Q1 2020 Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to Luminex Corporation's fourth quarter in full year 2019 earnings Conference call. My name is lets seats and I'll be your coordinator for today today's.
<unk> is being recorded.
At this time, all participants are any listen only mode.
Following the prepared remarks, there will be a question to answer session. If you will like to participate in this portion of the call. Please press star followed by one at any time during the conference.
That's assistance is needed at anytime during the call. Please press star followed by zero any coordinator would be happy to assist you.
I would now like to turn the call over to Harris Cory.
Senior Vice President and Chief Financial Officer for opening remarks. Please proceed.
Good afternoon, and thank you for joining US with me today is Homi Shamir, our 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 the Investor Relations section of our web site.
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 protection provided by section 20, Onee Other Securities Exchange Act for such statements. These four.
Looking statements speak only as of the date hereof and are based on our current beliefs and expectations and are subject to known or unknown risks and uncertainties. Some of which are beyond the company's control that could cause actual results or plans to differ materially and adversely from those anticipated in the forward looking statements.
Factors that could cause or contribute to such differences are detailed in our form 10-K for the year ended December 31, and our quarterly reports on form 10-Q filed with the Securities and Exchange Commission.
We encourage you to review these documents and we undertake no obligation to update. These forward looking statements also certain non-GAAP financial measures as defined by FCC regulation G. Maybe covered in this call to the extent that any non-GAAP financial measures are covered a presentation, Oh and ready.
Conciliation to the most directly comparable GAAP financial measures will be included in our earnings release, which is available on our web site in accordance with regulation G.
Ill now turn the call over to our President and CEO Homi Shamir.
Thanks salaries, good morning, and wait come to all coal to discuss Luminex Corporation first quarter result, as you all know well we are leaving an unprecedented times vastly different from anything we ever the experience.
Ryan we have all deeply concerned with everything from the health well being of the world population to the state of day corner Me Luminex is full tonight to be well position for these global pandemic.
Without technologies dedicated employees into a lot be development, we will be able to quickly we'll duals tool emergency use authorization I say, Oh next think Colby extended by now and now in jeans. So.
Called me to assay.
So all of these all employees remained engage an exit beat that see Steven nice He's also nice and dedication.
Managing most people like project as a team and finding solution for all customers and their patients.
At this point, we as well I'm I've pulled action to be able to provide more than 500000, Nextera energys FES pet among the majority of wage Oh next stake we did a maintenance split between there's either say and then he execution to fit.
Oh dedicated workflows is the strongest at Vail and I'm proud to say that I'll I'll double is having a direct impact on DC from than me.
As a direct result of the test we are delivering to the market and non digital focus the man if announce the plan to increase that's thing capacity using all technologies.
Additional and none of the if announced they pull chased luminex system to allow for Cobiz 19 testing in house as opposed to sending samples out for testing.
Which ultimately mean test results can be delivered through two patients in a matter of a few wells instead in several days.
Consistent we saw mission I'll pull that somebody living critical he sold to all the cost the man in a clinically actionable timeframe.
Just had in mind that most of our cost of met all mall doing two I complexity labs and I'll technology continues to deliver excellent result.
Additionally, we are seeing a significant uptake of our excellent be beads and associate sees things going to all partners, who are working on the entire span of coping 19 solution from so what did you test to treatment.
In development and many other initiative to and combine these kohona violence outlay in these many ways as possible.
So while we are very focused on the most critical issues facing DALI customers today.
We are also playing people to all in being part of the mid to long term several shame to this call him crisis.
We delivered.
90.4 million of revenue in the quote do just 59000.
Don't know shy of our previous walk old in default walked out of 2019, we see significant benefits realized from the sales of all that I spoke totally focused spoiled ducts.
Our total my local diagnostic revenue, which includes both automated the known automated products totaled 45.2 million <unk> was up 28%.
LPG totaled 36.8 million was up Pfeifle, St and now flow revenue stream totaled 6.5 million was down 42%.
More specifically, we know all my local diagnostic revenue will positively impacted by different than me.
Although we cannot say exactly what was they affect walls and we did not a coffee related products available in the end of the quote there many of our custom made use of hospitality products to roll out everything Bob Hope is 19.
Our LTG revenue were in line, we six that expectation up five suppose same with them and Joe do you have the gold at two of your doubled to increase consumable cents compared to defend schools tale of 2019.
Oh flow revenues, but a significantly affected by the quote unquote 19 pandemic as we saw a number of custom in close that facility and all significantly limited access to the research facilities. In addition, we had mode and 2 million younger forever.
Hughes, which we were unable to either in stone all sheep.
Operating expenses seem to quote there were less than they went last area and is the result of revenue Gold goes mountain maintenance and expense management, we returned to profitability in that will do well ahead of schedule.
As we look to the rest of Twentytwenty N.B. harmed, we Cmos clearly than ever in the value that I'll call into future portfolio can play in addressing critical and life altering diseases.
We are planning on incorporating some scope isn't going to targets as say into our verigene won and Virgin too as well as I'll Nextera LPP respiratory syndrome and find out so that our customers can have access to valuable products that deliver reliable.
The result in a timely manner.
We have sufficient manufacturing capacity to accommodate those new offerings and if additional plan in place to further expand our manufacturing capacity to meet the growing demand for products.
We are planning to increase Oh, thats manufacturing capacity from just over 500000 test today to more than 800000 tests, but a month by the end of June.
The majority of these capacity will still be used to produce next stage products.
We have also working on symbology solution and we'll provide more color on days when we have more information to share.
Not to remind you Oh my ex <unk> technology is uniquely suited to assist lobby that at least professionals in the development solution to cope with 19 pandemic.
In particular, though our ability to make millions of bead at the time translated into minimal variability at each sample when and scenes excellent be software blades onset of bids at the time, where other technology only take one reading at the time we are.
Able to believe they're a very high level of specificity and sensitivity, which is extremely important instead of all injury as thing.
In addition, all 96 wells formats for accident be based assays provides an ideal testing platform from I tunes boot.
Such as a public and screening.
Finally regarding the excellent be Intelliflex. Since then we remain on track for me you launch and the initiation of our early access program with our partners.
We believe that Intelliflex system will provide our research costs, the mill, which much needed improvement over the corn FMTV and Lx 215, and will as to maintain our position as the market leader in the mid two I flex floating rate.
