PerkinElmer, Inc. (PKI)

PKI 
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PerkinElmer, Inc. (PKI)

January 11, 2012 5:30 pm ET

Executives

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

Analysts

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Presentation

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

All right. We're going to go ahead and get started. I'm Tycho Peterson. It's my pleasure to introduce our next company this afternoon, PerkinElmer. For those interested in the breakout, it's going to be in the Olympic Room. So let me turn over to Rob to talk more about Perkin.

Robert F. Friel

Great. Thanks, Tycho. Thank you all for joining us this afternoon. So I'll just mention, with me today is Andy Wilson, our Chief Financial Officer, so somewhere over here; and Kevin Hrusovsky, who is the CEO of Caliper and has now joined PerkinElmer as the President of our life sciences and technology business.

So today I'd like to do a couple of things. First of all give you an overview of the company, but really focus a little bit more on our strategy. And I know, particularly in meeting with some of the investors over the last day or 2, there's been some discussion around the activity, particularly in 2011 with acquisitions, and it may appear they were putting together a disparate collection of technologies. And I want to really focus today on the rationale and the strategy behind some of the acquisitions we've done, specifically in 2011, and really sort of do that in the context of what we see are tremendous value-creation opportunities within PerkinElmer to really drive and assist our customers in improving world health for the next couple of years.

Before I do that, I do want to remind everyone that to the extent we're using non-GAAP information that you should consult with a reconciliation which we have done on our website, www.perkinelmer.com. And to the extent that I use forward-looking comments, I want you to make sure that you consult with the SEC documents and, of course, the 10-Qs and the 10-Ks.

So as I said, if you look at -- a lot of the moves of the actions that we've taken over 2011, it was a busy year and it was really driven by 3 fundamental themes. So first of all, it's -- our goal is to really put together differentiated solutions based on strong and hopefully intellectually or protected intellectual property that is application driven. Those applications are focused on attractive segments and improving health. And you see there that they fundamentally resolve around 3 areas: diagnostics, research and environmental. And I think one of the things that's somewhat unique to PerkinElmer is we've got great channel and access in emerging markets. And as I'll explain a little while, what we'll see is continued evolution on a hierarchy of medical needs, that we have the ability to take those and drive them into the emerging markets. So developed for the developed markets and then bridging that into the emerging markets, and I'll give you a little bit of perspective on that.

Before I start though in those discussions, I do want to give you a quick overview for some of you that are not as familiar with PerkinElmer. So you can see from the slide, about a $2.1 billion revenue company. You can see fairly geographically dispersed, less, I mean, 50% of our revenue in North America. And then actually, evenly split between Western Europe and the emerging markets. And you can see on the right side of the slide, our split between instruments, reagents, consumables and service and software, giving us about 60% of our revenue related to recurring revenue. And then the other point there on the bottom I want to make is a lot of intellectual property, 3,300 patents. And actually 2012 will represent the 75th year for PerkinElmer where we've been developing excellent technology, really using inspired innovation to assist our customers.

And with regard to that technology, I really want to focus on where that is directed and I thought would be interesting look. This is a study that was done by IBM Global Business Services that really focused on fundamental changes that are occurring in the healthcare system, and it really used sort of the Maslow's hierarchy to sort of lay out really some of the motivation and really value perceptions of stakeholders in healthcare, and to a large extent this is governing healthcare needs. And you can see there on the bottom, it starts with sort of rudimentary environmental needs, things like clean water and air, then moves up to the sort of the basic healthcare needs of preventive screening, immunization, medical necessities. So this thing, this will be sort of acute care and treatment, and then of course health enhancements and then ultimately sort of driving toward that optimal or personalized health.

And interestingly enough is when you think about the resources required, there's less resources required on sort of the bottom half of the triangle and the resources increase as you go up the triangle. And so I think PerkinElmer's got an opportunity to play almost across this entire triangle here. So if you look at our addressable markets, so with the exception of the health enhancements, we play within the research area, really focused at the medical necessities there. So about a $5 billion addressable market for us and you'll see most of our end markets grow in sort of the mid to high single digits. However, I will point out that we are targeting specific areas, specific subsections of those markets where we think the growth is considerably higher. We'll get into them on the discussion. You can see the diagnostic markets in the environmental health markets. And then we also have a service and software offerings that really cut across all 3 markets, about a $6 billion addressable market also growing in the 5% to 7% range.

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