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Bio-Reference Laboratories Inc. (NASDAQ:BRLI)

Q2 2014 Earnings Conference Call

June 05, 2014 11:30 AM ET

Executives

Tara Mackay - IR

Marc Grodman - President and CEO

Sam Singer - CFO

Analysts

Amanda Murphy - William Blair & Company LLC

Raymond Myers - Alere Financial Partners

Mitra Ramgopal - Sidoti & Company, LLC

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2014 Bio-Reference Laboratories Earnings Conference Call. My name is Britney, and I'll be the coordinator for today. At this time all participants are in a listen only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

And at this time, I would now like to turn the presentation over to your host for today Tara, Investor Relations Coordinator. Please proceed.

Tara Mackay

[Audio Gap] Laboratories is one of the largest full service clinical diagnostic laboratories in the country with focused marketing capabilities in the areas of genomics, oncology, women's health, correctional health and physician office pathology. Leading us on the call today will be Dr. Marc Grodman, President and Chief Executive Officer; and Sam Singer, Chief Financial Officer.

Some of the commentary made in this presentation may relate to future results and events. Statements regarding the company's revenue and earnings guidance are based on the company's current expectations. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, including general economic and business conditions; future regulatory requirements and pressure on healthcare reimbursement; the service, customer and geographic market mix of any particular financial period; the company's ability to effectively manage its operating cost and collect its receivables in a timely fashion; the level of demand for the company's products and services; and the company's ability to manage its supply and delivery logistics. Additional discussion of these and other factors affecting the company's business and perspective is contained in the company's periodic filings with the Securities and Exchange Commission.

I will now turn the call over to Dr. Marc Grodman, President and Chief Executive Officer.

Marc Grodman

Thank you, Tara. We make choices. Investors give away to different criteria to evaluate investment opportunities. All of you on this call understand the realities of both the market and the environment in which clinical laboratories; in fact all healthcare service companies operate today. With those that place a greater emphasis on the challenges the industry faces, all these will give greater way to help companies respond to those challenges. You could bet on the adversity, you could bet on the response of the adversity. Given the past two decades of growth and innovation, we believe this past quarter demonstrates, not only our ability to respond to the changing market landscape but serve as a validation of our long-term investment in growth, in genetics, in cancer, in woman’s health and other specialty testing.

I'll ask Sam Singer to give the financial details for our most recent quarter and then I’ll have some comments on the quarter, thank you. Sam?

Sam Singer

Thank you, Marc. Good morning everyone. During the second quarter of fiscal year 2014 which ended on April 30, Bio-Reference recorded net revenues of $201,366,000 the highest quarterly net revenues ever recorded by the company compared to $176,452,000 in the second quarter of the prior fiscal year, an increase of 14%. Gross profit on revenues for the current quarter was $88,549,000, representing a 44% gross profit margin. In the second quarter of the prior year, gross profit on net revenues was $80,676,000, representing a 46% gross profit margin.

Earnings per share on net income after tax were $0.37 per share in the current quarter versus $0.41 per share in the prior year quarter. Patient count for the current quarter increased to 2,364,000 from 2,066,000 for the prior year quarter, an increase of 15%. Net revenue per patient for the second quarter just ended was $84.18 compared to $84.93 per patient in the same quarter in the prior fiscal year, a decrease of 1%. April 30, 2014 working capital was 173,712,00, an 8% improvement over the 161,116,000 that we reported on October 31, 2013. With both sales outstanding on April 30, 2014 was 105 days. Net revenues were 382,635,000 for the six month period ended April 30, 2014, representing a 30% increase over the net revenues for the same period in the prior fiscal year. Gross profit on net revenues for the current six month period was 160,703,000 or 42% compared to the prior fiscal year of 151,589,000 or 45%. The number of patient service during the current six month period was 4,571,000, which was 13% greater than the prior year comparable period. Net revenue per patient for the six months period just ended was $83.07 which remained virtually unchanged from the prior comparable period.

Earnings per share or net income for six month period ended April 30, 2014 were $0.47 per share as compared to $0.72 per share in the prior year. Thank you. I return the call to back to Marc.

Marc Grodman

Sam, thank you very much. Who is Bio-Reference? First of all, we are who? Is that a what since it’s the core of this company is a group 100s of dedicated professional who comprise the who that we believe makes up this company and further believe that we can and will make a difference in our care that’s delivered to patients now and in the future. These are people who’ve committed to Bio-Reference in some cases it’s been decades and have served as role models for new members the Bio-Reference family. And anyone who has been here who has visited us, they’ve seen us, known us touched with us anyway know the capabilities of the people who are part of this company.

