Abcam plc(ABCM) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total reported revenues for the year ended December 31, 2022, were GBP361.7 million, up approximately 8% on a constant exchange rate basis and up approximately 15% on a reported basis, with favorable foreign exchange tailwinds accounting for approximately 7% of reported growth [18][19] - Adjusted gross margin expanded by 330 basis points to 75.5%, compared to 72.2% in the previous year, driven by in-house product mix and the inclusion of BioVision products [21] - Adjusted diluted earnings per share increased by 21% to GBP0.249 [21] Business Line Data and Key Metrics Changes - In-house revenue, which includes Abcam produced Catalogue products, grew by 18% on a constant exchange rate basis and now represents 67% of total reported sales [20] - Catalogue revenue from the Americas, which accounts for approximately 43% of Catalogue sales, grew by 16% at constant exchange rates [22] - Catalogue revenue from EMEA, representing 26% of sales, grew by 6% at constant exchange rates, while China, which represents 18% of sales, reported a revenue decline of 2% at constant exchange rates [22] Market Data and Key Metrics Changes - Academic revenues, representing approximately 43% of Catalogue revenue, grew at 4% globally at constant exchange rates, while biopharma revenues, accounting for approximately 27% of Catalogue sales, grew at 10% globally [23] - The market continues to shift towards recombinant antibodies, driving good demand for Abcam's products, with recombinant antibody and in-house assay technology growing over 80% at constant exchange rates [24] Company Strategy and Development Direction - The company aims to sustain and extend its antibody and digital leadership, drive continued expansion into complementary market adjacencies, and build organizational scalability to sustain value creation [9] - Strategic investments have been made to increase innovation capabilities and new product development capacity, with a focus on refining investments made over the last few years to improve customer experience [17][28] Management's Comments on Operating Environment and Future Outlook - Management noted that the implementation of the new cloud ERP system and COVID-19 impacts in China affected revenue growth, estimating a GBP30 million impact on sales [19] - For 2023, the company anticipates a return to historical growth rates in China, with expectations of mid-teens growth for the full year [56][59] - The company reiterated its full-year 2023 revenue growth guidance of 15% to 20% on a constant currency basis, projecting reported revenues of approximately GBP420 million to GBP440 million [29] Other Important Information - The company introduced over 1,200 new antibodies into application partnerships during 2022, with a total of over 2,100 antibodies in the market today [14] - The company is focused on delivering operating leverage consistent with its five-year commitment by 2024, with expectations of continued refinement of prior period investments [27][28] Q&A Session Summary Question: Impact of China reopening trajectory - Management indicated that the market in China is slowly returning to normal levels post-COVID, but it is still hard to predict how the market will swing [33] Question: ERP upgrade impact - The ERP implementation caused a GBP20 million impact in 2022, but business is returning to normal, with expectations of benefits from the rollout in the coming years [34][35] Question: Gross margin contributions - Most gross margin improvements were attributed to product mix and BioVision, with expectations for moderate increases in the future [40][41] Question: Capital deployment priorities - The company is looking for opportunities that fit its strategic plan but is cautious about high valuations in the market [42][44] Question: Assay growth opportunities - Management highlighted the importance of early visibility into relevant biomarkers, driving the development of new antibody pairs and applications [46][47] Question: Operating expenses in 2023 - Operating expenses are expected to moderate, with an increase in depreciation due to the ERP system launch [50] Question: Expectations for China growth in 2023 - Management expects China growth to align with historical rates, but it remains difficult to predict due to the recovery from COVID [54][56] Question: Contribution of BioVision to growth - The underlying growth of the cellular assay business is consistent with the rest of the business at about 4% [75]