumptionthattheeconomicmalaiseandtheslowergrowthenvironmentwon'tlastforever.Soyoudid4%organicrevenuegrowth,12%EPSgrowththisquarter.What'sthemodeltosortofthinkaboutgoingforwardonthis?

Ifwegetbackto5%to6%organicrevenuegrowth,whatdoesthatsortofcontributetoonEPSgrowthandEBITmargingrowthwhenwelookout?


Ithinkwhatwe'vesaidlongertermissortofmid-singleonthetoplineandprobablymid-teensonthebottom.


Wasthatinclusiveofsharebuybacks?


Well,itprobablyisnotinclusiveofcapitaldeployment,whetherthat'ssharebuybackoracquisitions.Iwouldsaythat'sthefundamentalsortofoperatingrhythmofthebusiness.Soifwecangrowthetopline,callit,[5],wethinkwecanprobablygetmid-teensonthebottomlineandthencapitaldeploymentwouldbeadditional,whetherthat'sbolt-onacquisitionsorsharebuybacks.


Great.Andthenjustsortofonefollow-upfromabiggerpictureperspective.IknowobviouslythenewChinafive-yearplanisfocusedonanumberofareaslikeenvironmentalandfoodwhereyouare.There'salsoclearevidencethattheChinesewanttobuildouttheirlifesciencesbusinessesandtrytodosomeacquisitionsinsomecertainareas.

I'mjustwondering,areyouseeinganysortofthreatfrominternaldevelopmentinChina,technologiesbeingacquired,thingsbeingcopied?Howdoyousortof--whatdoyousortofsayistheoutlookforthatconsideringthat--I'mnotgoingtosaythatsomeoftheinstrumentsandthatmarketarenothightech,butIdon'tknowifyouneedthelatestcuttingedgeinstrumentsforsomeofthoseareas.JustyourthoughtsontheChinesecompetitionquestion.


Iwouldsayifit'sspecificallyaroundtheresearchmarket,Iwouldsaywedon'tseealotofbecause,quitefrankly,oursIthinkIwouldputinthehightechcategory.Whenwethinkaboutourresearchproducts,it'scellularimaging,it'shighcontentimaging,it'sfairlysophisticatedtechnology.Sowedonotorwehaven'tuptothispointrunupagainstlocalcompetition.

Operator :

JackwithBarclays.

JackMeehan (Analyst-BarclaysCapital):




Hi,thanks,goodafternoon.Rob,Ijustwantedtostart,youguysputupanicefirstquarter,thetoneatthebeginningalittlebitmoremuted.Atthispointintheyearisthisjustcautionaroundeverythingweseeinthepressoristhereanythingelsethatyou'rekeepinganeyeonspecifically?


Well,Iwouldsayifyou'retalkingaboutcaution,maybefromatoplineperspective,Ithinkalotofitis,again,ifyoujustlookatsomeofthemacrofactorsoutthere,there'salottobeconcernedaboutfromthestandpointofPMI,whetheryoulookattheglobalnumberorwhetheryoulookattheUSnumbersisalittlebit--IthinkglobalPMIwasthesecondweakestreadingduringthelast40months,downtolike50.1,productiongrowthslippedtoa16-monthlowintheEuropeanUnion.There'salotofeconomicnumbersouttherethatgivesyoualittlebitofconcern.

Contrastthatwith--Imean,wefeelgoodaboutourbusinessandwecontinuetoliketheareasweoperatein,butIjustthinkwhenyoulookatsomeoftheeconomicindicatorsoutthere,it'sprudenttobealittlebitcautious.

JackMeehan (Analyst-BarclaysCapital):

That'sfair.Justonemoreonwhatyou'reseeingintermsoftheunderlyingbirthrates,maybeindifferentgeographies.HaveyouseenChinastarttoshowsomeimprovement?Andtheneverybody'sfavoritetopic,Z ika,whetheryou'veseenthatinanyparticularmarketsaswell?Thanks.


