Half Year 2021 Abcam PLC Corporate Sales Call
Ladies and gentlemen, welcome to the uptime and trading day Cool My name is Daisy and I will be coordinating Misco you have an opportunity to ask a question on the end of the presentation. If you would like to register a question. Please press star followed by one on your telephone keypad and if you are joining us on the line.
Please click on the request to seek cycle and I will now on day, but Youre hi, Alan how to C. O <unk> and then you may begin.
Thank you day D. and thank you all for joining this afternoon and this morning.
This is a really busy day across.
Growth life Sciences. So I appreciate you taking the time will also try and keep this short and within 30 minutes.
Hi, This is the abcam by first half of the financial year trading update it's a limited amount, we can say, but I am delighted to say that the business has returned to growth.
And we know class and met and we're talking about trading update that had not yet happened. So it's it's fantastic to see the business growing at 8.3% constant currency.
In spite of a global market demand not yet at full strength the picture for demand varies regionally, but our our view and third party market research would suggest that about 60% of labs worldwide or would claim that they're not yet operating at full capacity.
We've seen particularly in the United States, Canada, and the United Kingdom, but they've been hard hit in terms of there.
Access to laboratories, and our sense is that whilst we're growing demand and those important markets to us that make up.
Almost 50% of our business.
Our well below normal demand levels.
What we saw was.
You know that we're able to continue to implement our and our strategy as we have been throughout this period and those strategic investments and we've been making and the business has absolutely helped us grow we've seen real uptake.
From a a per.
Portfolio of high quality and and highly validated products that are made in house, which are now almost 55% of our revenue.
Growing at substantially higher than and the rest of the portfolio.
And in particular.
What we observe is that as researchers are looking for more.
Hi, I'm saving and work flow productivity, improving products are looking for higher quality and more kids and we certainly seen a real boom in terms of our sales of those products that are.
Highly validated and even our kids business.
So we're we're take all of these results to as a real confidence boost for us that we can continue to build out our strategy for sustained growth, which certainly been investing behind our team and our capabilities to to make the legacy business and Abcam antibodies continued to be.
The exciting and and opening up more growth as well as introducing new product.
At folio areas like proteins, and engineered cell lines and ER and other.
Areas, where we're investing around multiplexing and and immuno assets.
So we're really pleased with how we're starting up.
In spite of a very difficult market for our customers and I would just say on that thank you to all of those customers who have been.
Trusting us throughout the period to continue to work with them and find ways to help them discover and what they need to do faster than they would otherwise and I also want to thank our team who have done an outstanding job and debt, we've seen customer engagement and team engagement.
Improved throughout the period as we measure the MPS or customers and share our employees.
And I'm really really delighted to see and.
Proven it across the board not just the financial improvement, but with our customers and and to our employees and our team building and our culture. So thank everyone and I.
I will turn it over to Michaels and let him just talk about a few of the financial highlights and then we'll open up for questions.
Thanks, Alan and good morning, and good afternoon to everyone. Thank you for joining us for our unaudited trading update for the six month ended December 31st 2020.
And so as Alan mentioned, we are really pleased with our first half performance, particularly in light of the constraints facing most of our customers. During this pandemic.
Our revenues grew high single to double digit in all regions other than in the Americas, where the impact of Coas and particularly heartfelt.
As you read and a statement we expect to report total first half revenue of 147.5 million pounds versus a 138.2 million pounds for the first half of last year. This represents revenue growth of 8.3% on a constant currency basis. The same level of growth. We saw on the first half of last year.
On a constant currency basis catalog revenues grew at approximately 8% and CPFL revenues grew double digits.
As and what else I mentioned in our in house products represented 55% of our revenues and grew by over 25%, reflecting what we believe to be an increasing demand for quality and to prove lab efficiency.
We're continuing to see improvement on our gross margin, which is expected to be approximately 70.5 per cent compared to 69.7 per cent for the first half of last year and rating from and benefiting from a greater contribution from in house products.
We continue to be confident in our multiyear growth strategy and the long term opportunities for Abcam and we continue to invest to meet those goals. We expect our adjusted operating margin for the first half should be about 16%.
Additionally, we're pleased to have added a secondary listing of our shares on NASDAQ and the first half and believe it will bring strategic benefits for us and the future.
We remain well capitalized with the liquidity support our continued growth efforts and potential M&A.
So while were limited and what we can say until we report our full results or our full six month results on March Eightth, we're happy to take any questions you might have thank.
Thank you.