We’re built for growth and trying to get critical and scientific innovation. It’s these capabilities that have enabled us to respond to the current challenges that clinical laboratories have faced over the past year. A few years ago we introduced a disruptive change in how sexually transmitted infections are diagnosed, a clinical application that has been emulated by virtually all of our competitors as well as our suppliers. We have used this advantage to build an incredibly viable and competitive national initiative in women’s health that combines elements of genetics, cancer diagnostics as well maybe a decade ago or decade has passed since we’ve invested in genetics.

Since that time we became the first commercial laboratory to introduce next generation sequencing for clinical use transforming the ultimate question the clinical question to be able to go in and look for the condition rather than just test for the specific gene. We’ve a long history of cancer testing in diagnosis as well as strong relations with outstanding academic centers and we are poised to make a significant impact in utilizing the latest technologies in line with the challenges presented by today’s reimbursement environment. I am incredibly enthusiastic of the future prospects of cancer testing of what we and how we will post to market to both provide more information, more connectivity and be cost effective and be recognize the limitations of the environment in which we work.

We created the first national Spanish first clinical offering Laboratorio Buena Salud that continues to take market share in key demographic areas we are a national leader in offering connectivity solutions to hospital laboratories that enable them to compete with the national competitors as well as offering decision support to selective clients in order for them to prepare for the new demands placed on them by payers now and into future. We’ve built a national infrastructure that allows us to offer one stop shopping under the aegis of specialty brand others can use our words but they can’t duplicate our innovation and growth. They’ve never been able to duplicate clinical insights that we provide to scientific expertise that we offer and they also can’t duplicate our sales and marketing group that I believe given this historic record is one of the greatest sales forces in the history of health service companies.

Our response to these challenges in a quarter where comparisons are difficult because of the totally different reimbursement environment in last year and despite severe weather we grew volume and revenues by over 14%. Despite the changes in reimbursement in the added infrastructure from our investment in Florida and California, our net income during the quarter when adjusted for the impact of the weather is comparable to where we were in the same quarter last year, we are on $0.37 this quarter. We previously indicated that the weather would negatively affect this quarter anywhere from $0.05 to $0.07. I believe this time they already resulted in only a $0.05 reduction in earnings and it will be some of the challenges we faced. When the entire laboratory sector, while the entire leverage for the sector, readily acknowledges that reimbursements are down from last year, we’re still confident, confident right now that the reimbursement environment can settle down to where it was prior to this past year. Last year we announced that revenue per patient was down, which was ultimately confirmed by many comments from other laboratories and industry observers alike. There are reasons for this, the response to payers for the Affordable Care Act, changes in molecular coding, and environment that make clinical laboratories vulnerable to these pressures, perhaps maybe even more so than other providers.

We felt at that time that our non genetic work demonstrated a decrease of about 5% in revenue per patient. A bit higher than some of those imported by our larger competitors which makes sense since there are no space and we are the exclusive laboratory provider for major saving sure. We believe our slight decrease in revenue per patient from 84.93 last year to 84.18 this year is reflective of these reimbursement changes, and it’s reflective of two significant points, one it acknowledges with decreasing reimbursement changes, it also demonstrates the significant increase in the most complex, esoteric testing most of which are genetic in nature. We believe that most of the pricing pressures are behind us and we’ve been comfortable that this decrease remains at about 5% as we reported earlier.

We believe that our industry has undergone a disruptive change similar to the one that we experienced in late 2007 when extraordinary competitive forces drove pricing down, and started a spiraling downward trend that lasted for about a year until it eventually stabilize and remained in its usual pattern of what’s happened in the years until last year. I think the fact that CNS based on the recent offshore legislation is not proposing significant cuts until 2017 supports this thesis. There’re other factors that affected our performance when compared to last year. Over the past several quarters we’ve increased our infrastructure, we invested in facilities to facilitate growth in the future. Most clinical laboratories buy other laboratories in order to obtain their customers and gain accretion despite the loss of business they may suffer, and they gain the accretion by closing down facilities following such a transaction. We did the opposite.