IwouldsayinthecaseofChina,ourpeopletherearesuggestingthatprobablysomethinginthehighsingle,lowdouble-digitiswhatwewouldexpectfromabirthrate.IntheUSwe'reseeingsomethinginthesortof1%to2%,andIwouldsayclearlyinBrazilwe'veseenadramaticdropinthebirthratethere.Now,it'snotahugebusinessforus,butwe'reseeingprobablya30%,40%dropinbirthratesinBrazil.

AndnowoffsettingthattosomeextentImentionedthefactthatwearesellingsomeofourresearchproductsintothatanalysis.Butclearly,that'simpactingusinBrazil,morespecificallyalittlebitintheSouthAmericaarea.

Operator :

MiraMinkovawithStifel.

MiraMinkova(Analyst-StifelNicolaus):

Goodafternoon,guys.Thankyoufortakingmyquestion.Letmegobackforamomenttotheverystrongenvironmentalbusinessperformanceinthequarter.Itwasprettyimpressiveparticularlythatearlyintheyear.

Canyoumaybegiveusalittlebitofmorecontextbehind--besidesfoodtesting,whatdidsowellinthequarter?Howsustainableisit?Andinthecontextofyourcautiouscommentaryonindustrialmarketslastquarter,howdidindustrialdo?AndIdohaveafollow-up.


Iwouldsaytherewassortofthreedriverstotheenvironmentalstrength.Onewasfood.Theotherwassortofenvironmentalgenerally.Somoreinthesortofairandwaterareawasalsoagoodgrower.

AndthenIwouldsortofspikeoutChinaspecifically.ItalkedaboutthefactthatChinawasdouble-digitgrowthforus.Sothosewerethesortofthreebigdrivers.




Ifyoulookatindustrialspecifically,itwasdownlowsingledigitsandIwouldsaythedrivertothatwas,one,verydifficultcomparisons.SoitwasuphighsingledigitsinQ1of2015.Andthentheotherareawaswesawalittlebitofweaknessinwhatwewouldcallsortofmaterialcharacterization,whichislargelyinareaslikepolymers,maybealittlebitinsortofpaintsandchemicalsandIwouldspikethatoutfromasortofproductperspective.

Whetherit'syousustainableornot,Iwouldsaywearenotforecastingthattypeofgrowthtocontinueintheyear.Iwouldsaythatwethinkenvironmentalsortofmoderatesprobablymoretoalowersingledigitgrowthaswelookatinthesecond,thirdandfourthquarters.

MiraMinkova(Analyst-StifelNicolaus):

Okay.Thankyou.Andonthegrossmargin,towhatstrengthwastheimprovementdrivenbyyourleaninitiativesortheleanprogram?Andwhenmightweseeabiggerimpactfromlean?

AndyWilson (CFO):

Ithinkyou'regoingtoseethatimpactfromleangrowastheyearprogresses.We'vesaidmostofourgrossmarginimpactisreallygoingtooccurinthesecondhalfoftheyearastheseinitiativesarerolledout.Ithinktheleaninitiativesprobablywereaboutone-thirdoftheimprovementinthefirstquarter.Ithinkwedidhavesomepricinginitiativeswithinourhumanhealthbusinessthatcontributedanotherpieceandthentheincrementalvolumewasprobablythethirdpiece.

Ithinkyou'regoingtostarttoseetheleaninitiativesandtheproductivityinitiativesbeingimplementedwithinoperations,starttoaccelerateinthesecond,thirdandfourthquarters,andaswesaid,wethinkourgrossmarginexpansionfortheyearwillbesomewhereinthe70to80basispointrange.Sobeing30inthefirstquarter,youcanseeit'safairlyrapidaccelerationthroughtheyear.

Operator :

DanAriaswithCitibank(sic).


ThisisactuallyBrianonbehalfofDan.JustjumpingalittlebitfurtherintoEH,Ithoughtitwasinterestinghowstrongtheopmarginwasinthequarter.CorrectmeifI'mwrong,Ithinkitmightbethestrongestinatleastoverfiveyears.

Justkindofwanttoseehowthatrunrategoesorshouldpacegoingforward,especiallyinlightoftheweakChina[RemMB],etcetera,andcanyougiveanycoloraroundifthathadadragonEHperformance?


