Life Technologies' Sequence of Success
While genome-sequencing aficionados (what few there may be) focused attention on Roche's (OTC: RHHBY) bid for, and subsequent rejection by, Illumina (NAS: ILMN) , fellow sequencer Life Technologies (NAS: LIFE) focused on something more important: making money. Slowly and steadily, Life Tech keeps making a little more money and building a little more momentum. Its latest earnings revealed only modest overall revenue gains, but a 13% improvement in the Ion Torrent-centric genetic systems segment shows great promise going forward.
Break it down
Longtime Life Tech followers should be well aware of the company's consistency, but it's worth noting again, especially in light of the company's solid fourth quarter:
Sources: Morningstar and Life Technologies earnings release.
Life Tech calculated its revenue rather conservatively, with non-GAAP earnings clocking in $40 million below GAAP results. Even without that downward adjustment, Life Tech still set new revenue records, besting the $941 million earned in 2011's second quarter. Investors should take note of this consistency, because there is not an abundance of stable and profitable companies in this space to invest in. For reference, up-and-coming Pacific Biosciences of California (NAS: PACB) recently released fourth-quarter results featuring revenue of only $12 million and declining losses of $23 million. There were a number of interesting tidbits contained in both Life Tech's earnings release and conference call, though most slid under the radar of investors expecting another huge revelation on par with $1,000 genome sequencing (which was revealed earlier this year).
It might take a couple of quarters for that new low-cost machine to show up on earnings, but there are already signs that Life Tech is positioning itself for long-term sequencing success.
Let's take a look at some of the most important facts and figures from both Life Tech's earnings release and its subsequent conference call:
- 2011 free cash flow was $710 million on revenue of $3.7 billion.
- Non-GAAP organic revenue should grow by 2% to 4% in 2012, with the company issuing EPS guidance between $3.90 and $4.05.
- Life Tech revenue grew 2% in the Americas, 3% in Europe, and 9% in the Asia-Pacific region last year. Japanese revenue declined 3% on the year.
- E-commerce sales grew 12% in 2011. Over half the company's transactions are now processed through this platform.
- CEO Greg Lucier compared Life Tech's e-commerce platform to Amazon.com, noting that his company can ship bio-active products anywhere in the world within five days.
- Life Tech now has 900 employees in the Chinese region (including Taiwan and Hong Kong) and plans to add another 250 this year.
- Despite having $2.3 billion in long-term debt, Life Tech remains committed to a $300 million share repurchase, which comes on top of $100 million already spent on repurchases in just the past six months.
- Life Tech has $882 million in the bank -- plenty to meet this goal.
- Government and academic customers will be "challenged, but stable."
- The Ion Torrent sequencing platform should "grow significantly."
Foolish final thoughts
I remain quite excited about the breakneck drop in sequencing costs and its potential for broad adoption. The Ion Torrent segment only generated $278 million in fourth-quarter revenue, about a quarter of Life Tech's total. As plummeting costs make sequencing a common practice, that segment could very well become Life Tech's golden goose. It's certainly worth keeping your eye on.
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At the time this article was published Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights.The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services have recommended buying shares of Illumina, Pacific Biosciences of California, and Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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