We grow by offering this one stop shopping under the banner of specialty testing. We need international infrastructure to support national growth. The fact that we invested in the market, meaning in the regional clinical testing that suffered disproportionately through significant reimbursement pressures affected our margins. We believe we have demonstrated in this quarter’s performance that our strategy has facilitated growth and positioned us to greater success in the future. Despite the reimbursement infrastructure headwinds, we grew by 14% in both patient counts and revenues. Our growth is fueled by an ongoing commitment to specialty testing and our continued leadership in genetics. We believe that GeneDx is the largest full service, not just one test, two tests, or a handful of specialty area, or just full surface commercial genetics laboratory in the world. We do not believe that there is a commercial laboratory anywhere that has the expanse of the offerings or even has the same worldwide recognition. It’s our belief that every genetics meeting, wherever it is anywhere in this planet, the sight of zebra stripes means GeneDx and it also means innovative, trusted clinical genetic testing services that keeps the patient’s interest first.

Increasingly the work of GeneDx is merging with the strengths of all the Bio-Reference offerings, and it will be misleading to look at GeneDx as a separate entity, it’s not. It is illustrative however to note that patients whose testing was ordered on a GeneDx requisition increased by over 50% this quarter, compared to the same quarter last year. This growth is fueled by our leadership in exome analysis, the cutting edge of differentiating genetic service we provide as well as our growing volume in inheritive cancer testing. We have built our inherited cancer program carefully and thoroughly over the past six months. It’s been well received. By all metrics we are competitive with anyone else in the market, even more for considering the long established clinical expertise at GeneDx, the substantial reach for our GenPath oncology in women’s health units and the national infrastructure Bio-Reference.

Moreover, it’s important to note that we have been doing next generation sequencing on a commercial basis lot more than any other commercial laboratory in our space, and we believe this gives us advantage in the market. Think it’s also important to note that the growth of GeneDx will not be limited to this country. We currently receive work from 55 countries around the world and we’ll make a concerted effort to leverage our worldwide recognition and reputation in the coming years. As I mentioned before, about the reimbursement infrastructure changes over the past year have made the usual quarter over quarter comparisons difficult to apply. This year will be the basis of each comparisons in the coming years I believe.

I need to take a moment to discuss margins. We were at a different base line, I’m not sure that everyone clearly understands the overall impact to the level of reimbursement changes we have seen over the past year. By our calculations, if we correct for the estimated 5% reduction that we referred to in non-genetic testing, our revenue growth this quarter would have been 20%. If not for the changes in reimbursements, that instead of us losing about 170 basis points in our gross margin, we probably would have gained somewhere closer to 300.

Quite frankly, or strategy of investing in growth and in the right areas has allowed us to better respond to the demand that were created by this new reimbursement environment. We’re now establishing a new baseline with regard to expenses. We are in introverted interesting position. We need to continue to fund the growth and support the outstanding opportunity that is before us in all specialized testing including genetics, cancer and women’s health. We must continue to expand the capacity at GeneDx, and we could demand for our services in all areas of testing, but nowhere more than inherited cancers and some analysis.

Last quarter, we said that we were substantially increasing personal with GeneDx. This was continuing into the second quarter, resulting in an increase of just under a 50% over a year-over-year basis. Many of these professionals are MDs, Ph.D.s, or others with advanced degrees, and they constitute an asset that will prove increasingly valuable as we meet the ongoing demand for our services. We will invest in growth, we will feed the growth as we stated in the past. But given the reality to the marketplace we clearly understand that we need to do more than grow our way to margin expansion. In all areas of our business, given the fact the realities of the pressures of the environment we’ve evaluated the direct cost in order to cut expenses aggressively whenever possible.

This process has been going on for the past six months and will continue. I think there is more that we can do. The trick, the objective is to do it while growing, and adding support to directly fuel the growth. I think we can do that, to being more to do in the future. There are future goals in this regard. As we will continue to grow and review all work processes, we look if you will, based on the latest technology to extract all cost out of the system; because if we are to succeed in innovating, we will also have to succeed in being more cost-effective. This is certainly true that this is also true in cancer. As I mentioned before I am excited by the opportunity in oncology. But there are challenges.

The discrepancy between what we’re getting paid for tumor analysis versus clearly the potential value in the future. And I believe that the value and the bonus will allow us to provide cost-effective solutions. We have worked hard in formulating strategies to approach this market and how to do it in a differentiating position that will accomplish both goals; advanced clinical care and advanced key offering and approval of new drugs; making cost-effective and available to more people, in making useful for providers, and make it safe for providers. We will talk about it more in the future. I remain enthusiastic about this opportunity. Here are some other parameters upon which I need to comment.