Ladies and gentlemen to ask the question and to stop by one on your telephone keypad. If you have joined US on line and to stop flow by two <unk> on your telephone keypad.
We have our first question here from Charles Weston RBC tells you on now I pad and you May go ahead.
I try some say much flow hi, thanks for taking the question congratulations on that helps and have three things and.
On the stations and customers do you get a sense that we such as it all back and a lot of the trying to catch up on the what that mix still on and.
Lots of new projects kicking off without can hold up gaining great traction and penetration within that.
Oh, and you want to touch on that.
Hi, Charles Yes, I, you know as ever its a blend there there are some customers who have pivoted there work to be co vid related I would say that's a minority and we certainly have had a little benefit from that.
The majority of customers, though.
Are are struggling with the practicalities of trying to run a lab, where you've got greater social tests, and saying, there's less access and and try to figure out how to catch up and.
And get things started for win Cove, and is past us and what.
I Didnt mentioned earlier if at all.
GAAP on and on to this question is I you know our sense is there was a little bit of exuberance heading into July August and September where there was a bit more.
By and because the second wave really had and we'll have the a and b.
Western regions very much.
And we saw particularly in the U.S., a little bit of softening in demand and.
And.
Later stages of the last six months.
And you know.
It's not it wasn't enormous amount but.
I would I would not say based on what I saw in the United States and.
That theres a lot yeah, and I wouldn't presume, there's a lot and new things going on in terms of new activity. The mix may be new but activity if anything is down slightly versus where it was and in August.
August and September.
Thank you and.
I guess, because it looked on kind of coming through and and we think we have indicated they take it out and they.
Hi, you've got a day and people here at driving this day.
The growth of 25% and your in house and how about.
It is a huge step up and want to be about things going on and the market and at some point <unk> last year and is it.
Primarily those two.
Okay, and the confidence and.
And we'll be it and point to is there anything else that could get.
What's driving.
And they change and look like right.
Well there is as I mentioned earlier, certainly the case that anything that saves time and the lab right now is is getting attention and.
And products that are more obviously validated and where people have had success with on.
Are getting a lot and pull through.
But our as our cats, and we don't make all of our and get so we're seeing even some of the OEM supplied or third party supply products that are that are time savings those two have done well on this period.
And you know one of the things I'm interested in is do these trends continue.
Continue post Cove, it and you know do people see the benefits this productivity and using EUV and kits and using our our highly validated products I hope so, but we don't know yet I'd say the other thing that.
Hard to pin down the data, but I would.
Our hypothesis is that there's less time to go out there and try and many different reagents.
And it projects, where they might be starting and <unk> the portfolio breadth that we have he's not as fully exercised if you like in terms of number of antibodies per per project I think we if we had that data and its strength.
Difficult to get like we try and people are being much narrower about choosing quickly whats going on wind and and not looking so broadly across competitors or even within our portfolio.
Thank you and lost some sales can you describe the headcounts evolution theory the period a place that just were trying to give us a sense of when the way through that the pink and a acceleration of cost.
And Michael you want to and actually have coming on yeah, <unk> I don't have the current head count numbers right now Charles that we were [noise].
We are our turnover rates being quite low and our hiring rate is is continuing as it wasn't probably quite as high as it was at this time last year, but we are continuing the same level and our intention is to continue the same level of growth throughout this year that we talked about last year.
Well have that for March and so much.
Thank you.
We have on next question have from not love <unk> from William Blair <unk> and your line is now open you May go ahead.
And.
Hi, Good morning high on I, Michael Thanks for taking the question.
Yeah, one of the first asked about one year mouse and seek EDI on it and see deals. So just want to get a sense for per how those are going in and obviously you open and you know cell engineering facility and the.
The Bay area and I last month, so maybe you could just comment on what the initial.
Okay and everything.
Sure why don't we touch on Expedia and first and then we can talk about it.
S C or the cell line business, which is more nascent [noise].
I mean, expedia and <unk> has been integrated really well I think we didnt really quickly.
And we're seeing really good pull through from our customers and and I think we mentioned on our revenues. The last the last half of last year were about 5 million pounds are a bit 6 million pounds to share.
On the satellite business.
Yeah, well so once this is and emerging area for us. It's a combination not just applied stem cells, but also some sell on assets that we acquired and the great News is there's so on assets that we acquired are all available on the catalog and they are selling.
On to customers and we're and continuing to grow.
That revenue on albeit from a small base.
And the applied stem cells team.
Now has a facility and Fremont, California, where they can work instead of in the organization assay that we acquired from.
