Half Year 2023 Abcam PLC Earnings Call
Yeah.
Speaker 1: Hello and welcome to the Abcam PLC full year 2022 earnings conference call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation you can press star followed by one under telephone keypad.
Speaker 1: If you would like to withdraw your question, you may press star followed by 2. I will now hand over to your host, Tommy Thomas, Vice President of Investigations. Please go ahead. Thank you, operator, and good morning, good afternoon, everyone.
Speaker 2: Welcome to our results conference call. Joining me today will be Alan Hersl, our Chief Executive Officer, and Michael Baldock, our Chief Financial Officer.
Speaker 2: Before I hand over the call to Alan and Michael, let me briefly cover our safe harbor statements on slide two. gray
Speaker 2: Some of our comments made during this call may be considered forward-looking statements, leading beliefs and expectations about the company's future performance.
Speaker 2: These forward-looking statements are subject to risks and uncertainties that are based on currently available data.
Speaker 2: The company assumes no obligation to update them.
Speaker 2: Actual results are subject to future events and uncertainties, which can materially impact the company's actual performance.
Speaker 2: Please look at the company's recent regulatory filings for a more complete picture of our risks and other factors.
Speaker 2: During the call, non-IFRS adjusted financial measures may be used to provide information pertinent to our ongoing business performance.
Speaker 2: Tables reconciling these measures to the most comparable IFRS measures are available in the company's press release issued today.
Speaker 2: Finally, if you haven't already seen them, you can download a copy of the slides used in today's presentation at the company's website, www.corporate.adcam.com forward slash investors forward slash reports and presentations.
Speaker 2: Our agenda is set forth on slide 3. Alan will be making introductory comments before Michael discusses our full year financial results.
Speaker 2: We will then move to Q&A.
Speaker 2: I'm now pleased to turn over the call to our chief executive officer, Alan Rie. Alan, please go ahead. Thank you, Tommy. Good morning and good afternoon, everyone. Welcome to our 2022 results conference call for the year ended December 31, 2022.
Speaker 3: One of the many benefits of our location in Cambridge, England is the proximity and relationships we enjoy with leaders and life sciences.
Speaker 3: Sir Bruce Ponder at the University of Cambridge recently expressed the AppCam brand in his own words when he said,
Speaker 3: Discoveries result from the contribution of many people, and there are too few ways to recognize this.
Speaker 3: We agree, and we thank Sir Bruce and everyone working to make progress happen together and making it possible for us to talk about ADCAM's role and successes within the life science community as part of our presentation today.
Speaker 3: I think it's slide four.
Speaker 3: Our global team is motivated by a mission to make GapCam the most influential company in life sciences.
Speaker 3: We exist to influence this community and shorten the time from first discovery to impact on society.
Speaker 3: Over the last 25 years, AppChem has had an important role in providing tools and molecules to discovery scientists.
Speaker 3: as we grew our internal innovation capability and capacity over the last 10 years.
Speaker 3: We've learned to create products that can consistently go the distance from discovery research to clinical applications.
Speaker 3: Beyond our leaps forward to scale product innovation, we have brought empathy and understanding to how science makes this journey.
Speaker 3: In short, we've become a more integral part to making progress happen together.
Speaker 3: As a company, we are connecting researchers, organizations, and stages of scientific progress together to bring efficiency and better outcomes to society.
Speaker 3: This mindset is shaping our brand, culture.
Speaker 3: partnerships, and our daily interactions with hundreds of thousands of dedicated life scientists around the world in universities.
Speaker 3: research institutes, hospitals, government organizations, biopharma companies.
Speaker 3: diagnostics, and a broad range of teams working to ensure society is healthy and safe.
Speaker 3: Our success has been enabled by the tireless efforts of our team of over 1,800 employees working to advance science.
Speaker 3: We have created and continue to nurture a vibrant and dynamic culture through diversity, equity and inclusion, thereby differentiating the company and making us a great place to work.
Speaker 3: We believe that our growth is powered through our people, and our commitment to delivering excellence powers the pillars of our strategy, namely, to sustain and extend our antibody and digital leadership.
Speaker 3: to drive continued expansion into complementary market adjacencies.
Speaker 3: and to build organizational scalability and sustain value creation.
Speaker 3: We believe that the scientific community can go further when we all go there together.