SoIwouldsay,again,goingbacktosomeofthecommentswemadepreviouslywherewesaidwewantedtobeveryfocusedininvestinginwherewesawthegreatestgrowthopportunities.Atthesametime,wewantedtomakesurethatweweregettingourcoststructureappropriateforwhatpotentiallycouldbeaslowergrowthinsomeoftheotherareas.

Soyoumayrecallthatinthebackhalfof2015,wetooksomerestructuringactionsintheenvironmentalhealtharea.AndsoIthinkthey'vegotacoststructurenowthathopefullywillallowusto--thatmarginperformancethatyousawinthefirstquartershouldbesustainablethrough2016andgoingforward.





WasthereanydilutionfromtheRemMBtherethatdraggedinresultsgivenit'sthehighestrevenue(multiplespeakers)?


No,notmaterial.

AndyWilson (CFO):

Notmaterial.


Okay.Andthenlastlyfromme,ontheservicesside,isthereanylargecontractsthatarecomingupthisyear?Andcanyougiveusanycoloracrosstheboardonretentionrateoratleasthowretention(multiplespeakers)--?


Iwouldsayinanygivenyeartherearesomelargecontractsthatcomeup.Iwouldrathernotgetintothosespecifics.ButIwouldsaythesearegenerallythree-yearcontracts,soinany12-monthperiod,you'regoingtogetsomebigones.Ourretentionrategenerallyisveryhigh.Callitnorthof85%.

Operator :

RossMukenwithEvercore.

RossMuken (Analyst-EvercoreISI):

Goodafternoon,guys.SoIjustwantedto--


Goodafternoon,Ross.


Onthepanelsbusiness,canyoujustkindofprovideuswithsortofyourthoughtsonthepacingfortheremainderoftheyear?Andobviouslythere'sbeensomemixedchallengesinthatbusiness,howyou'resortofthinkingaboutthemediumtermgrowthoutlookforthatsubset,eventhoughit'ssmall?


IthinkasIthinkwe'vealludedtoalittlebit,itcontinuestohavealittlebitofaheadwind.Itwasdownlowsingledigitsinthequarter.Ithinkthat'sprobablygoingtobethecaseinQ2again,maybeevenalittlebitmorethanthat,maybehighsingledigits.Ithinkaswegettothebackhalfoftheyear,maybethatimprovesalittlebit.

ButIthinkourbeliefrightnowisfor2016that'sprobablyflattodownlowsingledigits.Andit'sfacingsomeverychallengingshort-termmarketheadwinds.Butatthesametime,it'sgotagreatteamandtheycontinuetoexecutewell.

Sotheprofitability,evengiventheheadwindsfromthetopline,theycontinuetosortofoperateatoperatingmarginsabovethecorporateaverage.Andthechallengingthing,asyouknow,Ross,thisistheonebusinesswherewe'reacomponentsupplierandobviouslysellingintothelargehospitalCapExmarket,itjustunfortunatelyisalittlebitmorevolatilethantheoverallportfolio.Bottomline,it'sagood




business.


And,Andy,Idon'tknowifImissedit,what'syourviewoncashconversionfortheyear?

AndyWilson (CFO):

We'restillcommittedtoourdeliveringonetimesadjustednetincome,whichisessentially$300million.AndIhadtalkedearlieraboutwehadaverystrongfinishtotheyearwhichdidimpactusabitinthefirstquarter.Mostofitistimingandwe'vealreadyseensomeofthatreverse.Wehadsomehigherinventorybillsforsupportingsomenewproducts.Wethinkthatwillflowthrough.Atthispointthere'snoreasontothinkweshouldn'tbeabletohitthatonetimesadjustednetincomeor$300million.


Awesome.Thanks.

Operator :

YDougSchenkelwithCowenandCompany.

DougSchenkel(Analyst-CowenandCompany):

Hi,goodafternoon.


Goodafternoon.


Lastquarteryoupositioned2016asaninvestmentyear.Youdidthatcomingoffaquarterwhereyoucameupabitlightofyourexpectations.Yousetrevenueguidanceataprettylowlevelfortheyear.Threemonthslater,thereisabitmoreoperatingleverageinthequarterthanexpectedandyou'rebumpingupgrowthguidance.

