Thermo Fisher Scientific Inc. Earnings Call Nuggets: Dionex, Internal Expectations

On Wednesday, Thermo Fisher Scientific Inc. (NYSE:TMO) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared with analysts and investors.

Dionex

Quintin Lai – Robert W Baird: So first question, relative to yesterday, we heard some others talk about big pharma with maybe a CapEx holdback at the start of the year. Marc, did you see any of that in your business?

Marc N. Casper – President and CEO: So from pharmaceutical and biotech perspective, very strong performance of Thermo Fisher in the quarter. Personally I think it reflects, our customers understand the value proposition that we have and the depth of our capabilities, Quintin. I think we were very unique in how we work with these customers. We saw a great strength across our portfolio, including our biopharma services outsourcing business, our bioprocess production businesses, as well as nice growth in our instruments business.

Quintin Lai – Robert W Baird: Did that pacing keep up through the quarter, Marc?

Marc N. Casper – President and CEO: Yeah, the quarter was strong with our pharmaceutical and biotech customers throughout Q1.

Quintin Lai – Robert W Baird: And then the integration and it looks like the things especially with you and Dionex is going really well. What you think that, you are seeing the biggest potential, is it taking the new products that Dionex would have done on their own and sending it through the Thermo Fisher channels or is it also selling the – cross selling between the two customer bases, some of the legacy Thermo Fisher and Dionex products?

Marc N. Casper – President and CEO: I’m excited about, obviously we are excited when we did the acquisition, I’m much more excited today because a year – we are almost a year into it, about two weeks or so away from that. The integration has gone flawlessly. We are well ahead of or synergy targets. We have integrated the business and the teams are working great together. When you look at where the opportunities are, they go across a huge range of areas. Some of them is the obvious the cross-selling, right, each company has great commercial reach and we’re helping the legacy Dionex business scale up and reach customers that they couldn’t in the past. We’re aggressively leveraging the strength that Dionex had in environmental customers to sell a lot more of ICP’s and other environmental products. Our connect rate between mass specs and liquid chromatographs are continuing to increase substantially, which means we’re basically taking what would have been legacy competition LCs and now keeping the profitability in-house. In the product development cycle as well, we are a number three player in gas chromatography. There is a very large number one player in terms of market share. It’s been a very boring category in terms of innovation and we took the incredible Dionex software with very unique innovations in our hardware platform and are aggressively going after the gas chromatography market. So, I think it’s going well, it’s going well on a number of fronts, and I feel like we’re just getting started.

Internal Expectations

Doug Schenkel – Cowen and Company: Pete based on your prepared remarks about guidance, where I believe you said you increased to the low end of the full year revenue guidance range by $40 million due to the Q1 beat. If it’s right to conclude that, that means that you beat your internal expectations by $40 million in the quarter. Could you just talk about some areas where you did a little bit better than internal plan? Then in terms of full year guidance, it sounds like all you did is just adjust for the Q1 be it in the changes in FX given that it does seem like you did a little bit better than internal plan in Q1. Could you just talk about the thinking or the reasoning behind, not been a little bit more aggressive with the guidance?

Marc N. Casper – President and CEO: So, I’ll start Doug. In terms of guidance, as you know we always focus on the midpoint and as the year unfolds, we make adjustments where we think it makes sense. Having the change in FX rates, we basically took that and flowed it through both the top end of the guidance and bottom end that was the $80 million, because Q1 was a good quarter above our expectations, the lowest end of the scenario in our original guidance seemed less likely and hence we lowered that. Excuse me — hence we raised that after the first quarter. That was the $40 million of operational performance. So, just given the good quarter behind you, it is less likely that you are going to have that low-end view. It’s a little bit early in the year to change the high-end operationally because we have still got three-quarters ahead of us and just still obviously some uncertainty in the end markets. So, that’s how we thought about it. If you want to say the next level is what went well relative to our expectations, we saw a slight improvement in academic and government end markets. It was still down low-single digits, but was actually a little bit better than Q4, so that was an improvement that we noted and it was nice to see continued strength in industrial and biopharma customers across the business.

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Doug Schenkel – Cowen and Company: One real quick clarifying follow-up. Unlike some of your competitors, I believe you did not have an extra day in the quarter. I know that was something that’s come up this morning and people have asked me what the impact was. I don’t think you guys had an extra day. Could you just confirm that?

Peter M. Wilver – SVP and CFO: That’s true. We’re on a fiscal calendar, so adding a day in February doesn’t matter.