FEI Company's CEO Presents At Goldman Sachs Healthcare Conference (Transcript)

FEI Company (FEIC)

Goldman Sachs Healthcare Conference Call

June 05, 2012 05:40 pm ET

Executives

Don Kania - President & CEO

Analysts

Isaac Ro - Goldman Sachs

Presentation

Isaac Ro - Goldman Sachs

Okay. All right let's get started. Thanks all of you guys for after lunch sticking around and beautiful weather, its good. Isaac Ro from Life Sciences here at Goldman, very happy to have Don Kania from FEI with us today and we actually think this is a company that has really only in the last year or so come back on the radar screen and named it that investors in this part of the world tend to know much about. So thanks for coming. And secondly, if we could have you maybe sort of a couple of minutes going over the big picture story on your key initiatives for this year and I think if we can start here and we can just jump into questions from there.

Don Kania

Okay, sure. For those you who don't know we are a company that makes electron microscopes, very sophisticated microscope that can see very, very small things and that's the starting point. Our thesis is technology leadership in providing total solutions to a market oriented set of customers and so we organize ourselves around marketplaces one of which is life sciences which fits into the theme of today's meeting, but we also serve the electronics business which is semiconductor customers.

We have an emerging natural resources business where we serve oil and gas and minerals companies and we have a material science business which is our largest single business serving researchers around the globe doing research on materials.

And so technology leadership; we have three technologies which we leverage into all those markets. We just package it up differently for each of those customers to grow the company. The other side that's on the market side driving the topline; we've put a lot of effort into margin improvement and been relatively successful over the past few years and I think we moved over 600 basis points in the past six to eight quarters, so we improved profitability dramatically. We still think there is room ahead for improvement, so you've got I think an opportunity for topline growth, an opportunity for leverage profitability as we go forward.

Isaac Ro - Goldman Sachs

And then just key things for growth this year, how should we think about, you know growth has never been more of a scarcity here; so you guys are growing; tell us a little bit about….

Don Kania

Yeah, last year it was 30% which was really great, obviously we will grow as much this year, but we told the world 6% to 9% organic growth rate for the year on that side and then we have highlighted that by the fourth quarter we will get to 47.5% gross margin which has been from last quarter little over two point improvement.

So you will see some benefit to the bottomline, you will see topline growth and in a lot of ways 2012 because we have major initiatives in both life sciences and natural resources really a set up for faster growth in ’13. So when we take a big step back and say how fast can FEI grow? Our target is 12% or higher over the next few years and which has been our track record if you go back to like ‘98 and you look you draw on it the growth of the company it’s tracked that 12% line.

Isaac Ro - Goldman Sachs

And in a normal year how much volume growth would you say versus mix and share?

Don Kania

Well, off late it’s been -- we’ve grab a lot of share in the past few years, but I think we’re kind of at the end of that rope and that’s why the emphasis we’ve been putting on creating these new marketplaces, take the same technology and repackage and serves some new customers. And the other piece that gives us may be kind of listen into investors today there is always concern about Europe, I am sure we will talk about this.

But our goal is in the growth that we see in particularly in life sciences and in natural resources, it’s customers that already have money and they are spending in a different way, we just want a piece of that. So we don’t rely on growth in spending to continue to grow FEI. We rely on our ability to execute on solutions to that set of customers that’s better than what they are spending their money on today.

Isaac Ro - Goldman Sachs

So maybe we can spend a few minutes going to your key end markets that you currently serve and address how that happens because the technology has been around for a while, I think as expenses in very high end, certainly (inaudible) probably couldn’t use one of these with any great physician other than as a paper weight. So if I think about what it takes the FEI customers involved in using technology what types of innovation are you guys are focused on?

Don Kania

So I think from the technology perspective, we have been wrapping more than just the microscope as a box; we want customers to see it that way. It’s a box that does a functionality; but also many of our customers spend their lives like in the life sciences world, creating some kind of sample, whether it’s some kind of light activity, or mitochondria or something like that they or some kind of drug that they want to understand better. They really want seeing this flow of information so they can get from; I grossly call it Group Today. Our job is to take that group, turn it into information that they can then make rational decisions on or deeper understanding of what they created.

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