Speaker 3: As an example of how we contribute to this progress, I want to share a recent example from an AppCam customer. I'm going to share a recent example from an AppCam customer.
Speaker 3: Dr. Daniela Quall at McGill University and her team recently published two articles in the journal Nature.
Speaker 3: Dr. Danielle Aqual at McGill University and her team recently published two articles in the journal Nature, extensively using AppCam in their work.
Speaker 3: For approach, applied artificial intelligence and multiplex antibody panels, the spatially resolved single-cell datasets that correlate with distinct clinical outcomes for lung adenocarcinoma and brain cancer.
Speaker 3: predictive algorithms and protein signatures that stratify patients.
Speaker 3: have significant implications for cancer diagnosis and treatment.
Speaker 3: Lumb cancer remains the largest cause of cancer-related death.
Speaker 3: while brain cancer patients have limited therapeutic options.
Speaker 3: We hope that their research goes on to contribute to increased survival time.
Speaker 3: and improved outcomes for patients.
Speaker 3: We look forward to supporting Daniella in building her next panel for further discoveries, and we thank her for publicly advocating for ABKAM as the preferred antibody provider for her and her team. Thank you for Teams during this question, and have a wonderful day.
Speaker 3: Her confidence in AFCAM is based on our promise of high-quality, low-lot-to-lot variability products, which enable consistent reproducibility in scientific research. Fly 5 summarizes our performance highlights for the year.
Speaker 3: Our financial performance trend and demand was good.
Speaker 3: But we had a challenging second half when we made some once-in-a-generation changes to our core operating processes globally.
Speaker 3: We achieved high single-digit CER revenue growth.
Speaker 3: expanded our operating margins, and delivered adjusted, diluted earnings per share growth.
Speaker 3: Michael will discuss these in more detail shortly. His performance would have been better if not for the operational challenges we faced in the second half.
Speaker 3: as we implemented the final stages of Oracle's Cloud ERP, that is Enterprise Resource Planning, and the effects of COVID-19 on our China operations.
Speaker 3: Innovation is still fueling our success. Abchem continues to expand its leadership and research antibodies. Our share of citations continues to expand according to Cite Apps data. And our focus on in-house development products has and continues to create value for our key stakeholders. All investments in Cite Apps are in generality and in their esteemed authority.
Speaker 3: Our in-house, made by Atcam, recombinant antibody portfolio, is now over 26,000 products.
Speaker 3: We control the full supply chain and can deliver higher quality product and service levels that are important to our customers, thereby enhancing our brand reputation.
Speaker 3: Attempt culture remains strong.
Speaker 3: The second half was incredibly challenging and rigorous from a workload standpoint.
Speaker 3: But I was proud of our team's dedication to customers throughout.
Speaker 3: We continue to get positive feedback and earn strong diversity scores.
Speaker 3: and our external recognition for employee experiences at the company.
Speaker 3: Our share-based programs have resulted in most of our staff becoming owners, and we look forward to unlocking the strong value creation story that is to come for them and external shareholders.
Speaker 3: Our ESC performance remains strong.
Speaker 3: We have once again earned top marks from Sustainalytics and MSCI.
Speaker 3: earn top marks from Sustainalytics and MSCI with improved scores at Ecobotus.
Speaker 3: Women, the majority constituent at our company, are well represented and their achievements have been duly recognized. Finally, we're pleased to have Luba Greenwood join our board of directors, making her the fourth female member. Women, the majority constituent at our company, are well represented and their achievements have been duly recognized. Finally, we're pleased to have Luba Greenwood join our board of directors, making her the fourth female member.
Speaker 3: Women, the majority constituent at our company, are well represented and their achievements have been duly recognized. Finally, we're pleased to have Luba Greenwood join our board of directors, making her the fourth female member of the total of nine directors.
Speaker 3: Finally, our partnerships are accelerating growth and opportunity in spatial biology, multiplex protein analysis, and diagnostics.
Speaker 3: We introduced over 1,200 new antibodies.
Speaker 3: into these application partnerships during 2022.
Speaker 3: And our total is over 2,100 in the market today.
Speaker 3: On slide six, AB-CAM's marketing and research and development teams work effectively to identify and develop the next generation of tool reagents in advance of when targets may be considered important and relevant to researchers in lab sciences.
Speaker 3: A notable example is the Pan-TRAC antibody that PanF-CAM published in 2014.