Net debt was about 8.5%, a bit higher than we thought at this time last year. That clearly reflected that where it’s been in of the new reimbursement realities and increasing direct patient responsibilities that have occurred in the marketplace. I believe this would be a baseline going forward. Our DSO’s were 105 days compared to 111 in the first quarter of the current year. The first time, since the second quarter of 2013, our DSO has come down. Little but disruptive with the new payer environment and our response to it, we are adjusting for the realities of today’s marketplace, more paced to responsibilities and the increase in need for medical records and preauthorization for certain testing.

We expect to continue to improve this metric but it is important to note that as genetic testing makes opting increasing portion of our business. This work is highly reimbursed and requires more documentation than any other areas of testing. In addition, the fact that the scope for our genetic testing is so comprehensive, our documentation is not cookie-cutter, if you offer only one test. Our test menu requires a great deal of customizable and unique solutions. In the long run, given the fact that we know that growth and genetic testing will be increasingly part of everyday clinical care. We believe that expertise that we are developing with team and requirements over such wide range of genetic testing, will become an undisputed asset of this company.

Cash flow was positive over $2.5 million, a swing to over $5 million in the first quarter. This represented highest since the third quarter of last year while it also marked two successive quarters of our improvement, something that has not occurred since the fourth quarter of 2012. There are many criteria to cash flow that go beyond just cash collected. But with regards to this factor we have seen a clear improvement over the last few months. In many ways we have been here. We’re faced with similar circumstances five years ago. At the time we had undergone a disruptive change in reimbursements due to managed clear contracting. We’d started out with new solid initiative and we are building infrastructure at the same time that we were undergoing substantial growth in time, and improved on all metrics including cash flow and DSOs.

We believe that what we learn then will enable us to recover from the current changes in this landscape. I need to emphasize that this is a transition year for us. Combined with the need to grow with expense reduction our past investment in genetics and other specialties has been -- have positioned us well to take advantage of this new environment.

Given all the changes that have occurred this year, we have provided more specific guidance than we had and done so in the past. As we stated we believe that we will just about equal and performance we will just about equal around our performance in the third quarter of last year in the coming quarter. We also believe that we’ll of course do well in the fourth quarter and we’ll show improvement over the depressed results of the fourth quarter of last year. We believe that it had not been that it now what is documented a $0.10 downward effect from the weather that we would have improved somewhere in the facility of 10% despite all the opposite goals and the changes and reimbursement of infrastructure. We still believe that it remains a viable goal.

We understand the challenges that lie ahead we express them when we realized then we’ve made everyone aware of them. We understand the environment in which we operate. Laboratories in the future will have to be provider centric allowing others to make critical clinical decisions in a cost effective manner. A year ago no one expected the consequence of changes that we had seen occur in our market. But our underlying strategy the long term investments that we’ve made in science in clinical care in marketing has allowed us to respond to those challenges today. We were positioned in the most compelling areas of diagnostics. We maintained ability to adapt, to move, to be able to go in and work with the changing market to create more value. We are a service business. Changes take time. Initiatives do not usually provide immediate dividends. Nonetheless, as disruptive as the landscape looks I am enthusiastic about our ability to respond. We will continue to innovate, we will continue to grow and expand the parameters in which clinical laboratories can contribute to improving patient care.

I want to thank all of you for being on the call today. Also want to appreciate your adaptability and flexibility to a different time of the call and I am more than happy to take some questions.

Question-and-Answer Session

Operator

(Operator Instructions) And your first question comes from the line of Amanda Murphy. Please proceed.

Amanda Murphy - William Blair & Company LLC

Good morning. Just a question on the volume growth that you -- the 14%. I am wondering if there is a way you can help us understand what the underlying utilization levels are relative to --? I don't know if market share gains is the right word, but what is ticking you up above and beyond base use utilization growth?

Marc Grodman

What? Hello, I am sorry, I don’t hear I think either I don’t have the right order or you there were no I don’t hear any questions. Okay…

Operator

Amanda, you may proceed.

Marc Grodman

They were having a technical issue I am to whatever reason not hearing anyone speaking. Hello?

Amanda Murphy - William Blair

Operator can you hear me?

Marc Grodman

Yeah I am sorry I stuck around I think there was a mishap or something I couldn’t hear anything. So fill me in on the call, was there a questions asked.

