Abcam plc (ABCM) Q4 2022 Earnings Call Transcript

State Bank of India ADR (ABCM) Q4 2022 Earnings Conference Call March 20, 2023 8:00 AM ET

Company Participants

Tommy Thomas - Vice President of Investor Relations
Alan Hirzel - Chief Executive Officer
Michael Baldock - Chief Financial Officer

Conference Call Participants

Tejas Sevant - Morgan Stanley
Puneet Souda - SBV Securities
Matt Larew - William Blair
Michael Ryskin - Bank of America
Charles Weston - RBC
Justin Bowers - Deutsche Bank

Operator

Hello, and welcome to the Abcam plc Full-Year 2022 Earnings Conference Call. My name is Alex, I'll be coordinating the call today. [Operator Instructions]

I'll now hand over to your host, Tommy Thomas, Vice President of Investor Relations. Please go ahead.

Tommy Thomas

Thank you, operator, and good morning, good afternoon, everyone. Welcome to our results conference call Joining me today will be Alan Hirzel, our Chief Executive Officer; and Michael Baldock, our Chief Financial Officer.

Before I hand over the call to Alan and Michael, let me briefly cover our safe harbor statements on slide two. Some of our comments made during this call may be considered forward-looking statements, leading beliefs and expectations about the company's future performance. These forward-looking statements are subject to risks and uncertainties that are based on currently available data. The company assumes no obligation to update them. Actual results are subject to future events and uncertainties, which can materially impact the company's actual performance. Please look at the company's recent regulatory filings for a more complete picture of our risks and other factors.

During the call, non-IFRS adjusted financial measures may be used to provide information pertinent to our ongoing business performance. Tables reconciling these measures to the most comparable IFRS measures are available in the company's press release issued today.

Finally, if you haven't already received them, you can download a copy of the slides used in today's presentation at the company's website www.corporate.abcam.com/investors/reports/presentations. Our agenda is set forth on slide three. Alan will be making introductory comments before Michael discusses our full-year financial results. We will then move to Q&A.

I'm now pleased to turn the call over to our Chief Executive Officer, Alan Hirzel. Alan, please go ahead.

Alan Hirzel

Thank you, Tommy. Good morning and good afternoon, everyone. Welcome to our 2022 results conference call for the year ended December 31, 2022. One of the many benefits of our [Technical Difficulty] Cambridge, England is the proximity and relationships we enjoy with leaders in the life sciences. Sir Bruce Ponder at the University of Cambridge recently expressed the Abcam brand in his own words when he said discoveries result from the contribution to many people and there are too few ways to recognize this. We agree and we thank Sir Bruce and everyone working to make progress happened together and making it possible for us to talk about Abcam role and successes within the life science community as part of our presentation today.

Turning to slide four. Our global team is motivated by a mission to make Abcam the most influential company in life sciences. We exist to influence this community and shorten the time from first discovery to impact on society. Over the last 25-years, Abcam has had an important role in providing tools and molecules to discovery scientists. As we grew our internal innovation capability and capacity over the last 10-years, we've learned to create products that can consistently go the distance from discovery research to clinical applications. Beyond our leaps forward to scale product innovation, we have brought empathy and understanding to how science makes this journey.

In short, we've become a more integral part of making progress happen together. As a company, we are connecting researchers, organizations and stages of scientific progress together to bring efficiency and better outcomes for society. This mindset is shaping our brand, culture, partnerships and our daily interactions with 100s of 1,000s of dedicated life sciences around the world in Universities, Research Institutes, Hospitals, Government Organizations, Biopharma companies, Diagnostics, and a broad range of teams working to ensure society is healthy and safe. Our success has been enabled by the tireless efforts of our team over -- of over 1,800 employees working to advance science. We have created and continue to nurture a vibrant and dynamic culture through diversity, equity and inclusion, thereby differentiating the company and making us a great place to work.

We believe that our growth is powered through our people and our commitment to delivering excellence, powers the pillars of our strategy namely: to sustain and extend our antibody and digital leadership; to drive continued expansion into complementary market adjacencies; and to build organizational scalability and sustain value creation.. We believe that the scientific community can go further when we all go there together.

As an example of how we contribute to this progress, I want to share a recent example from an Abcam customer. Dr. Daniela Quail at McGill University and her team recently published two articles in the journal of nature extensively using Abcam in their work. For approach to find artificial intelligence and multiplex antibody panels that spatially resolve single cell data sets, that correlates the distinct clinical outcomes for lung, adenocarcinoma and brain cancer. Predictive algorithms and protein signatures that stratify patients have significant implications for cancer diagnosis and treatment.

