FEI's CEO Discusses Q4 2011 Results - Earnings Call Transcript

FEI Company (FEIC)

Q4 2011 Earnings Call

February 8, 2012 05:00 p.m. ET

Executives

Fletcher Chamberlin – Treasurer & Communications Director

Raymond A. Link – Executive Vice President and Chief Financial Officer

Dr. Don R. Kania – President and Chief Executive Officer

Analysts

Patrick Ho – Stifel Nicolaus & Company, Inc.

Joe Maxa – Dougherty & Company

Zach Larkin – Stephens Inc.

James Ricchiuti – Needham & Co.

Mark Miller – Noble Financial Capital Markets

Thomas Diffely – D. A. Davidson & Co.

Presentation

Operator

Good afternoon ladies and gentlemen, thank you for standing by. Welcome to the FEI Fourth Quarter Earnings Conference Call. During today’s presentation all parties will be in a listen-only mode and following the presentation, the conference will be open for questions.

[Operator Instructions] This conference is being recorded today, February 8, 2012 and I would now like to turn the conference over to Fletcher Chamberlin. Please go ahead.

Fletcher Chamberlin

Thank you, Douglas. Good afternoon ladies and gentlemen. As the operator said, I am Fletcher Chamberlin, FEI’s Treasurer and Communications Director. With me today at our headquarters in Oregon are Don Kania, our President and CEO; and Ray Link, Executive Vice President and Chief Financial Officer.

We’ve again posted some slides under Events & Presentations in the Investor Relations part of our website, www.fei.com. We will refer to these slides during today’s call. We hope having these slides will make it easier for you to listen to our comments rather than just focusing on getting the numbers recorded.

While you are pulling up the slides and before we get to the presentations, we also have the regular housekeeping matters to address. This call contains forward-looking statements. To the extent that we discuss expectations of our future corporate financial performance and goals, future customer orders, performance by product in the market, the outlook for margins and revenue, market developments and opportunities, future product and technology developments, the effects of future movements in exchange rates, future hiring plans, expected government spending for research tools, expected tax rate and other future events and plans, those statements are considered forward-looking subject to risks and uncertainties that could cause our actual results to differ from the forward-looking statements made.

These and other risk factors are cited in today’s press release on slide two of the slides posted with this call and in FEI’s most recent 10-K, 10-Q and 8-K documents and other filings with the SEC. Investors are urged to read these documents. Copies of the SEC filings are available free of charge on the commission’s website at sec.gov, on our website or from our Investor Relations Department at 503-726-7710.

The company assumes no duty to update forward-looking statements set out in those documents or made on this call. This call is the property of FEI Company. It will be archived in the Investor Relations section of our corporate website at www.fei.com.

I’ll now turn the call over to Don for a review of our execution against our strategies, a view of our markets and the business environment and then Ray will go through the numbers in detail.

Raymond A. Link

Thank you, Fletcher. Good afternoon everyone. 2011 was a transformational year for FEI. Successful execution of our strategy generated record revenue earnings and cash flow. In 2012 we plan to continue investing to further our growth to expand our margins and to effectively use our cash. For the year revenue grew 30%, gross margin increased by 200 basis points, operating margins increased by 670 basis points, net income group by 94%, and cash flow from operations grew by 35%.

Since 2006 revenue has grown at a compound annual growth rate of 12% per year, essentially all organically. Gross margin has grown by 350 basis points. Operating margin has increased by over 1000 basis points. Net income is up over five times and cash flow from operations is up over four times.

We finished the year with a strong fourth quarter. Revenue was up 14%. GAAP earnings were up 36% and non-GAAP earnings were up 19% from last year’s strong fourth quarter. Ray will provide all the details in a moment.

Last June, we outlined our strategic plans to continue our growth by doubling our served available market by 2014. Indeed we expect all of our markets to grow. But in addition we seek the opportunity to expand it to market served by adjacent technologies. In particular we identified opportunities in life sciences and natural resources that are outside of our traditional electron microscopy market. We’ve taken important steps in the last few months toward executing our plan.

In life sciences our strategy has two components, structural biology and cell biology. We have established an important collaboration in each area. In cell biology, the living lab with Knight Cancer Institute at Oregon Health Sciences University was announced in September.

In structural biology we have signed a cooperative research and development agreement in December with the National Institutes of Health. Under this agreement our team will be working together with NIH experts in adjacent technologies to target important scientific discoveries that could be used in electron microscopy.

These agreements are important investments in our life sciences strategy and are a foundation for future growth. We added another key building block in November with the acquisition of TILL Photonics of Munich, Germany. TILL gives us the performance light microscope component of our correlated microscopy solution, the seamless combination of light and electron microscopy.

Read the rest of this transcript for free on seekingalpha.com

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