FEI's CEO Presents At Bank Of America Merrill Lynch 2012 Health Care Conference (Transcript)

FEI Company (FEIC)

Bank of America Merrill Lynch 2012 Health Care Conference Transcript

May 17, 2012 11:40 AM ET

Executives

Don Kania – President and CEO

Analysts

Derik de Bruin – Bank of America Merrill Lynch

Presentation

Derik de Bruin – Bank of America Merrill Lynch

Yeah, final day of the Bank of America Merrill Lynch 2012 Health Care Conference. I‘m Derik de Bruin, the Life Sciences Tools and Diagnostics Analyst, and it’s my pleasure this morning to introduce next company, FEI Company, with President and CEO, Don Kania speaking today. There will be a brief presentation followed by some Q&A.

With that, Don.

Don Kania

Thanks a lot and it’s a pleasure to be here. So, get going to the, obviously, the Safe Harbor statement on the slide. We are not going to give anything new in terms of guidance or anything like that. Well, we’ll be reaffirming any guidance, but we’ll show it.

So, who is FEI? I think, we’re, just knew this space and it’s the healthcare world. Our company makes electron microscopes and similar nano tools. There is really three core technologies that we have, one is called transmission electron microscopy, the scanning electron microscopes, and this we called focused ion beam.

All you need to do is we make instrumentation that can see atoms, image molecules in three dimensions, and can -- with the machine surfaces at the atomic scale. And we configure three basic technologies to deliver that capability through a variety of markets, that’s how we do, average selling price, just over $1 million to give you a sense.

So, we also believe in organizing the company around markets and we talk about four markets publically. The semiconductor industry and upper right, there is a picture of President Obama. We visited Intel and Oregon. They put in front of FEI microscope. INTEL is a big customer, usually number one and number two, which will be like a 5%, 6% level, so customer concentration is relatively limited. But semiconductor customers Intel, [PSNT], et cetera, that’s our world there.

Below that is we have our Materials Science business, where we sell, basically the researchers either at in the industrial applications or at universities or institutes around the globe, and that’s Daniel Shechtman, who won the Noble Prize this year in chemistry. He is customer of ours. Great customer of ours and in fact gave our instrumentation credit for his ability to win that Noble Prize.

Upper right, National Protein Center, that’s our Life Sciences business. We do two things there. We work on structural biology that is three-dimensional imaging of micromolecular structure, interesting to the functioning of life and also cell biology, which is relatively new for us at all. I’ll talk a bit more about that.

In the lower right, National Resources business, we serve mining and oil and gas with measuring capabilities of the structures of minerals, and I’ll talk little bit about that too.

So in terms of, on the left, we really have markets that have been well-established for us and those are around a couple hundred million dollars revenue a year.

Upper right, Life Sciences, about $1 million, lower right, the emerging business for us of mineral, Natural Resources is about $50 million under that level. We don’t talk the details on that right now, because is still kind of small.

So, the way to think about FEI, we have a nice run, I think of late. But our goal in terms of continuing to grow the company, which has been about 12% cliff over the past decade or so, is to go find new served available market, use our platform, technologies, reconfigure those in such away either with better sample preparation, better workflows overall that we can go serve new markets, and I’ll show you, we plan to double that by 2014.

We want to continue to expand geographically in the recent quarters. Almost 50% of our business comes out of Asia and Japan, and that’s the dramatic shift over the past two years. We made significant investments there to grow.

And we continue to grow in established markets Europe and U.S. in particular. And at the same time, we are improving our margin performance overall, that includes delivering better value to the customers through workflow based products. Our new customers, our new businesses have higher margins than are older businesses and then we continue to improve our operations internally.

A snapshot here, as we look at the order performance over the past few years on the left-hand side with compound annual growth rate about 12% and in the near-term, you can see in the past few quarters have pretty good trajectory. In fact, we delivered record orders in last quarter in Q1 that we just reported, which is actually unusual, because it’s really off our seasonal pattern, usually Q4 is the strongest quarter, and that was, I’ll go a little bit on the strength of that.

So, let me go through the bookings by segment here, now we’ve taken that view from a marketplace perspective, you can see the four years below last couple of years.

And what we like in FEI is to have a balance amongst our businesses. We like to keep Electronics around the third of our business, so you can see up stage in that range, that’s the semiconductor business. We see it is a cyclical growth business, not as just a cyclical, like, I’ll show you some more information on that.

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

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