PerkinElmer Management Discusses Q2 2012 Results - Earnings Call Transcript

PerkinElmer (PKI)

Q2 2012 Earnings Call

August 02, 2012 5:00 pm ET


Tommy J. Thomas

Robert F. Friel - Chairman, Chief Executive Officer, President and Member of Finance Committee

Frank A. Wilson - Chief Financial Officer and Senior Vice President

Kevin Hrusovsky


Jonathan P. Groberg - Macquarie Research

Daniel L. Leonard - Leerink Swann LLC, Research Division

Ross Muken - ISI Group Inc., Research Division

Daniel Brennan - Morgan Stanley, Research Division

Daniel Arias - UBS Investment Bank, Research Division

Isaac Ro - Goldman Sachs Group Inc., Research Division

Jon Davis Wood - Jefferies & Company, Inc., Research Division

Eric Criscuolo - Mizuho Securities USA Inc., Research Division

Bryan Brokmeier - Maxim Group LLC, Research Division

Derik De Bruin - BofA Merrill Lynch, Research Division

Zarak Khurshid - Wedbush Securities Inc., Research Division

Jeffrey T. Elliott - Robert W. Baird & Co. Incorporated, Research Division

Steve Willoughby - Cleveland Research Company



Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 PerkinElmer Earnings Conference Call. My name is Keith, and I'll be your operator for today. [Operator Instructions] As a reminder, today's conference is being recorded for replay purposes. And with that, I would now like to turn the conference over to your host for today, Mr. Tommy Thomas, Vice President of Investor Relations. Please go ahead, sir.

Tommy J. Thomas

Thank you, Keith. Good afternoon, and welcome to PerkinElmer's Second Quarter 2012 Earnings Conference Call. With me on the call are Rob Friel, Chairman and Chief Executive Officer; and Andy Wilson, Senior Vice President and Chief Financial Officer.

If you have not received your copy of our earnings press release, you may get one from the Investors section of our website at or from our toll-free investor hotline in 1 (877) PKI-NYSE. Please note, this call is being webcast live and will be archived in our website until August 16, 2012.

Before we start, we need to remind everyone of the Safe Harbor Statement that we have outlined in our earnings press release, issued earlier this afternoon and also those in our SEC filings. Any forward-looking statements made today represent our views only as of today. We disclaim any obligation to update forward-looking statements in the future, even if our estimates change. So you should not rely on any of today's forward-looking statements as representing our views as of any date after today.

During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measures we plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release. To the extent we use non-GAAP financial measures during this call, but are not reconciled to GAAP in the attachment, we will provide reconciliations promptly.

I'm now pleased to introduce the Chairman and Chief Executive Officer of PerkinElmer, Rob Friel. Rob?

Robert F. Friel

Thanks, Tommy. Good afternoon, and thank you for joining us today. Once again, we are reporting another excellent quarter, in which we delivered solid financial results while making excellent progress against our strategic priorities.

During the second quarter, our adjusted revenue grew 10% year-over-year, adjusted operating margins expanded 240 basis points. We generated excellent cash flow and adjusted earnings per share increased 23%, which exceeded both our guidance and consensus.

We continue to be extremely pleased with how we are improving both operating efficiencies and profitability of the company, while also delivering very strong top line growth. Our ability to deliver this impressive financial performance, particularly in light of the current difficult macroeconomic conditions, is due to several factors.

First of all, we serve many end markets that are less economically sensitive. In addition, within these markets, we provide products that are critical to our customers. Whether it is assisting in the screening of newborns, helping improve the productivity of labs or keeping drinking water safe, our products continue to be sought after even in an unstable, global financial situation, as global interest in both human and environmental health continues to grow.

And with our recent acquisitions, we have further bolstered this advantage by expanding our capabilities in the areas of informatics, molecular analysis, imaging and sample prep, positioning us well to address both current and future needs of the global human and environmental communities.

The second factor is our significant global reach and capabilities, particularly in emerging markets. As many of our products are instrumental to expanding health care services and improving environmental conditions, we continue to experience strong demand for many of our products in these areas of the world where there is a focus on developing fundamental, environmental and health care needs. I'm especially pleased that our sales into the emerging markets now represents approximately 28% of our total sales, and were responsible for over half of the company's total organic growth during the second quarter.

For example, our China business, once again, showed strong growth with organic revenues increasing more than 20%, and with adjusted operating margins greater than the corporate average. China continues to be an important contributor to both our revenue and earnings growth.

In particular, our Chinese diagnostic business continues to gain traction with both new and existing customers, adding approximately 40 new customers in the quarter as the country increases its efforts to help combat infectious diseases, such as hepatitis and HIV. What's important to note here is that we saw a double-digit sequential organic growth and feel that we're still only in the early stages of a very big opportunity. A major part of China's 12 5-year plan is focused on improving both human and environmental health, and we believe that we are well-prepared to capitalize on this trend.

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