SowhileR&Dinvestmentdidgrow,Ithinkitwasabout5%inthequarter,Iamwonderingifyouheldbackoninvestmentinthequarter,atleastearlyon,giventheuncertaintyandconcernthatyouacknowledgedbackintheQ4callinFebruary?Andnowaswelookahead,giventhatyougrewbetterthanexpectedinthequarterandyouguidedupexpectations,shouldweexpectinvestmenttorampfromhereandmaybeevenmoresoifyouseemoreupside?

IguessI'mjusttryingtofigureoutifwe'regettingaheadofourselves,giventhatwhileyoudidbeatQ1expectations,organicgrowthwasstillonly3.5%,4%againstafavorablecomp,whichIknowyouwanttodobetterandwhilebumpedupguidanceisdefinitelyastepintherightdirection,it'sstillonlyfor4%growth.Iamjustwonderingwhetheryoufeelcomfortableatthispointrampingupinvestmentpursuanttoobjectives?


Therewasalotofquestionswrappedinthatcomment.Firstofall,wedidn'tholdbackanyR&D.Tosomeextentweknewitwasgoingtorampupduringtheyearanywaybecausejustsortofhiringthepeopleandsortofspendingthemoney.

ButwhatIwouldtellyouiswhileitlookslikeourR&Dwentuproughly$2millioninthequarter,




actuallyitwentup$4millioninhumanhealthanditwasdownalittlebitinenvironmental.Sowe'vebeenrampingupfairlysignificantly.

IwouldsaythedifferencebetweentheemonthsagoandnowisnotnecessarilythefactthatwesloweddownR&D,andIthinkAndyalludedtothistosomeextent.It'sactuallywe'reseeingthebenefitsofourproductivityandleaninitiativessoonerthanwethought.Iwouldsaythat'sthefundamentalreasonwhywebeatinthefirstquarterandthat'swhywefeltcomfortabletakingtheentirebeatinthefirstquarterandflowingitthrough.

Buttoyourpointwithregardtowillwecontinuetoinvest,that'stheplanandwecontinuetoexpectthatin2016ourR&Dwillbe40basispointshigherasapercentageofrevenuethanitwasin2015.


Okay.Rob,that'ssuperhelpful.Ifyouactuallytrackaheadofplanagainatthetoplineoverthenextcoupleofquarters,shouldwethinkthatyou'remorelikelytoreinvestthat,givensomeofthethingsyou'reexcitedaboutintermsofgrowthdriversfortheoutyearsorshouldweexpectkindofanormalbalanceofreinvestmentaswellaslettingitflowthrough?


Ithinkitwouldprobablybeanormalbalance.Obviouslythere'ssomethingsthatwe'dliketodo,butoneofthethingsIthinkImentionedinthebeginningoftheyearwaswepurposelywantedtotakeR&Dupbecausewesawsometerrificopportunitiestoinvestinit.Wherewesawtheopportunities,we'refundingthem.

Operator :

JonGrobergwithUBS.


ThisisactuallyHarrisonbehalfofJon.AppreciatethequestionAfollow-uptoyourcommentsearlieronNTD.Asyoucontinuetorefocustheportfolio,canyouwalkusthroughmaybemorebroadlyyouhowyou'rethinkingaboutwhichproductlinesmakesensefor(inaudible)versusdivestingandhowfaralongwouldyousayyouareinthatprocess?


Well,Idon'tknowthatIwanttogetintospecificbusinesseswhetherwe'reeithergoingtokeeporsellonthecall,quitefrankly.ButIwouldsaywehavediscussionscontinuallywiththeBoardregardingwhetherwe'retherightowneroftheassets.AndIwouldsayrightnowaswesortoflookacrosstheportfolio,wethinkwe'retherightowner.

However,ifabetterowneriswillingtopayusastrategicpremiumtobethebetterowner,we'rewillingtolookatthosetypesofthings.ButIthinkIsortofarticulatedwhywethoughtNTDmadesensetosell.Asofrightnow,allthebusinesseswehavewethinkmakesenseintheportfolio.