'cause here too that was on acquisition of assets and carve out and have a team and.
That that project was affected a little bit by codes that were probably.
On the two months behind where we would have liked to have been just because of some constraints on building progress and in California, but you know.
I'll take that and in this environment and we're now able to re manufacture and sell lines that we acquired and and we are absolutely.
Creating new products for the catalog and [noise] profit.
On it.
Okay, Great and then you gave us as you know some of the flavor in terms of geographic mix.
On the trend right period, so what in terms of the customer and market you know academic versus research centers and make sure you know back on the diagnostics customers what you saw on.
Amongst those categories throughout the period.
Well, we'll give more guidance.
Got your can assays and thing I Westergren [laughter].
Well I mean, we'll give more detail on that on March and we'll be more specific as we usually are but it won't surprise you that.
Some of the pharma companies got back to work earlier than some of the academic labs. So we saw some we saw us a little evidence of that but we'll give you a better break down and March.
Fair enough thanks, guys.
Our next question is from Stephan HMO of Numis stuff and your line is now up and you May go ahead.
And then folks congrats on on the first time I've just got two firstly on <unk>.
Digging and more to what we've seen and comes the in house products and I hear that.
Recipes meal kits and become very popular and the pandemic Swiss interest see that happening with reagent kits and alive just wanted to dig into that what's going on with OEM.
'cause that's declined is that reflective on.
On the line market or have you guys means of actively managing the delisting OEM products that.
It will come in at least switched and homes.
Yes, Stephen it's a little of both.
And so we we obviously think as Alan and said, we think that that just quality products are selling better what people have less time, we're seeing that with the kids, but we also as we have been doing over the last few years continue to de Lis products that don't meet our quality standards and it's something we haven't talked a lot about before but if you look at this year, we probably do list.
This.
We delisted what was probably 4 billion pounds of revenues during the first half of last year. Some of that is switching over to our own products and then some of the shortfall in just revenue growth is being made up by just <unk> and even greater growth and our own products, which is why you see the 25 per cent number.
Gotcha.
And then just lastly on the hot seat PNM <unk> guidance back in that period, just any color that you think it's not a sustainable.
We'll break that out and March but.
If if you remember back a year ago and that was.
Moving to dance about why with CP nailed down and it was because we had a customer.
Who buys a antibodies for us that are used and and their beecher diagnostics platform and they had.
Paused their buying just happened to be our largest customer and they paused their buying and as they were being carved out of.
Their parent organization and acquired by somebody else.
They have now come back and that certainly helped and and we saw pretty strong continuation of the royalties growth it's been a per.
Part of the story and really part of the strategy as we get on more of our IP.
And we'll break that out in March and so you can see it.
Okay. Thank you.
And next question is from Michael Ryskin of Bank of America. Michael Your line is not type and you May go ahead.
Oh, great. Thanks for taking the question.
Pardon.
I appreciate your comments on the.
And I appreciate your comments on the slower than so we saw a recovery from Cove and it doesn't have the headwind and the Americas and the UK I was wondering if you could give a little bit more of an update on some of the other geography, China in particular, but also the rest of Asia and the rest of Europe any comments on how much.
On this back to normal things really are and some of these other places that perhaps haven't seen and they're going to second wave and UK and the U.S. has and anything and talk about it in terms of pacing and never turned over the course on the second half.
[noise], yeah, it's pretty fluid and so [laughter] I'm I'm reluctant to make me big statements about where were going for sure because of how things are but if I look at the last six months to try and it certainly has had a slow recovery.
Pretty well into the summer and then picked up nicely throughout the on and again, we'll break that out as much. So you can see it.
Europe broadly.
Probably has done pretty well for us all growth.
It does day.
Net for bike country by country, depending on policies and outbreaks throughout Europe, we think our outperformance you're about a lot more to do with us and necessarily the market Roaring back although some some countries like sweet and never really.
Shut its lab so.
So it's a mixed mixed story in Europe, but we're we're pretty happy with our own growth in Europe.
And then rest of world growth pretty.
Pretty small for us I mean, <unk> yield you had the biggest markets for us outside of China, U.S. and Europe would be Japan Japan's.
Perfectly okay. They did suffer a significant downturn from coated and labs is extended Didier for the U.S.
Although there was some impact and certainly now took you things are tricky so.
It still feels like we're in for another period.
Period, or so of uncertainty in these markets before we'll be able to call, where we are and in terms of underlying demand.
But as I said at the top of this the surveys are even where.
Even in Europe or in the U.S. parts.