Operator

Yes Ms. Murphy was asking her question. Ms. Murphy you may proceed.

Marc Grodman

Okay, great. Thank you. Hello?

Operator

Ms. Murphy you may ask your question again. We’re going to go on to the next question and that’s Raymond Myers.

Raymond Myers - Alere Financial Partners

Okay, I know and if you ask the question it was very quiet and if we really don’t hear you and.

Raymond Myers - Alere Financial Partners

Marc can you hear me? This is Ray Myers.

Marc Grodman

Well, I hear you great.

Raymond Myers - Alere Financial Partners

All right, great. I think this may touch on somewhat Amanda was talking about also. How much of the growth in the quarter was contributed by either BRCA testing or Inherigen versus other genetic tests? You did mention about 50% growth at GeneDx. Can you give us more color as to where that came from?

Marc Grodman

Yeah, I mean the volume in terms of -- remember lot of these are tests for mix once that came in on GeneDx requisitions where we gave a number of 50% there was strong growth in some of the more complex genetic analysis so we already had all the work over in [indiscernible] workers increased as well as some elements of all the work that we do. But we had a good response to that and it certainly has helped us to be able to achieve the kind of numbers we had. Beyond that I am not going to go into more detail and break up which amount is of increase with us.

Raymond Myers - Alere Financial Partners

Okay. Part of the reason I ask is this week -- earlier this week, Bloomberg news reported that Quest Diagnostics launched a new 341 gene cancer panel in partnership with Sloan-Kettering that would be billed at up to $4000 per test. That would seem to be a response to your Inherigen and I wanted to know if you could compare and contrast those tests?

Marc Grodman

No, I mean it actually leave more for lot in terms of cancer and the work that we do in oncology is not necessarily out of GeneDx but rather it’s really part of kind of out of the experience and the typical knowledge we’ve learned in sequencing that we have been doing up here working in New Jersey. And then that really has to do more with Oncotype -- with what we’ve done with OncoMatch the work with Mass General that we work with for a long time. Our concern and I’ve spent a lot of time with this, I have given a number of talks on this, it’s discrepancy in the marketplace. Between going in and attempting to do bigger and bigger panels and for more and more money and right now payers are not reimbursing for these panels. They are not paying for and the actionable gains on them despite how people go in and will definite action ability is incredibly varied.

And it’s not very clear what the size of those offerings are we have multiple academic affiliations and have one of those are one with Mass General we’ve made some recent additions to our technical staff here. We will be doing a number of new testing platforms but they’re not the bigger is not better. And the bigger might be effective and I am not saying we’re not going to do it which has to be cost effective and that price point doesn’t make any sense. So it absolutely has no effect I think it’s a reaction to another company that came out and did the 300 team have we’ve been in GeneDx for a long time and though there may be a market fleet for who want to see numbers just to have the numbers greater, the reality is that these tests need to go in and be made available to patients.

They need to be made available to patients when they have the most need they think they are available to patients if they have a lung cancer and they want to be able to go see what first could be available to them they wanted to be have to be cost effective accessible to patients if they have a melanoma if they can take it off so it ever comes back they may not need a liver biopsy. And it’s a still not part of what we do I wasn’t sure this is deep it’s not only the size of the panel it’s the cost effectiveness of the panel it’s the information back to the doctors about the panel it’s the cure rate databases of the panel, it’s the I think the connectivity information back to the doctors that are going to be in a usable fashion.

So we’ve been doing this for a long time. Our new plans that we will be introducing in the next three to six months I am incredibly enthusiastic there will be differentiation in marketplace, so I don’t have a reaction to what anyone else announced.

Raymond Myers - Alere Financial Partners

Okay. Thanks, Marc. And I did want to touch on one thing you said during the call and then I will let others get in the queue. You mentioned that the bad debt of 8.5% would be a baseline going forward. One way to interpret that is that 8.5 would be the low watermark and it could go higher. Is that correct? Or is that -- ?

Marc Grodman

No I really don’t think that I think that this kind of word is I mean there is a lot more effect on patients, patients are doing more billing the effect of the new insurance plans, the effect of more of the blues having different plans the patients have more responsibility I do not expect that to happen at all. I just have a sense that we started out we thought that it would be lower to the company the last few quarters and it seems and as I said before and we do it’s kind of a measure of demographics and it’s where the nature of where it is comes from. So I don’t really see a changing whether the dynamics are relatively stable and well that’s the case it’s going to be say.

