Immucor CEO Discusses F2Q2011 Results – Earnings Call Transcript

Immucor, Inc. (BLUD)

F2Q2011 Earnings Call Transcript

January 7, 2011 8:30 am ET

Executives

Michele Howard – VP, IR

Nino De Chirico – President and CEO

Rick Flynt – EVP and CFO

Analysts

Quintin Lai – Baird

David Turkaly – SIG

Joshua Zable – WJB Capital

Bill Quirk – Piper Jaffray

Scott Gleason – Stephens, Inc.

Daniel Owczarski – Avondale Partners

James Sidoti – Sidoti & Company

Presentation

Operator

Good morning, ladies and gentlemen. Thank you for standing by and welcome to the Immucor conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Michele Howard, Immucor's Vice President of Investor Relations. Ms. Howard, you may begin.

Michele Howard

Good morning and thank you for joining us to discuss our second quarter fiscal 2011 results. Participating with me on this call are Dr. Nino De Chirico, our President and Chief Executive Officer, and Rick Flynt, our Chief Financial Officer.

Before we begin, I'd like to read the following Safe Harbor statement. Many statements on this call constitute forward-looking statements that reflect our judgment about future events and circumstances, including statements or projections about future financial results or economic performance, or statements about plans and objectives for future operations.

Actual results could differ materially from these forward-looking statements. The company does not intend to update these forward-looking statements unless required to do so by the federal securities laws. For a detailed discussion of factors that could cause actual results to differ from these forward-looking statements, please refer to yesterday's press release and the company's most recent SEC filings.

We'll make some brief comments and then go to Q&A. I would now like to turn the call over to Nino.

Nino De Chirico

Thank you, Michele. Good morning. I would like to start this morning with a brief update on overall industry conditions. The US market continues to experience softness, which we believe is primarily due to the macroeconomic environment. Demand for blood from hospitals continues to be weak, which is negatively impacting testing volume.

We believe the total decline in US blood demand for fiscal year 2010 and 2011 combined will be between 6% and 7% as compared with fiscal 2009 levels. This is confirmed by both internal and external data. We believe the lower blood demand is primarily driven by the economy and it’s evil [ph] influenced by the number of insured and under-insured people. The lower blood demand is evident in our lower year-over-year reagent revenue.

For our fiscal year 2011, which ends in May, we continue to expect industry demand in the US market but to be 2% to 3% below fiscal 2010 depressed level. Over the longer term, due to the aging population and with an improvement in the macroeconomic conditions, we believe that the industry in the US will return with historic low-single digit growth rate.

As we discussed last quarter, we believe that instrument orders have been negatively impacted by the weak economy, which has resulted in a longer sales cycle and more economic buyers involved in the process such as hospital purchasing groups and CFOs. As the selling process has become more complicated, we have taken steps during the second quarter to compete more effectively in this difficult environment. We continue to expect our effort to have a positive impact on orders in the second half of fiscal 2011.

Our instrument orders in the second quarter met our expectations. Let me start with NEO. We had 26 NEO orders in the second quarter with 9 in the US and Canada and 17 orders in the rest of the world, including distributors. We have received regulatory approval in all of our direct markets for NEO, and we have been very pleased with the favorable reception of this new high volume instrument as received from end users. With expanded functionality, faster turnaround times and highest throughput available worldwide, we believe NEO is in a category of its own in meeting the needs of high volume labs.

Our competitive takeaway rate for NEO in the quarter was roughly 35% and approximately 15% of the orders were capital sales. In our release last night, we reiterate our new order guidance. We continue to expect to receive between 80 and 120 orders for NEO in fiscal 2011. We continue to expect approximately 20% of the orders will be competitive wins and approximately one-third of the orders will be capital sales.

Turning to Echo, we had 29 Echo orders in the quarter, with 16 orders in the US and Canada and 13 orders in the rest of the world, including distributors. Our Echo orders have been nowhere in the past several quarters because of the economy and more complicated selling process in the US market that I discussed earlier.

Echo was specifically designed to meet the needs of low volume labs, and despite its great success in the three years since its launch, we believe there is still a lot of opportunity for Echo given both the large number of manual customer in the US and the superior functionality of Echo compared with the competitive instrumentation.

As I said earlier, we continue to expect our Echo order rates to pick up in the second half of fiscal 2011 and we continue to expect to receive between 140 and 180 orders for Echo in fiscal 2011. At the end of the second quarter, we had instrument order and backlog of 106 Echo and a combination of 51 of Galileo and NEOs.

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