Parts of Asia, where people are back and a lot of they're not claiming to be back for capacity productivity and.
Okay. That's really helpful and phone question on can be sort of on on exactly that.
And you see anything in particular in terms of how people move through the budget cycle and in terms of catch up spend as people come out of cold and I think you commented that people were a little bit more excited earlier in the summer, but especially as it goes and the year and we think about fiscal year or calendar year budgets and for your customers.
And did you get a sense that there was a little bit of a catch up there or are people still more hesitant to spend.
And from that perspective.
Yeah here too I think it's difficult to get one answer.
You know if we if we focus on the U.S. and Europe.
For example, it where it impacts and more.
It varies a lot depending on where.
We're the researchers are in their cycle and funding if there.
Early in the cycle and funding. They certainly are feeling confident that they can you know they will be able to get back on the lab and they'll be able to catch up and they're feeling pretty confident if they're late and the cycle and other words, they've got to report the funding starting to come to an end.
<unk>.
You see a wide variety of responses to some thinking.
I better use it for and and get on it and and deliver because I need to count on this funding agency day.
Take me to my next phase others thinking.
Fine I'm not going to satisfy that funder I've got other options on go seek other funding so.
Yeah, it's a real mix bag in terms of how individual labs are are responding and I don't know Phil no. The net impact of all this for for quite a while.
Great and.
Appreciate that thanks again.
Our next question is from John Dang of Baring Bank. Your line is now I couldn't you May go ahead.
Hi, Thanks for taking my question.
And perhaps.
Uh huh.
The previous questions on that really.
What do you feel.
Here.
Because local companies.
The goal.
Don't expect major.
And now.
And.
Before Christmas and well just wondering.
And what what what the kind of relative Qubic try and what do you think.
Each day.
[laughter].
That would definitely go ahead of the forward looking statements [laughter] constraints on forward looking statements, even if I weren't trying to pick <unk>. Yeah. Its truth is I don't think we know I can tell you operationally within Abcam, we're certainly because we're operating around the world and multiple locations and having to daily consider.
And what what's our approach.
And and we.
We want to make sure we ensure the safety and well being of our employees and keep delivering those customers and depending on us and we've been running more recently and just under 50% of our people on site, whilst enabling the rest of them to work, either flexibly and and out of facilities or entirely from home.
And so we're still a long I.
Think about our own capacity and efficiencies and where we are so long way from.
What was normal free cobot I.
I assume the same must be true for our customers as well.
Yeah understood do you actually do you think based.
Do you think it could be less severe income. So you know that works really well.
Compared to last time because I.
Actually functioning right now.
Yes.
What have you seen from GAAP.
You know that.
[laughter].
Well I think the Q2 I can talk a little bit about us.
US internally and maybe you can read through some of that and customers that we have been operating with Kobe constraints as a business now since January and we certainly learned a lot from our colleagues in China and.
And our own implementation and safety protocols and controls worldwide through now a couple of waves.
That experience has taught us where.
Things, who might have done back in February and March that were less valuable we don't have to do other things we've had to turn up.
But I you know.
With almost a year now of operating experience with Cove it.
Without any.
Major outbreak sort of disrupted our own ability to serve customers.
We we feel we know how to shop work around it right and you know, it's it's more cumbersome, it's not ideal, but we know how to do that I suspect that will be true for many of our customers as well.
And that makes sense and maybe.
Maybe just a.
Final one on them.
No.
I mentioned, the researchers and the people.
Hi.
Activity and cooking.
Thank you.
You bet.
Work on this.
<unk>.
It's hard to track.
New customers looking to think Oh my.
We certainly hope, so and and and we hope that Cove. It has some of the things that we've done.
In this environment will and.
And your us to customers and and they will continue to think back that.
Fondly upon abcam as the company to help them get more done or helping them solve more problems more quickly than than others that that's that's where we're excited about your kids in aggregate across immuno assay and activity assets and everything is about 20% of our catalog revenue.
Today, and it's an important part of our long term strategy for growth and Abcam and.
I'm I'm eager to see that that carry on and.
And you know certainly the investments, we're putting into validating our products and.
And some of the portfolio pruning that that Michael mentioned has significantly reduced.
Any complaint you know the complaint rate for per Abcam everywhere, we're operating a complaint rate that's about a quarter, where it was in 2013.
As a result, the portfolio pruning and and and more of our on products and better validation and debt. That's ultimately that that will be enduring and lasting and and important to our customers.
Thank you very much.
And next quarter, we and type one more question and this would be the last one so thank you.