Operator

And your next question comes from the line of Mitra Ramgopal. Please proceed.

Mitra Ramgopal - Sidoti & Company, LLC

Good morning. Marc, I did miss the early part of the call with your prepared comments. I do apologize if you are repeating anything I am asking. But, I am trying to get a sense. As you mentioned you expect the third quarter earnings to kind of be flat versus a year ago and we should see improvement going forward. How much of the improvement you are anticipating as it relates to maybe you rationalizing your cost structure versus the underlying business continuing to show improvement?

Marc Grodman

As I said in the call Mitra, I think it has all those elements on it. If we don’t continue to invest in growth, we won’t grow. However we have gone in starting at the end of last year to a rather rigorous exercise, extracting as much direct costs out of the system, one balances growth and expects this all the time, so it clearly had a selective expense, expense control is really what we’ve done and it clearly has effect. I mean I don’t believe in grandstanding on numbers that do people do some times and announce what they’re going to do because it seems somehow empty and not reflective of being responsible for the changes. But we’ve extracted a healthy number that helped contribute to this quarter and I think makes us comfortable going forward and we thought this is where we were going to go do, we knew that at the end of last year, and that’s we’ve headed where we’re going to be. So, continue investing in growth. Continue to grow the business. Succeeding on what we have already spent and trimming it is kind of how we’ve been able to go deal and react to the changes in the landscape.

Mitra Ramgopal - Sidoti & Company, LLC

And, again, you think you still have some room on the expense side or is that pretty much behind you?

Marc Grodman

No, I think that we still have room. I think we took a lot, there were two kinds of controls that we’re looking at. One is more near term one is long reach. The near term one is what you could prune out of the cost. Putting more, it’s more service about to bid, more negotiation just to permit those. A reasonable amount of those have come out of the system, a reasonable amount of those already. The next phase which is a longer one that will take more time is to really being to go relook at the process, you see, the future of the business going forward is not just to have a clinical insight as what tests to offer, what to offer in new tests, it’s not only there, it’s there and once you do that at this phase how now are we going to make this more cost effective to be line with the new environment. Now this is going to [Indiscernible] we talk about, but not a lot of other people talk about, we’re rather transparent we try to be in our goals, but this is the reality of the market place so, I believe that in the future we have more to go but it’s going to take that will go in and that will go into next year and that will take more time.

Mitra Ramgopal - Sidoti & Company, LLC

Thanks for the color. And, quickly, I know you mentioned esoteric testing was about 68%. Clearly the highest it has ever been. It looks like that number should continue to move up, given the focus especially on the genetic testing side.

Marc Grodman

Certainly where we are and the opportunities we have, we’re growing as a company. You couldn’t have a 40% increase in volume without growing as a overall company, but yes the emphasis you know, clearly the growth there has worked out.

Operator

And your next question comes from the line of Amanda Murphy with William Blair, please proceed.

Amanda Murphy - William Blair

Hi, okay, so I’ll try this one more time. So my question was around the volume growth, I was curious if you have, or you can give some perspective around what the underlying volume growth was, you know you should think about basic per capita utilization increases, relative to you know, I don’t know if market share gains is the right way to think about it. But what’s kind of getting you above and beyond that space utilization growth? Specifically, I know obviously you think…

Marc Grodman

I think this is similar to what Ray mentioned before, I mean I think that we have been able to grow you know doing work in genetics is clearly important but you can’t align that growth necessarily to the regional laboratory growth even to women’s health growth that we may have, just in terms of just what makes up the volume. The volume growth as a company as a company is related to the underlying facts they were growing as a business, that we’ve been able to go and however all of that’s growth. The specific increase that we talked about is our GeneDx. But we are just really using it now, because I say it’s really one company and we really don’t because there are gene tests offered and brought in under from Bio-Reference that it performed in New Jersey, so the relative there is just a relative idea to say the GeneDx is growing at a very fast rate and that when it gave it 50% note, that’s a great response to where it’s been in the past. If you don’t grow 14% as an overall entity, without just increasing business in all segments.

Amanda Murphy - William Blair

So, on the routine side of the business did you see any improvements in utilization just thinking about relative -- and obviously, you have weather. So it makes it more difficult. I just want to see if there was any improvement in any utilization rates in Q2. It seems like that is a trend across the healthcare system base generally.

Marc Grodman

So what you are trying to go and say, there is a underlying increase in utilization of lab space now.