Great.Thankyou.

Operator :

TychoPetersonwithJPMorgan.




T ychoPeterson (Analyst-JPMorgan):

Thanks.Acoupleontheinternationalfront.IwanttostartwithJapan.Yourcommentarythereseemsalittlemorecautiousthanmaybesomeofthepeersthatarekindofguidingforstatusquotomaybeaslightimprovement.Sowonderingkindofwhat'sbehindthat?

AndtheninEurope,wehadanothernegativedatapointfromoneofthesmaller[captools]companiestonightonequipmentinEurope.Justwonderingwhattherisksaretothatbusiness?

LastlyinChina,Ididn'thearyouquantifywhatyouthoughtthegovernmenttendersonthatcoulddothisyear.Ifyoucouldgiveanycoloraroundthatwouldbehelpful.


Letmegothrough.InJapan,weweredownlowmidsingledigitsinJapan.That'sbetterthanwhatwesawin2015,butwe'restillconcerned.Whatwe'vesaidinthepastis,atleastinthelatterhalfoftheyear,wegeteasiercomps.SoIthinkourviewforJapanrightnowissortofflat,maybedownalittlebit.

Forus,we'reseeingprettygoodstrengthinenvironmental,butcontinuedheadwindsinhumanhealth.Andalotofthatisbecausewethinktheacademicfundingisstillnotflowing.Sowe'llcontinuetobecautiousonJapan.ButlikeIsaid,Ithinkitprobablygetsbetterinthesecondhalfoftheyear.

YourquestiononChinawithregardtothebloodscreening,IthinkasAndytalkedabout,wehadaverystrongquarterthereandIwouldsaywhenwethinkabout2016versus2015,wethinkthatbusinessatleastdoubles.AndIthinkwe'vesaidinthepastthatwethinkoverthenextcoupleyearsit'sa$50millionbusiness.Wethinkwe'rewellontracktoachievethat.

Again,wefeelverygoodaboutthatbusiness.Wefeelverygoodaboutthetractionthatbusinessisgettingandwefeelverygoodaboutthepercentageoftenderswe'rewinning.YourotherquestionIthinkwasaroundEurope,andwasitspecificallyonproduct?Tellmeagain,Tycho?


MoreonequipmentinEurope.WehavetwonegativedatapointsfromcompaniesthathavemissedonsystemsalesinEurope,soI'mjustwonderingifthere'sanyrisktokindofyouroutlookthere?


(Inaudible)wassortofmidsingledigitsanditwasfairlyevenbalancedbetweenhumanenvironmentalhealth.Ithinkprobablyservicegrewalittlefasterthanproducts.Nothingmorethanjustsortoftheoverallmacroconcernthatwesortofhighlightedbefore.IfyoulookatsomeofthedatacomingoutonthesortofproductiongrowthandthePMI,itmakesyoualittlecautious.IthinkwestillfeellikeEurope'sstabilizedandshouldgrowinthelowtomidsingledigits.


Thankyou.

Operator :

BillQuirkwithPiperJaffray.

BillQuirk(Analyst-PiperJaffray&Co.):

Great.Thanks.Goodafternoon.Firstquestion,youmentionedbirthratesaredownstarklyinBrazil,30%to40%asaresultofZ ika.Obviously,it'sanunknownhereintheUSintermsofhowthiscouldexpand.




Butthereissomedataouttosuggestyoucouldbelookingatmultiplemosquitospeciesasvectors.Andsohowareyouguysthinkingaboutthatasitrelatestothepotentialimpactonoverallscreeningintheprenatalspace?Thanks.


Iwouldsaywe'renotreallyfactoringthatintoanysortofforecast.ImentionedthatIthinkintheUSitwasup1%to2%.Ithinkthat'swhatweassumedinourforecast.We'llseeifthatstartstohaveamoredramaticimpactandweseebirthratesdeclinealittlebit,we'llsortofadjustaccordingly.Iwouldsayrightnowthat'snotourassumption.