Perfect. On next question is from Ted just seven of Morgan Stanley You May go ahead.
Hey, Thanks, guys and good afternoon, and just just a couple of quick ones from me and Alan and Michael I mean on.
And in terms of inorganic contribution here from the acquisition side and in the first half of the fiscal it looks like it was about 6 million GBP, how should we think about those ramping over the next day not so much of the the second half of the year, but oh, even more long term than that I mean, obviously, that's going to happen.
Implications for your margin line as well and then I have a quick follow up.
Well sure that was <unk> 6 million tickets was written was just from expedient and so if you think about the fact that we've got the cell lines that Alan talked about moving in and and and other assets. You know we hope over time that they get integrated fully into our product line, particularly with expedient and all the conjugation technologies that you.
We'll begin to be able to see it less and less independently, but it's going to be an important remember, we basically bought technologies last year and they're going to be important drivers of of of our underlying growth.
Yeah, I just build on that I got it on on expenses specifically.
The a big reason why we acquired debt capability and that technology was to serve customers, we already had and antibodies better by combining.
What they were buying from expedient independently of us into one value added service offerings and to open up more share of wallet with those customers. As a result, we have seen that happened and so some of that growth from 5 million first second half of last year to six me and first after this year with the Expedia portfolios just been our team taking existing customer list.
On chips, and and doing more with them already.
Got it and then Alan or considering on the M&A theme here I mean whats the latest you're seeing in terms of the deal pipeline any any particularly interesting areas that you're focused on at the moment I mean, obviously valuations and the public markets are what they are but on the other and you know certain and early stage or even pre revenue companies perhaps.
That's struggling a little bit here with the pandemic. Obviously can you just give us an update on on your deal pipeline at the moment.
I <unk> I think the everything and I agree with everything you said and turns valuation expectations that that's both a positive in the sense that I, what we see or more companies optically privately held companies thinking about.
He is now the time debt to exit both for their kind of generational transition and the attractiveness of valuations and market. So that's a plus in terms of.
The outlook the minus I guess is it you know people are waiting to see when its peak [laughter]. So thorough there some overhang on for the for the next bump up and valuation and around the corner I guess.
So it's there are a lot of conversations going on and we're happy to have the capital.
On hand, and the access to capital to deploy on where we remain disciplined and where were hunting and <unk>, mainly and areas we already exist.
And and in fact, it's entirely and areas where already exist and.
In terms of our product portfolio technologies.
And my hope is that we will we will be able to put capital to work in the near future and and carry on with acquisitions as a component to our growth strategy.
Got it and then one final one for my color on the on the EBIT margin. It's Michael I mean, as you I'm sort of proceed into the second half of the our how should we think about that 16% number that you posted for the first half I mean is that sort of a a good and sort of peg. If you will for the back half estimate and then sort of progression beyond.
On that as you benefit from a meat on the cost of the ERP implementation rolling off and just go 22 and so on.
Well, we're not I mean, we're not giving guidance on on where were going but I think that if you look at sort of what we did last year, what we're doing now and we're continuing yeah, a ramp up in investments that we hope is going to drive and <unk> that that we think is going to drive us towards that for 50 to 500 million and revenue. So.
I I think that you can expect to see EPS continue to invest a as we drive growth over the next couple of years and certainly on the ERP side and not just here Peter on the digital side, you know, we're investing to integrate those and to launch the ERP program and to launch the digital program over the next couple of years, we've laid out kind of the total numbers, we've been talking about spending.
And that hasn't varied it's just the speed with which we spent it I remember last year, we got a lot of technologies and we're now spending to integrate those and that will be a big driver of future growth.
Yeah, no not and I mean, not enough it's the most and.
And most important thing for US is over the last 18 months, we've been heavily and installing capabilities and acquiring talent and.
Barring portfolios of products and technologies, we look at the next 12 to 18 months is really solidifying the basis under which they're operating with an abcam make sure they are integrated well make sure.
Things are are set for for scalability and growth and we're you know we're very excited about the outlook for top line growth and and where we are in terms of implementation and program right now.
Yeah remember, we got into that and appreciate this program for one day for one year and now so.
[laughter] Beast.
We still got a ways to go but we think we're doing really well if he predict if you look at the revenues. This year. So we think we're well on her way.
Perfect I appreciate the color guys. Thanks.
Thanks to assets and thanks, everyone for joining us day appreciate there.
Quality of the conversation on the call and look forward to keeping your more full update in March.
Great. Thank you everyone.
Ladies and gentlemen, thank you for joining todays call you may now disconnect your line.