FEI Company (NASDAQ:FEIC) Q1 2015 Earnings Conference Call - Final Transcript

Apr 28, 2015 • 05:00 pm ET


FEI Company (NASDAQ:FEIC) Q1 2015 Earnings Conference Call - Final Transcript


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Donald Kania

in future quarters.

Industry orders were up 13% from a year ago on an organic basis. Growth at both large and regional Asian electronic customers was strong during the quarter. We saw near-line capacity buys at our large Asian customers and we increased our penetration at several leading memory manufacturers. This includes a successful expansion into a major memory manufacturer in Japan.

We continued to see adoption of our near-line tools by leading-edge foundry, logic and memory customers in parallel with continued lab investments for sub-10-nanometer R&D. Our workflows are well-positioned to deal with the increasingly complex structures, new materials and the uncertainties around yield-limiting defect. Visibility into our electronics customers' capital spending plans has improved over the past three months and our backlog and pipeline support our outlook for a strong year of growth for 2015.

Orders from natural resource customers continued to be slow during Q1. While our expectations for this business in 2015 remain modest, our confidence in the long-term opportunity for digital rock technology continues to increase. In the quarter, we made progress establishing the technical validity and economic value of our digital rock workflow. We look forward to providing more details at our June investor event and we remain committed to our investment in this large adjacent opportunity.

Science bookings were down 34% on an organic basis compared with Q1 of 2014. The lower Q1 Science orders follow record orders for the group in Q4 of 2014. The order slowdown in Q1 was most evident in emerging markets and Europe. In emerging markets, we believe the strong U.S. dollar and macro-economic uncertainty are negatively impacting the pace of business and customer purchasing power. In some regions, we are seeing customers needing to return to their funders to request more money as currencies have depreciated. Historically, we have seen this as a delay rather than a shift in underlying demand. We expect a substantial pickup in Science orders in Q2.

In China, we believe the processes for transacting are now moving into place and this will allow for a pickup in business. We have seen our Science order activity improve in China over the past two quarters, particularly from life science customers. We continue to expect growth in this market in 2015.

At our life science customers, cryo-electron microscopy continues to gain momentum within the adjacent crystallography and NMR communities. At a recent protein crystallographers meeting in California, over 90% of the 60 participants surveyed indicated they would need to involve electron microscopy in their work in the near-term.

On the funding front in North America, we are encouraged by several EM programs being set up throughout through the National Institutes of Health and a large U.S. philanthropic institute. These complement ongoing activities in Europe and China.

A recent publication in Nature on ribosome structure highlights the growing capabilities of cryo-electron microscopy for structure and functional determination of macro-molecular structures. The research demonstrates resolution of less than 3 Angstrom, a resolution level comparable with the best