Speaker 3: For this antibody, researchers at Memorial Sloan Kettering Cancer Center identified immunohistochemistry as an efficient and reliable tool.
to screen for NPRK fusion-positive cell tumors and non-small cell lung cancers.
Roche identified the opportunity to develop an IHC diagnostic to improve patient testing for treatment pathways for these indications.
Because of the existing relationship and licensing agreement placed between AppCam and Roche, this clone was easily added to our master agreement.
enabling seamless access to the product for rapid product development.
The clone being immediately available in our portfolios saved valuable time, approximately two years on the IBD development as no discovery was required.
Let's move to slide seven. At the end of our 2019 Capital Markets Day, we presented our investment plan to remove constraints in the business. At what cost do we have and how much do wewheel?
and double our revenues by 2024. Our ambitious goals and 2022 accomplishments are detailed here.
We were determined to increase our innovation capabilities and new product development capacity.
improve our propositions about pharma, enhance the customer experience with better IT and e-commerce platforms.
expand our operational footprint, and where we could, acquire to accelerate progress on our strategy.
Looking back over the past three years, we have completed most of the planned investments and achieved the milestones as expected.
We have strategically increased our investment research and development, enabling ongoing new in-house product development.
that has driven our revenue growth from in-house products at approximately 24% over this time. In addition, we've vertically integrated our global manufacturing capacity, supply chain and logistics infrastructure.
And we've prudently deployed capital for strategic M&A, thereby increasing our product portfolio and new product development capabilities.
I am proud of all we've been able to do thus far.
As we look to 2023, our strategy focuses on refining our investments that we've made over the last few years to improve the customer experience as well as complete the expansion and build-out for our Wollton site. Thank you for your kind attention today. I'll pass it over to Michael.
Thank you, Ellen. Good afternoon, good morning, everyone. I'll take you through some of the key elements of our income statement, including in-house revenues and operating expenses, and finally, guidance.
We'll then move to the Q&A portion of our call.
On slide 9, I want to highlight some of the key financial metrics we believe are good indicators of the successful implementation of our strategy to date. All of my comments today will compare full-year results for the year ended December 31, 2022 to its comparable prior year.
Total reported revenues were 361.7 million pounds, up approximately 8% on a constant exchange rate basis and up approximately 15% on a reported basis.
with favorable foreign exchange tailwinds accounting for approximately 7% of reported growth, largely because of the pound weakening against the US dollar and Chinese liquidity.
During the year, two factors impacted revenue growth and our year-end cash balance.
First, the implementation of the new Oracle Cloud ERP system and second, COVID-19 controls and outbreaks in China.
Based on the differences between forecast and actual results,
We estimate the aggregate impact on sales with approximately 30 million pounds.
We estimate this headwind negatively impacted revenue growth by approximately 10% on a reported and 9% on a constant exchange rate basis growth rate that significantly impacted working capital.
Overall, in-house revenue was the key driver of our results with 18% constant exchange rate revenue growth. In-house sales, defined as AppTam, produced catalog products, including BioVision, plus custom products and licensing CP&L, now represent 67% of reported total sales.
The period contained a full year of BioVision revenues within in-house revenues. Recall, BioVision was a third-party supplier before the acquisition, and the prior year's sales pre-October acquisition were counted for a third-party revenue.
Moving to adjusted gross margin, we achieved a 330 basis point expansion, 75.5%, as compared to 72.2% in the full year 2021.
margins benefited from in-house product mix, the inclusion of the sale of Bi-Vision products at higher margins,
and ongoing commercial activities.
Adjusted operating profit margin increased by 190 basis points to 21.1% year-over-year, driven by gross margin expansion, slower operating expense growth in our base business, and the incremental costs from biovision.
Adjusted diluted earnings per share were 24.9% up 21%. Finally, as you've seen, our adjusted profit margin improvement drove our return on capital employed to 8.9%, obviously negatively impacted by the sales and distribution implementation above.
Oracle ERP systems, and China's COVID impact on revenue. Let's move to slide 10 to review catalog revenue.
catalog sales exclude revenue from custom products and licensing
It includes both in-house and third-party sales.
The Americas, representing approximately 43% of catalog sales, grew 16% at constant exchange rates.
excluding the estimated headwinds revenues.
Revenues in the Americas would have grown 20% on a constant exchange rate basis.
Revenues in EMEA, which represents 26% of catalog sales.
grew at 6% constant exchange rates.