BillQuirk(Analyst-PiperJaffray&Co.):

Gotit.ThanksforthecoloronthebloodscreeningtoTycho'squestion.DowehaveatargetforwhenthisshouldbefullypenetratedwithintheChinabloodcollectionsystem?


Idon'tknowthatitwilleverbefullypenetratedbecauseIthinkitwillcontinuetogrow.ButIwouldsayprobably2017iswhereyou'llprobablyseesortofaslowdownininstrumentplacements.Butyou'llstillcontinuetoseesortofreagentgrowththere,webelieve.

Operator :

JeffElliottwithRobertW.Baird.

Jef f Elliott (Analyst-RobertW.Baird&Company,Inc.):

Thankyou.Andy,justaquestiononthepricingenvironment.Ithinkyousaidstrongpricinginhumanhealth,butIguesscanwegetanupdate,morecolorthere,andhowaboutpricingintheenvironmentside?Thanks.

AndyWilson (CFO):

IwouldsaywetypicallyacrossPerkinElmergetpricingspecificallyaroundreagentsandconsumablesandsomepricingaroundservice.Instrumentshasbeenalittlebitmoreofastruggle.Onthehumanhealthside,weimplementedsomenewpricingprogramsandsomediscountingprogramswithinoursalesorganizationlateinthefourthquarterlastyearandwe'verolledthoseoutacrossthegeographies.

We'restartingtoseethetractionfirstintheUSandwethinkwe'llstarttoseetractioninEuropeandAsiatofollow.That'sreallywhereit'sbeenfocused.Ithinkwe'llprobablytakesomeofthoselearningsandportthoseovertoenvironmentalhealthaswell.Hopefullywecanseesomeupsidethere.

ButI'dsayrightnowintheconsumablesandreagents,wedogetpricetypicallyandthenofrecent,whichIspikedout,wegotsomeproductpriceonthehumanhealthside.


WhatIwouldsayisIthinkwewerealittlebitpleasantlysurprisedbysomeofthepricethatwasstickingandwethink,tosomeextent,hopefullythatspeakstothedifferentiationnatureofsomeofthenewproductswe'rerollingout.Ithinkalotoftimeswhenyoulookatyourabilitytogetprice,Ithinkthathopefullyreinforcesthecompetitivenatureoftheproduct.

Andsowesawitontheresearchside.Laterthisyearwe'relookingtocomeoutwithsomenewproductsontheenvironmentalsideandhopefullyusethatasawaytogetsomeprice.ButIwouldsayonthe




environmentalsidethepricecontinuestobealittlechallenginguntilwegetsomemoreofthenewproductsoutintothemarketplace.


Gotit.Canyoubreakouthowmuchyougotfromnewproductsinthequarter,howmuchrevenue?


Itwasabout--wewouldcalculateasabout$18million.


Okay.Great.Thankyou.

Operator :

BryanBrokmeierwithCantorFitzgerald.

BryanBrokmeier (Analyst-CantorFitzgerald):

Couldyouprovidesomecoloronyourmicrofluidicsbusiness,particularlyaroundifyou'reseeingadisproportionatepenetrationofbenchtopsequencersversussomeofthehigherthroughputNGSsystemsandinwhattypesoflabsareyouseeingthemostinterest?


Sothemicrofluidicbusinessdidquitewellinthequarter.Ithinkitwasuphighsingledigits.IwouldIsayitwasfairlybroad-based,soIthinkwesawthatgrowthacross.Imean,Idon'tknowthatIcangiveyouspecificsintowhattypesoflabsthatwentinto,butIwouldsaywecontinuetoseegoodgrowthinthemicrofluidics.AndclearlytheNGSlabsisatargetedareaforus,butIcouldn'tgiveyouthesplit.

BryanBrokmeier (Analyst-CantorFitzgerald):

Okay.Andyouseemtohave--Ithinkalotofyourbusinesseshadprettysolidgrowth.Idon'tknowifyoureallytalkedalotaboutwhereyou'rethemostsurprisedeitherpositivelyornegatively.Couldyougetintothat?