Amanda Murphy - William Blair

Right.

Marc Grodman

Or to what trainings are. You know we looked at this and had that discussion, I think the jury is still out, I think that there are so many comparisons that we have that are lower that you do have some work and sometimes you think that there are new people, people are going to get, try to go and get new testing by way of the Affordable Care Act, there’s a one-time shop, when they get started with this and there are some people who have spoken to us who had some really compelling arguments looking at drug data and subscription data and doctor office visits right now and things that will have an effect. I’m not sure it’s significant that it may be an upset but I don’t think it’s significant. And I think that things had been so depressed for so long, it would be awfully hard to do, the comparisons are nil so have to have go look at certain areas there, similar to looking, I think we look into some of those, the difference between October and March or April they’re like couple of months where not a lot is going on. There may be a small lift off that offset but I don’t think it’s a significant point. This is my point.

Amanda Murphy - William Blair

Got it. And I know you have done some acquisitions recently and they are pretty small. But how much of the growth was the top line growth was acquisition-driven based?

Marc Grodman

Not you know, very-very low single digits.

Amanda Murphy - William Blair

Got it. Okay and then, just last one on the guidance. So I think, typically, you have a pretty meaningful ramp in the back half of the year generally, but this year it seems like you are keeping more so weighted to the fourth quarter. So I was curious what you were thinking about in terms of top line driver there, relative to kind of keep here (ph) is there something else that is coming online later in the year that you are including in the ramp?

Marc Grodman

Well you know last year was a difficult year, we all talked about it, and it was difficult not only in the fact that of the change in the environment but also the concern about the change in the environment affected a lot of things, nothing to do with sales. We feel pretty good about growth in all, it is our business. However, however, clearly we need to continue to believe we can continue to grow in genomics, we think GeneDx will continue to grow, we can add new areas and new product launches that are going to be successful, that we’ll look for toward the end of our fiscal year, they’re going to have an impact. And in terms of the guidance that we gave out, we’ve really tried to go in this year because it’s not usual comparisons of our previous quarters, we’ve tried to go give guidance that is at the same time more specific but still remains guidance which means that it’s a guide as to how we think we’re going to be. We said we’ll be around where we were last year in the third quarter. When we came out with our initial goals last year, we said despite the reimbursement changes, despite the increase in infrastructure, we still think we’d do about 10% and so we still think that that’s going to be case, except for the weather. So I can’t go in and I really, and that is the best guess estimated where we’re going to be, given all the changes which if we do that is going to be remarkable I think response to the challenges that this company has faced over the course of the last year. You know, again I’m not going to, we’re not going to get that down to the quarter of a penny. But it gives a guidance as to where we are. The driver that is going to be the growth of the company, some expense reductions continuing on to the next quarter and certainly the growth, the growth and the opportunities going to remain in the esoteric testing and in genetics.

Amanda Murphy - William Blair

And that is the 10% EPS growth, or netting (ph)?

Marc Grodman

We said consistently that we believe, we said even last year we gave it out at the end of our fourth quarter was that we felt that we would do about 10% better despite all the changes last year, and since that time there’s been nothing that’s really changed us from that point. Something we had to go in and see in the area of, with last year, it is a lot of unclear, of lack of clarity, about the clinical laboratory landscape and do all the changes that we’ve done, I think that we sold, for a tough first quarter and bad weather, may have seen it sometimes doubtful, now I don’t know if it’s going to be that’s the same case, so this is kind of where we think we’re going to be, and given where we were and the changes that we would have done, I think these are significant areas. Think about what the company and what this company and the life structure would been if we didn’t have the cut in revenues what I mentioned about in my goal, about the margins of where we’d be. We respond to the challenges of the area and we end up that way we’re going to be pretty pleased with our results.

Operator

At this time I would now like to turn the call over to Dr. Grodman for further remarks.

Marc Grodman

Great, thank you everyone very much, I appreciate you coming into the call, later in time, I’m sorry we had a technical mishap but I think we’ve got all the questions in. We’re enthusiastic about our opportunity, it is unique, it is differentiated, I am proud of what we’ve done, thank you very much, have a great day.

Operator

Ladies and gentlemen this concludes the presentation for today’s call, you may now all disconnect, have a wonderful day.

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Source: Bio-Reference Laboratories' (BRLI) CEO Marc Grodman on Q2 2014 Results - Earnings Call Transcript
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