Excluding the estimated TED-Windsor revenues, EMEA would have grown at low teens on a constant exchange rate basis.
China, which represents 18% of sales, reported revenue that declined 2% at constant exchange rate.
excluding the estimated headwinds on revenues, China would have grown mid-teens on a constant exchange rate basis.
From a customer perspective, academic revenues represent approximately 43% of our catalog revenue and grew at 4% globally at constant exchange rates.
Bio-pharma revenues represent approximately 27% of catalog sales and grew at 10% globally at constant exchange rates.
with high teens growth rates in the Americas and EMEA. Our products are purchased by thousands of customers with no customer accounting for more than 3% of revenue.
We continue to experience strong demand for our recombinant antibodies and in-house assay technology, which includes bio-vision.
which grew over 80% at constant exchange rates. Distributors represented approximately 30% of catalog sales and grew at 12% globally at constant exchange rates.
Let's move to slide 11. We reported in-house catalog revenue of 222 million pounds, up 20 percent on a constant exchange rate basis. We reported in-house catalog revenue of 200 million pounds, up 20 percent on a constant exchange rate basis.
Our results continue to benefit from favorable trends as we expand to adjacent products and the inclusion of BioVision products.
The market continues to shift to recombinant antibodies across all customer segments.
driving good demand for AppCamp's products enabled by our batch-to-batch consistency, validation data, and coverage across thousands of relevant targets.
Assay sales were driven by our simple steps ELISA, that's enzyme-linked immunoabsorbent assay kits and the inclusion of BioVision assay.
We win by serving our customers with our extensive and growing portfolio of in-house products.
offering high quality ease of use and consistent supply.
We continue to experience the benefits from life science research, particularly biopharma's investments from the bench to the clinic, especially in cell-based therapy.
This has been a key driver of our sample prep and detection, protein, cell engineering category, which now accounts for 10% of in-house catalog sales.
In 2022, we continued our focus on removing constraints, building out our in-house capabilities, and returning to business-as-usual environments with the broader expansion of travel.
As our investment build-out is largely complete,
We are moving to refining what we have implemented.
Cost growth in our base business has moderated and we expect it to continue in 2023 and 2024.
Our focus on driving operating leverage would have resulted in a maturely lower reported operating expenses as a percentage of revenue.
That's excluding the implementation of the ERP system, sales and distribution components of Oracle, and COVID-19 impact in China. Looking to 2023, we anticipate operating expenses that reflect continued refinement of our prior period's investments.
including its continuing focus on improving invoicing and collections that were hampered in the second half of 2022 by the Oracle Cloud ERP implementation.
To conclude, we are laser focused on delivering operating leverage consistent with our five-year commitment by 2024.
Let's move to slide 13. Before we move to guidance, I want to provide a brief review of Abecam today.
and just a few accomplishments from 2022.
I'm really pleased that we are entering the final phase of our Oracle ERP implementation, which ultimately will allow us to provide the best digital experience for our customers.
I'd like to thank our team that worked hard to remove our three material weaknesses relating to our first year of Sarbanes-Oxley compliance as a first-time full US compiler.
And in line with our guidance for 2024, we will continue to grow gross margins through expansion of our in-house product portfolio, as well as expand adjusted operating margins by driving down OpEx.
We built a global life science company with market-leading innovation capabilities and the infrastructure to allow us to manufacture, sell, and distribute our growing portfolio of products.
This foundation is enabling us to bring researchers high quality products that generate reproducible scientific results the first time, every time.
Our strategic initiatives over the last several years will enable us to deliver durable, organic revenue growth.
with strong operating margins.
operating margins. Let's move to slide 14 and guide.
For 2023, we are reiterating full year 15% to 20% constant currency revenue growth guidance provided on January 30, 2023.
At current exchange rates, this would result in reported revenues of approximately 420 million pounds to 440 million pounds.
In terms of cadence, we expect slower first-half revenue growth as we're facing tougher prior-period comparisons and expect modest growth in China.
Higher second half revenues are anticipated due to favorable comparisons and a normal China growth outlook. For modeling purposes,
You should expect an approximate split of our full year revenues along historic lines as follows. Approximately 45% of full year revenues in the first half and approximately 55% in the second half.
We're forecasting ongoing adjusted operating margin expansion consistent with our 2024 target.
We are also reiterating our 2020 court guidance goal.