Right.
We expect revenue for Q2 will be at that Bob onto within 5 million, Oh out, 26% omo compared to last year.
With respect to the full here.
While we are extremely confident that we will be the top end of our current revenue guidance of 362 million we are not.
April to give a specific updated guidance range at this time due to the uncertainty that covert 19 is causing to all day economy.
We anticipate providing an update full year revenue guidance in conjunction with our second quarter earnings release.
With that I would like to tenants open to at least to discuss the financials in greater deep then and then I will return we some fine uncommon.
Thanks Homi.
This homi mentioned, we had a great first quarter led by significant growth across our molecular diagnostics portfolio.
We reported total revenue of 90 pause for 90.4 million up 10% over the first quarter of 2019.
If you look at revenue across our respective revenue streams.
Reported that our molecular diagnostics revenue stream for the quarter was 45.2 million up 28%, mainly driven by increased demand for respiratory and related products as a result of the cobot 19 pandemic.
Sample to answer molecular diagnostics revenue was 26.3 million up 38% over the first quarter of 2019 and non automated molecular diagnostics revenue was 18.9 million up 17%.
In contrast, our tools revenue for the quarter was 43.3 million down 6% over the first quarter 2019 with revenue in our license technologies group of 36.8 million up 5% for the quarter with a 20% growth and consumable revenue partially offset by.
Accretion royalty revenue of 6%.
Well cytometry revenue was 6.5 million down 42%.
Our first cytometry revenue stream for significantly affected by the current pandemic in several ways.
First as a world began to close down the ability of our sales reps to access potential customers became limited, resulting in a slowdown in orders secondly for image based orders in hand that had been shipped and already delivered to the customer we found ourselves unable to gain access to the customer site.
And to install the system.
Installation of the system is a key revenue recognition criteria.
Finally, we had orders in hand, but no one available to receive them at a customer site.
As a result, we had over $2 million of orders either waiting for installation are waiting to ship for which revenue recognition was not possible.
Also the final update on Labcorp.
A material effects of Labcorp are finally behind us.
The current quarter, we had nominal headwinds of approximately 3.4 million, representing a 4% headwind for the for total revenue in the quarter.
We do not anticipate any further significant quarter over quarter headwinds from Labcorps moving forward.
Looking at our revenue line items system revenue was down 3.6 million or 23% compared to the first quarter of 2019 included in system revenue our sales of our actually about systems flow systems and molecular diagnostic systems.
The primary driver to this decline was the current quarter weakness in flow cytometry replacements.
Was directly affected by the cobot pandemic and related shutdown. This decline was partially offset by an increase in both molecular diagnostic system revenue and ex map system revenue.
We placed 223 X map systems during the quarter up 6% and molecular diagnostic system sales nearly tripled during the quarter keep in mind. The majority of our molecular diagnostic system placements or via reagent rental agreement and not a capital sale.
As Homi mentioned, we placed just over 120 molecular diagnostic systems in the quarter.
Only about 20% via capital sale.
Consumable revenue was 12.8 million up 19% for the quarter, partially due to the timing of bulk purchases from certain of our partners.
Royalty revenue was 13.3 million down 6% for the quarter, primarily attributable to lower base royalties in the current quarter. As a reminder, total royalty revenue includes base royalties, coupled with audit findings self reported shortfalls and accrual adjustments.
Total assay revenue was up 26% to 43.7 million with our respiratory related products on all of our platforms up almost 100% as a result of our contributions helping battle the Corona virus pandemic.
Our customers initially used our next tag products on a rule in rule out basis.
And now that we have eway cleared products, we've seen that volume shift towards covitz specific products not surprisingly respiratory related products comprise more than 60% of our total assay sales.
Service revenue was 5.5 million modestly by 2% and all other revenue was 3.1 million up 88%, but includes approximately $643000 revenue from the first BARDA contract we receive associated with the development of the next tag Cove It plus.
Panel.
The second BARDA contract that we received associated with development of the Aries covert assay will be recognized in the second quarter.
Gross margins were consistent 56% with equal distribution year over year between higher and lower margin items.
Operating expenses were roughly flat with the prior year, primarily driven by lower expenses in R&D, which reflects reduced clinical trial activity in the current quarter. This was partially offset by higher sales expenses, a direct result of our 10% growth in sales.
Our revenue growth consistent gross margins and operating expense control all contributed to a significant improvement in operating profit.
Our effective tax rate for the quarter ended March 30, Onest 2020 was 36% as compared to a benefit of 184% in the prior year quarter.
Our effective rate significantly affected by the distribution of profit and loss across our worldwide subsidiaries.
The prior year included a discrete benefit of 6.6 million related to a reduction in unrecognized tax benefits related to the U.S. transition tax as a result of an IRS ruling for certain aspects of the calculation of our Canadian subsidiaries earnings.
We expect our consolidated full year effective tax rate to be between 30 and 40%.
Cash investments for the quarter were down approximately 16 million.
This was not unexpected as the first quarter every year is one in which accrues sales commissions bonuses et cetera are typically paid in the first quarter of 2019, the comparable decline was approximately 14 million.
Well, we mentioned that our current expectations for the second quarter and full year 2020, as 105 million or higher for the second quarter and for the full year current expectations are to be above the top end of our previous full year guidance of 362 million.
At these levels of revenue, we would expect to be extremely profitable relative to the comparable periods and generate a significant amount of cash relative to our current cash position.
With that I'd like to turn it over to Homi for some final comments.
Thanks say, we're certainly looking forward to achieving mold and hundreds of million for the first time in the company easterly, which we will all will get us fall off a billion dollar target quicken.
Well I'll I'll go out to all of those who has been impacted we are proud to be playing a critical role in helping to address. These pandemic. We are not resting on our success to date and have plans in place to further enhance oh on market product before.
Value. So we can continue to be an important part of the full solution for emails to come this and our formal comments operator. Please open the line for question.
So we certainly are witnessing unprecedented times.
We wanted to provide some flavor around our current quarter expectations of the distribution or expected 105 million plus second quarter revenue.
First of all covert 19 is driving sales of our molecular diagnostics revenue and we expect that potential doubling of total sample to answer revenue in the second quarter over the second quarter of 2019.
