FEI Company (NASDAQ:FEIC) Q4 2015 Earnings Conference Call - Final Transcript
Feb 02, 2016 • 05:00 pm ET
(Operator Instructions). Isaac Ro, Goldman Sachs.
Thanks, guys. It's actually Joel in for Isaac. Just trying to get a better sense of why you guys are so bullish on cryo-EM again in 2016, just given how long it takes some of these new high-end technologies to gain traction and find funding? And then maybe could you just help us understand the typical sales cycle of one of these placements?
Sure. I think the bullishness comes from, as we look prior to 2016, customers were very, very effective in the United States at finding non-NIH funding to buy their tools. There was relatively limited funding in the area. They were able to get either the university funding, philanthropic funding in areas outside of the traditional funding routes. We see that continuing into 2016, I think, but on top of that I think we are starting to see that the NIH's waking up that this is a technology change that's deserving of additional funding. And so I think within the US we see both the existing opportunities for growth and perhaps additional opportunities for people to acquire our systems.
If we look outside the US, Germany has been very aggressive in this area over the year and we expect that to continue. We see the UK aggressively investing, and to some extent some other areas in Europe and if we go over to China, they are very well-funded to contribute to their development in the long-term of a pharmaceutical industry and so we see that funding as robust as well.
Typical sales cycle traditionally in a high-end equipment like this can run as long as a year. But our experience has been in areas where you have the hot technology topic, that cycle time can shorten up because people get very aggressive and what you have is the high-end scientists who have significant sway with the funders, and they may be either within the traditional government routes or within their local funding or whether that state or university or philanthropic funding, find themselves to be more effective. And we've seen a little bit of that pattern starting to happen where orders are closing more quickly because people want to lock in slots so they can be generating their differentiated research products more quickly.
And then maybe just one on the service business. I think you guys have seen some nice sequential improvements in organic growth throughout the year. Can you maybe just dive into what exactly is driving that improvement and why you guys are so bullish on service in 2016 as well?
Yes. I think the easiest way to be bullish is just to look at the track record in the business, which is growing linearly over multiple years. But there's a reason that we've been able to do that. One, you do have some installed base expansion, but at the same time we feel confident that we will continue because we've enhanced the management team, enhanced our product offerings such that