I'd like to thank you for your time. I'll turn the call back over to the operator and we can begin our question and answer session.
for your time. I'll turn the call back over to the operator and we can begin our question and answer session. Operator.
Thank you. As a reminder, if you'd like to ask a question, you can press start followed by 1 on your telephone keypad.
If you'd like to withdraw your question, you may press start followed by 2.
Please ensure you're unmuted locally when asking your question. Our first question for today comes from Tijas Saron from Morgan Stanley . Tijas, your line is now open, please go ahead.
Hey guys, good morning and thanks for the time here this morning. Maybe Michael, I'll start with one on the top line here in terms of the China impact. Can you just talk to us a little bit about some color on the reopening trajectory there, particularly following the Lunar New Year?
and any differences in trends across your academic versus biopharma customer base in the region?
Sure, just good morning. We are, as you rightly point out, the Chinese New Year followed the end of the year and the impact we were seeing from COVID in November , particularly December . And we've seen sort of the......
End of January , February , the market started to pick up.
Still not returning to former levels, but it is slowly returning. But we've been through this for three years now, and it's hard to predict how that market will swing.
Fair enough. And then one on the ERP upgrade, you called out about a 20 million pound impact here in 2022. Can you just provide some context around what drove that sort of impact versus your prior expectations and are you now confident that all of that is now Oh,
I would say that we're expecting to get the benefits of this over the next couple of years.
begin to leverage it, but we're certainly seeing a return in the levels. As we mentioned, I think, in the last conference call, when we talked about the preliminary update, the biggest issue was getting product shifts. The order levels and order to customer demand remained about where we expected it.
It was about the same as it had been prior to our launch, but it was a slowdown in our ability to actually get products out the door and shipped. But we're certainly seeing that returning to normal levels. And I guess, you know, because the question will come is just say that, you know, we're currently for the for the year where we are right now trading at expected levels right now.
Got it. That's helpful. And then final one here for me on margins, you've talked about reiterating that 30% plus operating margin target for 24. Obviously, there was a delta between your first half and second half margins in 22 because of China and the ERP situation. But as we try to frame 23, any bookends that you're willing to provide.
So if we're trading at revenue expectations, remember that the constant currency increase in OpEx last year, it was 12% of constant currencies, 8% of that was the addition of BIOvision, a full year of BIOvision operating expenses, and the underlying increase in operating expenses was 4%. And we're continuing to see that. Got it.
Got it, super helpful, thanks. Thank you, our next question comes from Puneet Sudha from SVS Securities. Puneet, your line is now open, please go ahead.
Thanks for taking the question. Michael, first one for you on gross margins slightly ahead of us despite the impact in China and the European plantation ongoing. So just wondering how much of that contribution was from pricing, just trying to think about that and how should we think about gross margin cadence here as well in 2020.
and outcome of adding value to our products. So we expect as the product mix continues to change, which we see happening over time, it increasing slightly, but we're expecting it to moderate around where it is now. And I wouldn't drive expectations from modeling perspective much above that sort of 75-76 percent.
Got it. Okay. That's helpful. And then, as we think about overall capital deployment after BioVision, looking at valuations to the market and whatnot, antibody suppliers, capabilities, maybe can you elaborate what sort of what are the priorities? Or you know… the
can be done at a level which we think is add.
value to our shareholders. We're looking at a lot of companies. Most of them don't fit with exactly what we want and many of the ones that do are going still at pretty high prices. Our price expectations are certainly not coming down where we expect them to be. And as you remember, our strategy and our long-term target is to make sure that we're
our organic ones. So anything we decide to buy will be incremental. So we are certainly looking at things, but it's not high on our list if we don't find the right thing at the right price. Okay, fair. And then the last one for me and maybe for Alan. I mean, Alan, how should we think about the efforts you have ongoing on the assays and you pointed out and try...
into those assets. Thank you.
Hi, Puneet. Thanks for the question. The subtle point I was trying to make with NTRAC is that was a commitment we made in our product development innovation pipeline.
in 2014.
So it's the insight about what biomarkers are relevant to disease and discovery that we get early that allows us to participate in the way that we did with that particular biomarker. And now sticks to it.
eight years on of seeing that kind of early visibility to what could be relevant. That's what's driving.
thousand plus new antibody pairs or antibody content into these black marker applications.
variety of IVD and proteomics applications. So I would say to you that we can talk about Interact now because it's gone the distance. We have the insight from our data and our relationships, and it's now in clinical applications helping patients. There are now more than 2,000 of those kinds of options that we've built into the portfolio there.
that are in that journey. It's hard to predict how many of them will go through, but we have enough of them. We know we have a repeatable model for making this work.