Additionally, we are experiencing very strong demand for our next tag RPP product.
On the other hand, we expect flow cytometry to continue to be down relative to the prior year, but as a percentage less than in the first quarter and finally, we expect our LTG revenue stream to be roughly flat quarter over quarter, one closing remark before we open it up to questions during them.
As of April we generated approximately $20 million of cash, which brought us back above our 12 31 2019 balance.
Now operator, please open the call up to questions.
Yes, Sir as a reminder to ask a question you will need to press star one and your telephone to withdraw your question press the pound King.
Please standby, we compile the Q when a roster.
Our first question comes on line of synergy nom a BTI G. Your line is open.
Hi, Thank you and thank you for taking the question on and also thank you for everything you guys you're doing I'd area Carbonite team. My first question I am in regard to your coal that 19 hot related potash and also respiratory pathogen related potash. If you look at what you have.
Currently what exposure outside of the U.S. ice is significant and I'll say, it's not think you talk about your opportunity in testing related to corporate 19 outside the U.S.
Okay. So let me think some Gi and there [laughter]. Let me maybe currently we have to we you way and we are expecting somewhere in the beginning gopher acutely to apply fall on mostly Additionally way why did you say multiplexing.
Lately I often exit Gulf the piece so the Cofins 19, all away all the styles will be included in in the final currently the panel I think if 20 or 22 pathogens. We're also expecting to have a it's encouraging one.
But that's more as a standalone and obviously, we are incorporating into all the LPP submission. We have done today of da with Advantaging too. So those are all expected to get the way will fall somewhere they enjoy good July timeframe.
Hey concerning the second a question about the international markets. Yes, We think international market is a funny enough, we start seeing now and not the search coming from SCR and not from China, but the rest of the company national especially a okay.
And coming out for a while it is all dock and mainly so we see a nice so today, having you know we see continuously demand for awhile next stake RPP product as well as we've seen a lot of entities all dog going on there they see.
System.
So sungy one thing that I hope that you're not already asking which is downside right based on the revenue reported just so you know less than 10% of our total molecular diagnostic revenue today comes ex us.
So exposure.
Not significant.
Okay, Great and then just related to that you know there in terms of testing requesting capacity into you at more recently and I don't know a lot of different from resolved, but there's been a lot of issue where the sample collection supply shortage issue and so what.
Sure. It's about you know given you can keep this is Tom demand what kind of your take on what's going on with regards to that and if you think that's been largely resolved with you feel like your product Oh, you're.
Strategy, it's less exposed to that HM.
I cannot comment about that they are really don't know out to comment there.
[laughter].
And we see as much as use on jeweler during or they can to to increase the availability of sample media right in the universal transformation to get all that done and so obviously the supplier that has increased over time and that's driven the overall helped drive the overall increase of testing.
Across the world to be honest and so.
Were no more exposed and anybody else's there from mail to run a test it requires collection like that.
Okay, and then lastly from me could you talk about all the new product out in your instruments that Youre I expect it to launch throughout the year. I think you mentioned you talked about Intelliflex could you talk about the timeline.
You know if there any update to that for.
For the next Chanderi gene I call it sounds like a flow cytometry products, if they're in the kinds of delays or even possible acceleration. Maybe then for the Derisking product line. So yeah, I mean, intelliflex, we still tracking into all the exact timeline we used waiver.
We don't see any changing there it concerning managing to divergent tool G.I. submission is still in the end of the FDA if youre all aware and they are not now looking in anything gaol, improving anything that is not correlated or related tool.
Corporate 19.
The only way we have now is to put it to the I'll be that we submitted and today. The corporate 19, and those are said, we expecting to gauge the E away from that somewhere in July so we only a walking to incorporate that into that the flow cytometry. A we're also on track in what we had.
There.
And so are we seeing very well in what you're doing obviously, one thing we I should mention and I think I mentioned it in my script and we are doing some said also all Gigi testing and it's progressing nicely.
Hopefully, we'll be able to submit a two day after day bye.
As the E away by the end of this month.
And.
As a matter of fact, they are we getting.
We learning all the time that a customer level for us there and using our lack some bit technology, a two style testing on symbology. For example, we know the state of New York. They just spogli something good earlier today, the Dell testing or now and some clarity is out.
Adjusting for symbology, they actually were like I look at the white data they submit that they all the testing fall I G.I. Jie Han and name.
See I GA anti bodies, we because that's the beauty and that's what I too mentioning landscape. They are we believe that some Pete technologies can be playing fundamentally in better bringing better symbology test into the market both in the specifically specificity.
Okay, and mainly but eventually also in the sensitivity and that's why we internally also developing a kid today to be offer way either directly all tools, while the apartments.
Great. Thank you so much.
You bet.
[laughter].
Thank you. Our next question comes from Brian Weinstein of William Blair. Your line is open.
Hi, guys. This is actually and your brackman on for Brian Thanks for taking the questions.
Maybe to start off can you maybe add a little bit more color on the new placements in the quarter on the simple answer side and on some thoughts around what.
Sorts of institutions to sit in and then as we look forward. How do you think about those driving future assets held for that business.
Yeah, I mean, so and will aim.
It's it's one mainly to close the door, okay, and what nine feet. That's I think 80% of them and actually was Lee entitled and he had jumped right rental fleets made the customer commit that fall away two years [laughter] is to use our technology. So it's no. They only endemic age.
No, it's only going to coffee they see the need for the same and they committed they mole long time into that so at the basically from us placing so many unit, it's creating a very strong annuity philosophy going forward. Obviously, there was about 20% of them also portrayed.
See same and painful copied 19 or other test.
Some of them on in the U.S. say some of them outside the USA and but I must say, we see also very strong demand for sistema older deem ethylene.
And as I keep saying gained a lot more than a few years, we're not giving we are not placing system out to the minority GE is either we are selling it or we are conducting for long time. So it's a slightly different I the way all some of our competitors are looking in that.
And eventually that's really create us a fairly strong annuity stream in years to calm, but there's a say the ethylene was also very very strong mindful installment for us.
Okay. Thanks, and then just one on pricing for the expansion next tagging verigene panels with that's our scope to on them as we think about the pricing benefit that you guys might be able to capture on those and I just had one oh, yeah. I mean, the next the Gulf it'd be a we're selling its exactly like the next think LPP along faulty dollar.
