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Trinity Biotech Plc (TRIB)
Q3 2012 Earnings Conference Call
October 18, 2012 11:00 a.m. ET
Joe Diaz – Lytham Partners
Ronan O’Caoimh – CEO
Kevin Tansley – CFO
Rory Nealon – COO
Chris Lewis – ROTH Capital Partners
Laura McGuigan – B Riley
Ross Taylor – Somerset Capital
Dave Cohen – Midwood Capital
Walter Schenker – MAZ Partners
Jeffrey Warshauer – Sidoti
Paul Nouri – Noble Equity Funds
Hello, and welcome to the Trinity Biotech Third Quarter 2012 Financial Results Conference Call. (Operator Instructions)
I would now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead.
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As the operator indicated, my name is Joe Diaz. I’m with Lytham Partners. We’re the financial relations consulting firm for Trinity Biotech.
With us on the call representing the company today are Ronan O’Caoimh, Chief Executive Officer; Rory Nealon, Chief Operating Officer; Kevin Tansley, Chief Financial Officer; and Jim Walsh, Chief Scientific Officer and Business Development Director.
At the conclusion of today’s prepared remarks, we’ll open the call for a question-and-answer session. If anyone participating on today’s call does not have a full text copy of the press release, you can retrieve it off the company’s website at trinitybiotech.com or numerous financial sites on the Internet.
Before we begin with prepared remarks, we submit for the record the following statement. Statements made by the management team of Trinity Biotech during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties.
The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, will, and other similar statements of expectation identify forward-looking statements. The forward-looking statements contained herein are subject to certain risks, uncertainties and important factors that could cause actual results to differ materially from those reflected in the forward-looking statements included herein.
Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, but not limited to, the results of research and development efforts, the effect of regulation by the United States Food and Drug Administration and other agencies, the impact of competitive products, product development, commercialization and technological difficulties and other risks detailed in the company’s periodic reports filed with the Securities and Exchange Commission.
Participants on this call are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. The company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
With that, let me turn the call over to Kevin Tansley, Chief Financial Officer of Trinity Biotech. He will be followed by Rory Nealon with a review on the Premier project, and he will be followed then by Mr. Ronan O’Caoimh, the Chief Executive Officer with his review of the quarter. Kevin?
Thanks, Joe. I am going to give you an update on the financial results for quarter three 2012, the details of which are contained in the press release as we issued earlier today.
Firstly, I’ll briefly discuss our revenue performance. As you’ll have seen from the press release, our total revenue this quarter were $20.9 million. This compares to $19.8 million in quarter three of last year, and represents growth of 5.2%. However, excluding the impact of foreign exchange movements – mainly the weaker euro – the overall increase would have been approximately 8%.
Point-of-care revenues increased by 20.6% from $3.9 million to $4.8 million. Meanwhile clinical laboratory revenues increased from $15.9 million to $16.1 million, an increase of 1.4%. However, excluding the impact of currency movements and Fitzgerald revenues, which were down slightly in the quarter, the increase in clinical lab revenues would have been 6%. Ronan will provide you with more details on revenue later in the call.
Now, moving on to gross margin. This quarter’s gross margin was 51%, which is slightly down on the 51.7% we reported in quarter three last year. Lower gross margins attributable to higher instrument placements – predominantly sales of our new Premier instrument, which increased to 54 units this quarter. I’ve mentioned before that we can expect gross margins to be a little lower than some quarters due to placements such as these, as instrument sales typically have lower margins.
Moving on to indirect expenses, our R&D expenses of $800,000 this quarter were at similar levels to those recorded in the equivalent quarter last year. Meanwhile, our SG&A expenses have decreased slightly to $5.1 million. This has been due to continuous cost management, but it’s also impacted by exchange rate movements.
As I’ve mentioned on previous calls, we effectively have a natural hedge from an FX perspective. In other words, our foreign-currency-denominated revenues and expenses are broadly equal. Whilst our revenues have been impacted by a weaker euro, so our SG&A expenses are down also for the same reason.
Operating profits for the quarter increased from $4.1 million to $4.35 million. And this brought the operating margin up to 20.9%. This is the highest operating margin that the company has ever achieved. As I mentioned in the press release, this is the key metric for us, as it indicates the extent to which future revenue growth will be converted into enhanced profits going forward. This is now the sixth quarter in a row with an operating margin in excess of 20%.