Thank you guys. Thank you. Our next question comes from Matt LaRue from William Blair. Matt, your line is now open. Please go ahead..
Thank you for taking the questions. Thinking about operating expenses here in 2023, obviously you're clearing this sort of ERP hurdle. Are there any other items to think about in terms of new investments? Obviously you reference moderate expense growth, but just as you think about the...
the cadence of OPEX growth? Any items to call out either from final Bio Vision integration or any of your investments at the sites? No, I mean, I guess, look, we're trying to continue to moderate the growth. I just would say a flip around the forward exchange impact on a reported basis to OPEX is about 6%.
BioVision was for any underlying growth of operating.
Expenses is about eight. I think the only area that we're going to see growth that you should think about as we launch Yeti, which is our front-end website, and as we have now launched the ERP system is the increase in depreciation we'll see over the next year. So it was 32.8 million.
For 2022, it will be about $40 million for 2023. But other underlying operating expenses you will see moderating. And as we've said fairly consistently, if you look to the target we're setting in 2024, you should see a fairly straight line of operating expense.
Okay, and then just going back to the question on the bridge to 2024, given the split in revenue this year, you mentioned 45% first half, 55% second half. Given the sensitivity to the top line, is it fair to assume that operating income will be even more?
skewed towards the back half than revenue? Yeah, a little bit, but I think it should be fairly even, right? So, because the increase, since there's an increase in operating expenses, it should be also fairly level. We also were carrying some incremental expenses in the first hand.
as we finish off the implementation of the ERP system, which we won't have in the second half. So, I mean, we tried not to be too prescriptive in the past about the differences between the first half and the second half, and even on revenues, you know, it varies around those metrics. So, I just wanted to give you some idea from a modeling perspective.
Okay, thank you. Thank you. Our next question for today comes from Michael Reisgen from Bank of America. Michael, your line is now open. Please go ahead.
Great. Thanks. Maybe a quick one to follow up on an earlier point. Just on China, given how much of a variable it was in fiscal year 22, what's your expectation for China growth in 23? Is it sort of back to historical growth rates? Is it in line with a broader company or even faster than that? What are you looking for right now?
I mean, we're expecting it to come back in line with historic growth rates, but again, it's quite hard to predict as it recovers from COVID. And as you know, they've swung back and forth quite consistently.
Okay, and then on the 2023 versus 24 numbers, I mean, the long-term fiscal year 24 numbers, you've had them out there for a while. They've been, you know, tweaked and adjusted, but it's been a multiyear view. As we're getting closer and closer, you know, the jump from 23 to 24 is getting pretty tangible, I would say. So, for example, you're looking for...
420 to 440 million next year and then 450 to 525 in fiscal year 24 on the lower end of that the 450 million That's only five percent growth from next year and on the high end. It's 22 percent so One I guess I would say is what's gonna lead you to refine that fiscal year 24 revenue outlook
And then second part of that would be, you know, you commented on how so much of the operating margin.
Leverage is really just driven by top line growth. So to hit the 30% margin targets, is that, can you hit that at the midpoint of the 450, the high point, or can you hit it at 450 as well?
We've been pretty consistent saying that we expect we hit it at the higher end.
So I think we'll continue to be consistent. You're right, the math is very accurate. So if we hit 440 this year, the jump from 440 to 450 is pretty small.
we get to the end of the year, then we'll revise the 2024 targets based on where we end up. But don't forget, we have a significant FX movement in both our revenue line and our off X line. And so when we look at what our reported numbers are, we're trying to factor that in as well. Okay.
And maybe last one from me just on- Mike, just before you go- Yep. Mike, just before you go, the outlook for China this year, we just want to clarify that we're expecting mid-teens growth in China for the full year. Okay.
Thanks, appreciate that Tony. And then one last one for me actually on the more near-term factors you talked about January , February trading essentially in line with expectations. Are you seeing any noise just in the last couple months? We've heard a little bit of volatility bolt on.
the academia side and some of the pharma customers, just for some of the macro dynamics. Obviously you're saying trading's in line, but could you go a little bit deeper into order trends, any conversations that you shift the behavior between the baskets? I was gonna pick this up at the end, so thank you for asking, Michael.