While initially with their these they extraction to said well isn't that 20 something.
When we started nichols vegetables in L.D. and that's a pies and now we are falling Sofia pricing, which is around 37 $40 out full and there is 'cause said in those testing.
Okay. Thanks, and then the last one was on strategy just sort of follow up to that last line of questioning around the Kid product for you guys sounds like you're going to have something sort of by the ended the month, but how should we think about the minimum level sensitivity and specificity that you guys are targeting for that product and I don't want all state it there.
At this stage, but as I keep saying that technology is a unique.
And you should the fuel ice specificity for sure Okay.
And also also ice sensitivity, but at this stage I don't want to command and when we submitted they eat away when they talk about bad so.
And you can also look at some publication that.
I'll be installed popping up in around our technology and what kids can do.
So.
That's maybe a reference to that.
Okay, just thinks that the state you understand your can you mentioned when are we going to start doing serology testing, we already have a customer doing serology testing today. Yeah. So we may have something available as we move forward, but the Luminex technology is already being used to do so.
The test not only serology has been use of incidents disgraceful drug development and vaccine development. So all the names that you seen CNBC, how you see on a daily basis in the you in the news using Luminex like Finfet technology as part of that investigation, but as they said.
We know for sure the state of New York style that testing gay so all the GE using good luminex.
Perfect. Thanks, guys.
You bet.
Thank you. Our next question comes from brand into yard of Jefferies. Your line is open.
[laughter] good afternoon.
Harris was [noise].
Just to see if you could put any finer point in terms of the Koby 19 specific product revenue contribution you expect in this quarter you talked about $500 test capacity today ramp up to 800000 by June is that consistent with the number test you actually expect to sell almost two leases. So obviously, we increased our capacity to.
To be able to address the potential for significant increase.
Indeed, I think you can see from the discussion in our in our second quarter revenue comments that we certainly we're expecting a pretty significant uptick in volume.
The total capacity that we have today.
Is weighted more towards next tag, which is a beat based technology than it is the the Aries technology. The the pricing for a covert assay is roughly the same but that capacity covers all of our products.
That are that are molecular products not just the covert based products and then lastly from a covis standpoint in the first quarter, you'll recall and Homi mentioned. This is comments, we didn't have a covis specific product available until the very into the quarter. So all the uptick in red.
Revenue that is related and quotes to coated was attributable to people ruling out everything but coated in the second quarter. We certainly expect that rule out effort to continue but we also expect some lift from covis specific products as well, yeah, but the 800000 not including the.
Urgent for the clock, okay insulin as we get Verigene in the beginning goal.
During Q3, it will give us export capacity and assisting calls.
Okay, and understanding you kind of economic people your guidance, but it's but just look at it but you know you originally talked about opex spend year being roughly flat curious if you're looking to accelerate investment projects are expecting the additional expenses in light of the topline growth.
Okay. I mean, obviously, we are hiring game manufacturing people.
And because we are working now almost say, Italy shave [laughter] seven by 24. So that's will add my best will be reflected mainly in the gross margin, but on the sometimes we stopped looking in a long built a man for example, do we need to put Capex and we start booking into for example.
And manufacturing go.
The addition of capacity.
To be aligned what will happen in six months. So nine months. If we look at the end just a matter of argument. If you look at coffee to be we saw us enables to which we believe we wouldn't be though and things like seeing or other technology will be implemented and we're looking out to add couple of million dollar level investment.
In our automation facility.
Mainly open so.
But but those are all opex will continue to be flat onto the control that's when you and for your way.
In conclusion.
Okay begin thinking.
You're going to.
Thank you again to ask a question press star one at this time.
Next question comes on the line of Tyco Peterson from JP Morgan Your line is open.
Hi, This is millennium for Tyco, Thanks for taking my question.
Great.
In terms of your too cute I appreciate you tease that driver and noted Hello, Hi, COMETRIQ expected to continue to decline, but as a percentage you noted that less than one Q.
Can you talk about what will drive last of the decline in to Q versus one Q is it primarily a function of an easier comp or is there anything else on that line your forecast.
No, it's mainly because China style, three opening and we go think but a ways that.
In China to style, please and as we look at that we are also anticipating basis every said earlier, we ever for close to 2 million dollar whole frame.
Recognize revenue that we have not installs. So that's one style things and installation and we're seeing also demand fall no doubt today make other institution. So I'm feeling good but you know its wouldn't be a lesser decline, but the gain on the overall, yeah youre looking at a very small number.
Because the all less loss ultimately is a relatively small contribute to its less than 10% full our total overhauls revenue and and warrant and to be clear.
It's in harder comp in the second quarter than it is in the first quarter because revenues in the second quarter last year were over $30 million.
And then the first quarter last year, there are only love so the numbers going up the percentage is going down.
This means flow revenue must be going up not declining as you alluded to in your your comments of getting so I want to make sure you get your arrows all pointed in the right direction.
Youre laying this out.
That's helpful. Thank you and then I had another class in terms of coverage territory panel.
Can you comment on common for recent development, we've heard lately, namely the CMS order from last week, expanding the scope of who can order service territory past and and on top.
Bladder CMS requesting coverage expansion for the panel as well as needs that cdcs recommending doctors to pass for others pair trade actions on testing for Kobe and if you think that we could see respiratory panel coverage HM.
So certainly you would expect the overall reimbursement rate to go up for testing given that our tests across all of our platform tend to be the lower priced alternative we certainly see that as a benefit because less use our technology and other lessors adopt our technology can actually realize a little better profit position and they can today.
Should the overall volume increase because of the expansion of the.
The constituents that are actually allowed the order it that certainly we would benefit from that expanded level of testing as well.
Great. Thank you and lastly can you talk about what it is left at that time for you.
Serramonte Center.
Hi, Dan.
What's left to be done for Surajit.
Yes, most testing and validation internal validation isn't there.
That's what we're doing and then that's what we're doing.
Okay. Thank you.
You bet.
Thank you at this time I'd like to turn the call back over to Homi Shamir for closing remarks, Sir.
Thank you look different thank you everyone from those tenants or earning call. We look forward speaking with fuel in the very new future, but maybe seeing your who've been in near future [laughter]. Thank you.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
[music].