Well,Imean,onthetoplineside,wereallydidn'tbeatbythatmuch.Iwouldn'tsaytherewasalotofsurprises.Wespikedthatalittlebitonfood,sofoodwasprobablyalittlebetterthanwethought.AlsoIwouldsayChinaprobablycameinalittlestrongerthanwethought.

Relativetothetopline,weweremaybealittlebitbetterbutnotsignificantly.IthinktherealsurprisethisquarterthatwetalkedaboutwasreallyonthemarginsideandIthinkthatreallyrelatestothefactthatwe'restartingtoseetheflow-throughofsomeoftheactionsthatwe'veputinplacethelatterpartof2015alittlesoonerthanwethought.

Operator :

DanLeonardwithLeerink.

DanLeonard (Analyst-LeerinkPartners):

Thankyou.RoborAndy,Iwashopingyoucouldgiveusanupdateonhowtosizeyournewbornscreeningexposurearoundtheglobe.HowmuchofyourbusinessisexposedtoBrazilversusNorth




Americaversuselsewhereinnewbornscreening?


Brazilnewbornforusisinthe--lessthan$20million.

DanLeonard (Analyst-LeerinkPartners):

Okay.And,Rob,canyoutalkaboutwhereViaCellfitsintothebusinessnow?IbelievepartoftherationalebackwhenyouacquiredthatCompanywasthatthereweresomesynergiesbetweenViaCellandNTDintermsofcallpoint?


Iwouldsayfirstofall,ViaCell,insomeinstances,astemcelltransplantisacureforsomeofthethingsthatweuncoverinournewbornscreenings.SoIthinkthere'sagoodtiethereandIthinkfirstofallittieswellintoourmissionfromthestandpointofhumanenvironmentalhealth.Iwouldsaythat.

IwouldsaycordbloodisanareathatIthinkfor2016webelievetheremaybesomeopportunitiesheretoseesomenicegrowth.We'vebeenparticipatinginsomestudiesandwecouldseesomepositivemovementhereincordblood,Ithink,intheforeseeablefuture.

Operator :

Atthistime,I'mshowingnofurtherquestions.IwouldliketoturnthecallbackovertoRobFrielforclosingremarks.


Great.Well,firstofall,thankyouforallyourquestions.LetmejustsummarizeandsaywefeelgreataboutareprogressheretodateandlookforwardtocontinuingtostrengthenandexpandthePerkinElmerbrandacrossmarketsandamongourcustomers.Andourhopeisthatinthefuturewe'llcontinuetomakeanevengreaterimpactaroundtheglobe.

ThankyouforyourcontinuedinterestinPerkinElmerandhaveagreatevening.

Operator :

Ladiesandgentlemen,thankyouforyourparticipationintoday'sconference.

Allrightsreserved(c)2014TheStreet,Inc.

Pleasefeelfreetoquoteupto200wordspertranscript.Anyquoteshouldbeaccompaniedby"ProvidedbyTheStreet"andalinktothecompletetranscriptandwww.thestreet.com.Anyotheruseormethodofdistributionisstrictlyprohibited.

THEINFORMATIONCONTAINEDINEACHWRITTENORAUDIOTRANSCRIPT(the"TRANSCRIPT")ISAREPRODUCTIONOFAPARTICULARCOMPANY'SCONFERENCECALL,CONFERENCEPRESENTATIONOROTHERAUDIOPRESENTATION.THETRANSCRIPTSAREPROVIDED"ASIS"AND"ASAVAILABLE"ANDTHESTREETISNOTRESPONSIBLEINANYWAYNORDOESITMAKEANYREPRESENTATIONORWARRANTYREGARDINGTHEACCURACYORCOMPLETENESSOFTHETRANSCRIPTSASPRODUCED,NORTHESUBSTANCEOFAPARTICULARCOMPANY'SINFORMATION.

THETRANSCRIPTSAREPROVIDEDFORINFORMATIONALPURPOSESONLY.THESTREETISNOTPROVIDINGANYINVESTMENTADVICEORENDORSINGANYPARTICULARCOMPANY.




Documents

PERKINELMER INC (PKI) Earnings Report: Q1 2016 Conference ... · I'm pleased to report on PerkinElmer's strong start to the year in which we delivered solid financial performance