AppCam has built more and more of its own product portfolio and we have that 67% of our revenue now coming from our own products.
AppCam has built more and more of its own product portfolio, and we have that 67% of our revenue now coming from our own products overwhelmingly.
And the whole reason why we did it was to address biopharmala as a greater opportunity. So we're growing very rapidly with customers who are on a more sophisticated discovery to clinic journey. And that growth rate and our market share gains are so strong.
that whatever noise there is in terms of short-term funding with small biotechs get lost in that transition. And we see really healthy growth out there for us and pretty excited about it.
Okay, thank you. Thank you. As a reminder, if you'd like to ask a question, that's style followed by one near-delafin keypad.
Our next question comes from Charles Weston of RBC. Charles, your line is now open, please go ahead.
Thank you. My first is just to go back to the ERP system, please. Demand was as expected. You commented earlier that the new guidance is significantly below prior expectations for the new ERP system.
in 2023, implying there's some sort of hangover effect from ERP. So just wondering if you could give us some color around that. For example, is there a decline in the net promoter score, which I can't see in the presentation or the press release? And are there any outstanding orders from last year still to be delivered?
Hi, Gerald Stone. Next question. The cycle that we went through with...
with the go live and the ERP was an important milestone in that campus history. We had to replace the...
higher kind of end-to-end order to cache legacy architecture and software with something that we've been designing and planning for a long time.
higher kind of in the end order to cache legacy architecture and software with something that we've been designing and planning for a long time.
order to cache legacy architecture and software with something that we've been designing and planning for a long time. It was an epic.
achievement to get that done while still running the company. It did not go flawlessly. But the impact of that on orders and revenues was most sharply felt in September , a little less sharply felt in October and started to get back to normal in November , December . Now we feel like we're in normal operation. So I just say that when those sorts of things happen, we don't—
sign some buying rather than create some surge in the backside and that's certainly what we've seen. It is not something we're pleased about to put signs on hold or customer.
on hold, but we worked hard to regain their trust and as Michael said earlier, order delivery times are now much more in the normal zone. If there are orders that are still holding from last year, theyíll be holding because they will be products that were purchased that were out of stock.
and make them for that particular order. For example, polyclonal antibodies, oftentimes if they're in the remote tail of our product portfolio and we're not holding them in inventory, it will take several months to make that product and there will be some orders associated with that rather than ERP first.
Thanks, can I move on to the CP&L line please? Revenue is up 5% constant currency year on year, but revenues in each of the subcategories is down in H2 on H1. I appreciate these can be a bit volatile, but even still I would have expected the underlying trend to be up, particularly given the number of...
I'd say on the IVD line, it was the similar issue we had.
with normal orders, which was the backlog we had to build, that we had to get out as we switched systems over and try to get back to normal operations. On the royalty side, I mean, the royalties, the royalty side has been fairly consistent and we're now seeing that actually much more normalized. And on the custom product side, that is a bit.
that goes up and down, you know, based on demand for difficult antibodies to be produced or generated or custom product areas. And that is always, Charles, you'll remember, been a really volatile business. And that line is what has caused the volatility in the CPNL line altogether.
So, if it continues to be about 6% of our business, and remember as our business grows, it's also staying consistent.
Okay, my last one please. Just on the right down the Firefly. Yeah, just one more thing. A few Heavy Recovery clones.
Don't show up in the custom, in the CPL line, remember, because they buy them straight off the catalog.
is that in the custom, in the CPL line, remember, because they can buy it, they buy it straight off the catalog. So
Yes, good point, thank you. And then just on Firefly, you know, it looks like you're stopping the activity to develop your own multiplex assays. And it looks like you're aiming to serve the market there through all your partners. Are there any particular sort of learnings that you've taken from Firefly that you're sort of taking forward? paying close attention to the change actually anything with the Kelley serpent and we've had a
Yes, Charles, absolutely. I mean, the good thing is that by having that technology, we learned a lot about how to validate and create antibody pairs and panels, and that gave us a massive head start then as other multiplex technologies entered the market. And it's a big reason why we could provide data sets to those partners that says, look, here's a 70-plex. This is nuts.
an antibody panel that doesn't interfere with one another. So in essence, it was extremely valuable.