[music].
Good day, ladies and gentlemen, and welcome to Luminex Corporation's fourth quarter and full year 2019 earnings Conference call. My name is let's see and I will be or coordinator for today.
Today's call is being recorded.
At this time, all participants already listen only mode.
Moving to prepare remarks, there will be a question and answer session.
I'd like to participate this portion of the call. Please press star followed by one at any time during the call threats.
Persistence is needed at anytime during the call. Please press star followed by zero and a coordinated would be happy to assist you.
I would now like to turn the call over to Harris Cory.
Senior Vice President and Chief Financial Officer for opening remarks. Please proceed.
Good afternoon. Thank you for joining US with me today is Homi Shamir, our president and CEO.
Following our comments, we'll take your questions.
As a reminder, today's conference call is being recorded at a replay will be available for six months on the 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 protection provided by section 21, the other Securities Exchange Act for such statements. These.
Forward looking statements speak only as of the date hereof and are based on our current beliefs and expectations and are subject to known or unknown risks and uncertainties. Some of which are beyond the company's control that could cause actual results or plans to differ materially and adversely from those anticipated in the forward looking statements.
Factors that could cause or contribute to such differences are detailed in our form 10-K for the year ended December 31.
Our quarterly reports on form 10-Q filed with the Securities and Exchange Commission.
We encourage you to review these documents and we undertake no obligation to update. These forward looking statements also certain non-GAAP financial measures as defined by FCC regulation G. Maybe covered in this call to the extent that any non-GAAP financial measures are covered a presentation Oh and record.
Situation to most directly comparable GAAP financial measures will be included in our earnings release, which is available on our website in accordance with regulation G.
Ill now turn the call over to our President and CEO Homi Shamir.
Thanks.
Good morning, and welcome to our core to discuss Luminex Corporation first quarter result.
As you all are well, we are living and unprecedented times vastly different from anything we ever the experience.
While we are all deeply concerned with everything from the health well being off the wall population. So this state of the economy Luminex is fortune eight to be well positioned for these global pandemic.
Without technologies dedicated employees and talk a lot development, we are well be able to quickly we'll duals.
Emergency use authorization I say, Oh next Fig Colby extended.
And now is these so called the two essay.
So all of these all employees remained engage and excipient that hey, Steven nice.
Those full nice and dedication.
Managing multiple like project as a team and finding some notion for all customers and their patients.
At this point, we as we ramp up production to be able to provide more than 500000 Nextera Energys Pes minimum then majority of wage next stake we did a main this fleet between that leaves a say and then leave it function to fit.
Our dedicated workflows is the strongest at Vail and I'm proud to say that I'll I'll double.
I think a direct impact on beef from them.
As a direct result of the best well delivering to the market and non battle for customer have announced the blend to increase testing capacity using all technologies.
Vision.
And not have announced they've pulled chase luminex fix them to allow for Colby 19 testing in house as opposed to sending samples out for testing.
Which ultimately mean testing results can be delivered.
Patient in the medical for a few wells instead in several days.
Consistent we saw mission.
Well that's of delivering critical result to all the customers in that clinically actionable timeframe.
Just had in mind that most of our customer moderate to high complexity labs and now technology continue to deliver excellent result.
Additionally, we are seeing a significant uptake of our exome b b and associate systems going to our partners who are working on the entire span of woven 19 solution from say allergy test to treatment.
Vaccine development and many other initiative to combine this call will know files outlay in these many ways as possible.
So while we are very focused on the most critical issues facing customer today. We are also playing people don't wall in being part of the mid to long term several shame to this call and crisis.
We delivered.
94 million of revenue in the quote Dale just 59000.
No no shy of our previous walk gold in default walked out of 2019, we see significant benefits realized from the sale of all the us but only focus products.
Our thoughts on my local diagnostic revenue, which includes both automate the non automated products.
45.2 million was up 28%.
And the Jeep Daltile 36.8 million was up five more sand and now flow revenue stream talked about 6.5 menu on most on 42%.
More specifically, we know my local diagnostic revenue will positively impacted by different than me.
Although we cannot say exactly what was may affect walls, and we'd be moved a coffee related products available in the end of the growth there many of our customer use all of us, but only products to roll out everything, but hopefully 19.
Oh MTG revenue wedding line, we six that expectation up five well same with the majority of the quote and two of your the bone to increase consumable cents compared to the first quarter 2019.
Oh flow revenues would have significantly affected by the quote unquote maintain pandemic as we saw a number of custom in close that facility and all significantly limited access to their research facilities. In addition, we had more than 2 million of revenue.
Use, which we were unable to either install all sheep.
Operating expenses seemed like what do well in less than they were in last you and as result of revenue gold gross margin maintenance and expense management, we returned to profitability in that will do well ahead of schedule.
As we look to the rest of Twentytwenty MB harmed, we see more clearly than ever.
With that I'll call into future portfolio can play in addressing critical and life altering diseases.
We are planning on incorporating south scope is linked to target.
Let's say into our vetted June one and managing too as well as our next day LPP last but only some volume find out so that our customers can nave access to valuable products that deliver reliable results in a timely manner.
We have sufficient manufacturing capacity to accommodate those new offerings and if additional plan in place to further expand our manufacturing capacity to meet the growing demand for our products.
We are planning to increase our dense manufacturing capacity from just over 500000 test today to more than 800000 past month by the end of June.
The majority of these capacity will still be used to produce next day products.
We're also working on symbology solution and we'll provide more color on days when we have molding formation to shale.
Not to remind you Oh my excitement technology is uniquely suited to assist loved it at least professional in the developments in motion to cope with 19 pandemic.
In particular, though our ability to make millions of base at the time translated into minimal variability at each sample when and same excellent be software late onset of beef at the time well other technology only take one reading at the time we are.
Able to believe they're very high level of specificity and sensitivity, which is extremely important instead all injury as thing.
In addition, all 96 wells formats for excellent be base assays provides an ideal testing platform from I tunes quote.
Such as a public and screening.
Finally regarding the excellent being teleflex. Since then we remain on track for me you launch and the initiation of filed early access program with our partners.
We believe that Intelliflex system will provide dolls research Gospel mill, which much needed improvement over the corn FMTV and that's still on the face them and will add to maintain our position as the market leader in the me too I snacks Bolting Lisa.
Yeah.
We expect revenue for Q2 will be at that Bob on within 5 million them, all up 26% omo compared to last deal.
With respect to the full year.
Why do we are extremely confident that we will be the top end of our covenant revenue guidance of 362 million we are now.
But to give a specific updated guidance range at this time due to the uncertainty that's covered 19 is causing to all day economy.
We anticipate providing update full year revenue guidance in conjunction with our second quarter earnings release.
With that I would like to dance over the two areas to discuss the financials in greater deep then and then I will return we some final comment.
Thanks, Tony.
This homi mentioned, we had a great first quarter led by significant growth across our molecular diagnostics portfolio.
We reported total revenue of 90 port for 90.4 million up 10% over the first quarter of 2019.
If you look at revenue across our respective revenue streams.
Reported that our molecular diagnostics revenue stream for the quarter was 45.2 million up 28%, mainly driven by increased demand for respiratory and related products as a result of the cobot 19 pandemic.
Sample to answer molecular diagnostics revenue was 26.3 million up 38% over the first quarter of 2019 and non automated molecular diagnostics revenue was 18.9 million up 17%.
In contrast, our tools revenue for the quarter was $43.3 million down 6% over the first quarter 2019 with revenue in our license technologies group of 36.8 million up 5% for the quarter with a 20% growth and consumable revenue partially offset by.
Accretion royalty revenue of 6%.
Hello, Cytometry revenue was 6.5 million down 42%.
Our full cytometry revenue streams were significantly affected by the current pandemic in several ways.
First as a world began to close down the ability of our sales reps to access potential customers became limited, resulting in a slowdown in orders secondly for image based orders in hand that had been shipped and already delivered to the customer we found ourselves unable to gain access to the customer site.
And to install the system.
Installation of the system is a key revenue recognition criteria.
Finally, we had orders in hand, but no one available to receive them at a customer site.
As a result, we had over $2 million of orders either waiting for installation are waiting to ship for which revenue recognition was not possible.
Also the final update on Labcorp.
A material effects of Labcorp are finally behind us.
The current quarter, we had nominal headwinds of approximately 3.4 million, representing a 4% headwind for that for total revenue in the quarter.
We do not anticipate any further significant quarter over quarter headwinds from Labcorp moving forward.
Looking at our revenue line items system revenue was down 3.6 million or 23% compared to the first quarter of 2019 included in system revenue our sales of our ex map systems flow systems and molecular diagnostic systems.
The primary driver to this decline was the current quarter weakness in flow cytometry replacements.
Was directly affected by the covered pandemic and related shutdown. This decline was partially offset by an increase in both molecular diagnostic system revenue and ex map system revenue.
We placed 223 X map systems during the quarter up 6% and molecular diagnostic system sales nearly tripled during the quarter keep in mind. The majority of our molecular diagnostic system placements are via reagent rental agreement and not a capital sale.
As Homi mentioned, we place just over 120 molecular diagnostic systems in the quarter.
Only about 20% via capital sale.
Consumable revenue was 12.8 million up 19% for the quarter, partially due to the timing of bulk purchases from certain of our partners.
Royalty revenue was 13.3 million down 6% for the quarter, primarily attributable to lower base royalties in the current quarter. As a reminder, total royalty revenue includes based royalties coupled with audit findings self reported shortfalls and accrual adjustments.
Total assay revenue was up 26% to $43.7 million with our respiratory related products on all of our platforms up almost 100% as a result of our contribution is helping battle the Corona virus pandemic.
Our customers initially used our next tag products on a rule in rule out basis.
And now that we have you a cleared products, we've seen that volume shift towards covance specific products not surprisingly respiratory related products comprise more than 60% of our total assay sales.
Service revenue was 5.5 million modestly by 2% and all other revenue was 3.1 million up 88%, but includes approximately $643000 revenue from the first BARDA contract we receive associated with the development of the next tag Cove It plus.
Panel.
The second BARDA contract that we received associated with development of the areas Cobot assay will be recognized in the second quarter.
Gross margins were consistent 56% with equal distribution year over year between higher and lower margin items.
Operating expenses were roughly flat with the prior year, primarily driven by lower expenses in R&D, which reflects reduced clinical trial activity in the current quarter. This was partially offset by higher sales expenses, a direct result of our 10% growth in sales.
Our revenue growth consistent gross margins and operating expense control all contributed to a significant improvement in operating profit.
Our effective tax rate for the quarter ended March 30, Onest 2020 was 36% as compared to a benefit of 184% in the prior year quarter.
Our effective rate significantly affected by the distribution of profit and loss across our worldwide subsidiaries.
The prior year included a discrete benefit of 6.6 million related to a reduction in unrecognized tax benefits related to the U.S. transition tax as a result of an IRS ruling for certain aspects of the calculation of our Canadian subsidiaries earnings.
We expect our consolidated full year effective tax rate to be between 30 and 40%.
Cash and investments for the quarter were down approximately 16 million.
This was not unexpected as the first quarter every year as one in which accrues sales commissions bonuses et cetera are typically paid in the first quarter of 2019, the comparable decline was approximately $14 million.
Well, we mentioned that our current expectations for the second quarter full year 2020, as 105 million or higher for the second quarter and for the full year current expectations are to be above the top end of our previous full year guidance of 362 million.
These levels of revenue.
I would expect to be extremely profitable relative to the comparable periods and generate a significant amount of cash relative to our current cash position.
With that I'd like to turn it over to Homi for some final comments.
Thanks say, we're certainly looking forward to achieving malden unless million for the first time in the company easterly, which we will all will get us full all often billion dollar target quicken.
Well I'll go out to all of those have been impacted we are proud to be playing a critical role in helping to address. These pandemic. We are not resting on our success to date and Theyve plan in place to further enhance on market product before.
So we can continue to be an important part of the full solution for iOS too.
This and our formal comments operator, please open the line for question.
So we certainly are witnessing unprecedented times.
We wanted to provide some flavor around our current quarter expectations of the distribution of our expected 105 million plus second quarter revenue.
First of all Cobot 19 is driving sales of our molecular diagnostics revenue and we expect that potential doubling of total sample to answer revenue in the second quarter over the second quarter of 2019.