What became clear to us though was that companies were investing.
40 to 60 million dollars a year in negative cash flow to build out their technologies and that was not something we felt was the right investment for shareholders.
in our particular technology and we were better off serving that market and partners through the antibody content we had. But we could have had the choice to say to join the fray and kind of invest in that. We looked at that and said no.
Okay, thank you. Just before I go Michael, I just wondered if I could clarify. The BioVision, how much did that contribute to your growth?
Thank you. Just before I go Michael, I just wondered if I could clarify. The BioVision, how much did that contribute to your growth for this year, or for last year?
BioVision? Yeah. Remember, Charles, there were some product lines in there that we got rid of. So the underlying cellular assay business is growing fairly consistently with the rest of the business at about 4%. Is there like an organic...
number that you can you can provide us? Well we have to remember when you look at fireplace we were when you look at
a bunch of them on our own. And then we brought those increases along the lines of the rest of our business, and then we added what was being sold through other distributors and stuff. So it's a hard number to actually, to separate it out. We've decided not to actually actively go out and separate out now via business products as we fully integrated it into the business. Okay, thank you.
Thank you. Our final question for today comes from Justin Bowers of Deutsche Bank. Justin, your lines now open. Please go ahead.
Thank you. Our final question for today comes from Justin Bowers of Deutsche Bank. Justin, your line is now open. Please go ahead. Hi. Good afternoon slash morning, everyone.
Just in terms of the customer, or sorry, the in-house mix, that's the penetration there has been up pretty nicely over the last few years. As you look out to 2024, what are you envisioning in terms of the penetration of in-house for catalog there?
Hey Justin, thanks. I hope I've been consistent on this, that the ratio of in-house to third party products and resources is totally defined by...
our customers man and customers and we're quite happy if we've got great OEM.
products that grow really rapidly that we've not decided to make, so we have those. So, you know, it's not a planning assumption in the name. That's it.
the level of investment and innovation that we've got going into the business, we expect it to continue to drive higher growth of our in-house products for that ratio to continue to move.
move on that basis. But I just wanted to make sure you and everyone understood that's not a targeted outcome measure. That's a result of market demand and products that we're innovating being more successful than what we're bringing in. Understood, appreciate that.
And then in terms of what is the mix of assay revenue now and catalog in-house, roughly? I think Michael had the slide. I threw out a number and it's wrong.
Myself so Michael, what's the. That was in your mix.
It's growing so rapidly, the challenge is, if I say a number, it's going to stop me.
It's growing so rapidly, the challenge is, if I say a number, it's going to stop... I mean, is it growing at like 80 percent? it really crisis.
So, yeah, that's basically, that's what we gave is just the growth rate. We didn't get the full, we just gave customer, we gave region, and then we gave the growth rate. So we said assays were growing greater than 80%.
that's basically that's what we gave is just the growth rate we didn't get the full we just gave customer we gave region and then we gave the growth rate we said assays of growing greater than 80%
as advice for going at 10 and sample prep detection printing is not greater than 30, but we didn't split up the amount.
sample prep detection printing was not great in 30, but we didn't split up in those. Okay.
Okay and then you cited some headlines in Europe and is that entirely related to ERP or were there some other factors there?
And then you cited some headlines in Europe . And is that entirely related to ERP or were there some other factors there as well?
It's entirely Europe . We find Europe's doing pretty well. Again, the biopharma side of the equation is helping drive quite a lot of our share gains.
Okay, and then just one more to clarify on the commentary on Matt's question around EBIT contribution. Are you saying that it should be in line with sort of the top line or it should be
with the top line split or more balanced.
between first half and second half.
between first half and second half.
Is that the operating margin question?
Yeah, yeah, yeah. So it wasn't – the question is, is it – is EBIT in line with sort of the revenue split that you talked about, or is it more like 50-50 or pro rata throughout the year with some of the costs coming off offline? Yes, so I mean, looking at the revenues going up – Sorry about that.
any further remarks.
Thank you, Alex. I hope that when you're thinking about the outlook of 2024 that you'll reflect on the consistency that we've had in terms of the outlook we have for the company and the case we've made for investment back.
in 2019. For me, what I'm pleased about is we're well through most of the really hard change efforts that we had to make in order to deliver that outcome. And we're excited about having this year and next year to refine and drive performance in the company. And that's why we're continuing to offer the confidence and consistency of message around the business.
You