Additionally, we are experiencing very strong demand for our next tag RPP product.
On the other hand, we expect flow cytometry to continue to be down relative to the prior year, but as a percentage less than in the first quarter and finally, we expect our LTG revenue stream to be roughly flat quarter over quarter, one closing remark before we open it up to questions during them.
As of April we generated approximately $20 million of cash, which brought us back above our 12 31 2019 balance.
Now operator, please open the call up to questions.
Yes, there as a reminder to ask a question you will need to press star one and your telephone to withdraw your question press the pound King.
Please standby, we compile the Q when a roster.
Our first question comes from the line of Sungy Knob.
The T. I'd your line is open.
Hi, Thank you and thank you for taking the questions and also thank you for everything you guys you doing R&D area Carbonite team.
My first question.
In regard to your covert 19, Todd related products.
And also respiratory pathogen related products. If you look at what you have currently what's the exposure outside of the you add.
Significant and I'll say, if not thank you talk about you opportunity in testing related to corporate 19 outside the U.S.. Okay. So let me thanks, Angie and.
Let me maybe Colin can do we have we you way.
We are expecting somewhere in the beginning of Q2 me to apply fall on mostly Additionally way well, let me say multiplexing completely a often exit golf bps. So the corporate 19, all way all the styles will be.
Included in in the panel currently the panel I think 20 or 22 pathogens. We're also expecting to have it's encouraging one.
But that's more as a stand alone and obviously, we are incorporating into all the RPP submission. We have done today, if the with Advantaging too. So those are all expected to get the way over the summer weather and you only get July timeframe a concerning the second question.
Now the international markets, Yes, we seeing international market is a funny enough, we start seeing now and not the search coming from as.
And not from China, but the rest of the company national especially a okay.
A coming out for.
At this product and mainly so we see a nice so they have in euro we see continues a demand for a while next stake RPP product as well as we've seen a lot of these all dialogue going on there they see Stan.
Sungy, one thing that I hope that you're not already asking which is downside right based on the revenue reported just so you know less than 10% of our total molecular diagnostic revenue today comes ex U.S.
So exposure.
Not significant.
Okay, Great and then just related to that you know there in terms of testing capacity the testing capacity in the you add.
More recently and I don't know a lot of different than resolved, but there's been a lot of issue with.
The sample collection supply shortage issue.
So with curious about given you continue to see strong demand.
What kind of your take on what's going on with regards to that and if you think that's been largely resolved with you feel like your product you're at.
Strategy is less exposed to that that each year.
I cannot comment about a I really don't know out to comment.
[laughter].
And we see as much as you do CNG either during or they can to to increase the availability of sample media right in the universal transforming to get all that done and so obviously the supplier that has increased over time and that's driven the overall helped drive the overall increase of testing.
Across the world to be honest and so.
We're no more exposed and anybody else's there from mail to run a test it requires collection like that.
Okay, and then lastly from me could you talk about all the new product all the new instruments that Youre I expect it to launch throughout the year. I think you mentioned you talked about in pellet plants could you talk about the timeline.
You know if there any update to that for.
For the next Gen Verigene Edraulic some of the flow cytometry product. If there is potential delays or even possible acceleration. Maybe then presidents will product line, but yeah, I mean, intelliflex, we still tracking tool.
Exact timeline, we used to it.
We don't see any changing there.
Concerning packaging to divergent tool Jiyai submission is still in the end of the FDA.
Youre all aware.
No no looking in anything Gaelic moving anything that is not correlated all related to incorporate 19.
The only way we have now is to put a to the I'll be that we submitted and today. The corporate 19 and those are said, we expecting to get the you April that somewhere in July so we only a walking to incorporate that into that the flow supplementary. We have also on tonight in what we.
Hello there.
And so we feel very well in what you're doing obviously, one thing we I should mention and I think I mentioned 18 My scheme and we are doing some said also allergy testing.
And it's focusing nicely.
Hopefully, we'll be able to submit it the today bye.
The way by the end of this month.
And.
As a matter of fact, they are we getting.
Learning all the time that a customer profile us there and using I'll make some bit technology and to style testing on so all the G. For example, we know the state of New York. So they just spogli something earlier today, the testing or novel, some clarity and though.
Staying for symbology, they actually were like I look at the white paper they submit that they all the testing fall EISG am in it I GA anti bodies, we because that's the beauty and that's what I too mentioning mugs game they.
We believe that some key technology can be playing fundamentally in better bringing back to the so all injury test into the market both in the specifically specificity and mainly but eventually also in the sensitivity and that's why we internally also developing a key to that too.
We offer.
With that actually all tools, while the apartments.
Great. Thank you so much.
You bet.
Thank you. Your next question comes from Brian Weinstein of William Blair. Your line is open.
Hi, guys. This is actually Andrew Brackman on for Brian Thanks for taking the question.
Maybe to start off can you maybe add a little bit more color on the new placements in the quarter on the sample to answer side and on some thoughts around.
What.
Sorts of institutions, those said and and then as we look forward. How do you think about those driving future asset sales for the business.
Yeah, I mean song and will aim.
It's it's one mainly to close the door, okay, and what nine feet I think 80% of them and actually was Lea and Eddy edge and today then translates main the customer committed fall away today is [laughter] is to use our technology. So it's no they only indicates.
Okay, only going to coffee they see the need for all the same and they committed their mobile long time into that so at the basically from us placing so many your made its creating a very strong annuity for us going forward. Obviously, there was about 20% of them also for Jay.
The same and have for corporate 19 allowed the test and some of them out in the USA some of them outside the USA.
But I must say, we see also very strong demand for assisting older deem ethylene.
And as I keep saying gained a lot more than a few years, we're not giving we are not licensees them out to them and knowledgeably is either we are selling it all we are conducting for long time. So it's a slightly different I the way off some of our competitors looking at that.
And eventually that's really create us a fairly strong annuity stream in years to calm, but there's a say the ethylene was also very very strong month for installment for us.
Okay. Thanks, and then just one on pricing for the expansion next stagnant bear gene panels with that Saar scope to on them as we think about the pricing benefit that you guys might be able to capture on those and I just had one month, yes, I mean, the next the Gulf it be we're selling its exactly like the next think RPP along faulty dollar.
While initially with the these they instruction to said well isn't that 20 something.
When we started nickel vegetables, and LT and that's a pies and now we are falling Sofia pricing, which is what I'm 37, faulty doled out fall and at least 'cause said in those testing.
Okay. Thanks, and then the last one was on strategy just sort of follow up to that last line of questioning around the kid product for you guys.
Sounds like you're going to have something sort of by the ended the month, but how should we think about the minimum level sensitivity and specificity that you guys are targeting for that product. Thanks, I don't want all state. It at this stage, but as I keep saying that technology is a unique and you should assume ice specificity.
For sure Okay.
Hey, also also ice sensitivity, but at this stage I don't want to command.
When we submitted the way when they talk about that so.
And you can also look at some publication that can.
Being installed popping up in around our technology and what gets can do so.
All right, that's maybe a reference to that.
Okay. Let me just success. Despite you understand your can you mentioned when are we going to start doing serology testing, we already have a customer doing serology testing today.
So we may have something available as we move forward, but the Luminex technology is already being used to do serology test normally so all history has been yields and southern disgraceful drug development and vaccine development. So all of the names that you've seen CNBC, how will you see on it.
Daily basis in the you in the news using Luminex like Finfet technology as part of their investigation, but as they said we know for sure. The state of New York style. The testing so all that you're using luminex.
Perfect. Thanks, guys.
You bet.
Thank you. Our next question comes from brand into yard of Jefferies. Your line is open.
Good afternoon.
Harris was.
Just to see if you could put any finer point in terms of the cover 90 specific product revenue contribution you expect in this quarter you talked about 500000 test capacity today ramp up to 800000 by June is that consistent with the number test you actually expect to sell on a monthly basis. So obviously, we increased our capacity.
To be able to address the potential for significant increase in need I think you can see from the discussion in our.
In our second quarter revenue comments that we certainly are expecting a pretty significant uptick in volume.
The total capacity that we have today.
Is weighted more towards next tag, which is a beat based technology that it is the the Aries technology. The the pricing for a covert assay is roughly the same but that capacity covers all of our products.
That are that are molecular products not just the covert based products and then lastly from a covis standpoint in the first quarter, you'll recall and Homi mentioned this as comments, we didn't have a covis specific product available until the very into the quarter. So all the uptick and.
Revenue that is related and quotes to covert was attributable to people ruling out everything but coated in the second quarter. We certainly expect that rule out effort to continue but we also expect some lift from covis specific products as well, yeah, but the 800000 melting clothing.
The Virgin for the clock, Okay as soon as we get managing.
In the beginning goal.
During Q3, it will give us export capacity at Austin shifting that calls.
Okay.
And I understand you kind of.
Full year guidance, but it's but just look at it CNL.
Yeah, you originally talked about Opex spend year being roughly flat curious if you look into it so great investment projects are expecting the additional expenses in light of the topline growth.
Okay. I mean, obviously, we are higher than being gay manufacturing people and because we are working now almost say utterly shave say seven by 20 fold. So that's will add my best will be reflected mainly in the gross margin, but on the sometimes we stopped looking in a longer.
For example, do we need to put Capex and we start booking into for example, and manufacturing go a additional capacity and beyond what will happen in six months. So nine months. If we look at the end just a matter of argument. If you look at coffee to be we saw us in yield.
Which we believe we wouldn't be that on things like seeing or other technology will be implemented.
We are looking out to add couple of million dollar of investment in our automation facility.
Mainly okay. So.
But but overall opex will continue to be flat a wonderful comes along that's the need for your way.
Calculation.
Okay begin thinking.
[music].
Thank you again to ask a question press star one at this time.
Next question comes on the line of Tyco Peterson with JP Morgan Your line is open.
Hi, This is millennium for Tyco, Thanks for taking my question.
Great.
In terms of your QQ Guide I appreciate you tease that driver and noted Hello, Hi, COMETRIQ expected to continue to decline, but as a percentage you noted that less than one Q.
Can you talk about what will drive last was a decline in to Q versus one Q is it primarily a function of an easier comp or is there anything else under line your forecast.
No, it's mainly because China style reopening and we go think but a ways that.
In China to style, please and as we look at that we are also anticipating that is every said earlier, we ever for close to 2 million dollar of Fame.
Equipments revenue that we have not installs. So that's one stop seeing and installation and we're seeing also demand fall no doubt today make other institution. So feeling good but you know its won't be less decline, but the gang overhaul.
Looking at the very small numbers because the all lead flow supplementary is a relatively small contributive AIDS less than 10% fall total overall revenue.
And work and to be clear.
It's a harder comp in the second quarter than it is in the first quarter because revenues in the second quarter last year were over $13 million.
And then the first quarter last year. There are only 11, so numbers going up the percentage is going down.
This means flow revenue must be going up not declining as you alluded to in your your comment of getting so I want to make sure you get your arrows all pointed in the right direction.
You are laying this out.
That's helpful. Thank you and then I had another class.
I'm, sorry coverage territory panel.
Can you comment on some of the recent development.
We've heard lately, namely the CMS order from last week, expanding the scope of who can order service territory past and.
Top.
Letter to CMS requesting coverage expansion for the panel.
As well as he is that CDC is recommending doctors to pass for other spirit transactions on testing for Kobe, and if you think that we could see respiratory panel covering.
Okay.
So certainly you would expect the overall reimbursement rate to go up for testing given that our tests across all of our platforms tend to be lower priced alternative we certainly see that as a benefit because less that use our technology and other labs and adopt our technology can actually realize a little better profit position and they can today.
Sure the overall volume increase because of the expansion of the.
The constituents that are actually allowed to order. It certainly we would benefit from that expanded level of testing as well.
Great. Thank you.
And lastly can you talk about what it is left to that Dan for you.
Their own Hussein.
Hi, Dan.
What's left to be done for Surajit.
Yeah, I'm more testing validation.
Nation and then that's what we're doing and then that's what we're doing.
Okay.
Okay. Thank you.
You bet.
Thank you at this time I'd like to turn the call back over to Homi Shamir for closing remarks, Sir.
Thank you look different thank you everyone from your attendance or earning call. We look forward speaking with fuel in the very new future, but maybe seeing your who've been in near future.
Thank you.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.