Lung cancer remains the largest cause of cancer related death, whilst brain cancer patients have limited therapeutic options. We hope that their research goes on to contribute to increased survival times and improved outcomes for patients. We look forward to supporting Daniela in building her next panel for further discoveries and we thank her for publicly advocating for Abcam as a preferred antibody provider for her and her team. Her confidence in Abcam is based on our promise of high quality, low to lot variability products, which enable consistent reproducibility in scientific research.

Slide five summarizes our performance highlights for the year. Our financial performance trend and demand was good, but we had a challenging second-half when we made some once at a generation changes to our core operating processes globally. We achieved high-single-digit CER revenue growth, expanded our operating margin and delivered adjusted diluted earnings per share growth. Michael will discuss these in more detail shortly. This performance would have been better if not for the operational challenges we faced in the second-half as we implemented the final stages of Oracle’s Cloud ERP and its enterprise resource planning, and the effects of COVID-19 on our China operations.

Innovation is still fueling our success. Abcam continues to expand its leadership in research antibodies, our share of citations continues to expand according to SIDAPs data and our focus on in-house developed product has and continues to create value for our key stakeholders. Our in-house made by Abcam recombinant antibody portfolio is now over 26,000 products, we control the full supply chain and can deliver higher quality product and service levels that are important to our customers. Thereby enhancing our brand's reputation.

Abcam culture remains strong. Second-half was incredibly challenging and rigorous from a workload standpoint, but I was proud of our team's dedication to customers throughout. We continue to get positive feedback and earn strong diversity scores and our external recognition for employee experiences at the company. Our share-based programs have resulted in most of our staff becoming owners and we look forward to unlocking the strong value creation story that is to come for them and external shareholders.

Our EFC performance remains strong. We have once again earned top markets -- marks from Sustainalytics and MSCI with improved scores at [Indiscernible]. Women, the majority constituent at our company are well represented and their achievements have been duly recognized. Finally, we're pleased to have Luba Greenwood join our Board of Directors, taking her the fourth female member of the total of nine Directors. Finally, our partnerships are accelerating growth and opportunity in spatial biology, multiplex protein analysis and diagnostics. We introduced over 1,200 new antibodies into these application partnerships during 2022 and our total is over 2,100 in the market today.

On slide six, Abcam's marketing and research and development teams work effectively to identify and develop the next generation of tool reagents in advance of when targets may be considered important and relevant to researchers in life sciences. A notable example is the Pan-TRK antibody that [Indiscernible] published in 2014. For this antibody, researchers at Memorial Sloan Kettering Cancer Center identified immunohistochemistry as an efficient reliable tool to screen for NTRK fusion positive solid tumors in non-small cell lung cancers. Roche identified the opportunity to develop an IHC diagnostic to improve patient testing for treatment pathways for these indications. Because of the existing relationship and licensing agreements placed between Abcam and Roche, this clone was easily added to our master agreement, enabling seamless access to the product for rapid product development. The clone being immediately available in our portfolio saves valuable time approximately two years on the IBD development as no discovery was required.

Let's move to slide seven. At the end of our 2019 Capital Markets Day, we presented our investment plans to remove constraints in the business and double our revenues by 2024. Our ambitious goals and ’22 accomplishments are detailed here. We were determined to increase our innovation capabilities and new product development capacity; improve our propositions biopharma; enhance the customer experience with better IT and e-commerce platforms; expand our operational footprint; and where we could acquire to accelerate progress on our strategy.

Looking back over the past three years, we have completed most of the planned investments and achieved the milestones as expected. We have strategically increased our investment in research and development, enabling ongoing new in-house product development that has driven our revenue growth from in-house products at approximately 24% over this time.

In addition, we've vertically integrated our global manufacturing capacity, supply chain and logistics infrastructure, and we've prudently deployed capital for strategic M&A, thereby increasing our product portfolio and new product development capabilities. I am proud of all we've been able to do thus far. And as we look to 2023, our strategy focuses on refining our investments that we've made over the last few years, to improve the customer experience, as well as complete the expansion in build out for [Indiscernible] site.

Thank you for your time and attention today, I'll now pass it over to Mike.

Michael Baldock

Thank you, Alan. Good afternoon, good morning, everyone. I'll take you through some of the key elements of our income statement, including in-house revenues and operating expenses and finally guidance. We'll then move to the Q&A portion of our call.

On slide nine, I want to highlight some of the key financial metrics we believe are good indicators of the successful implementation of our strategy to-date. All of my comments today will compare full-year results for the year ended December 31, 2022 to its comparable prior year. Total reported revenues were GBP361.7 million, up approximately 8% on a constant exchange rate basis and up approximately 15% on a reported basis with favorable foreign exchange tailwinds accounting for approximately 7% of reported growth largely because of the pound weakening against the U.S. dollar and Chinese renminbi.

During the year two factors impacted revenue growth at our year-end cash balance. First, the implementation of the new working cloud ERP system and second, COVID-19 control and outbreaks in China. Based on the differences between forecast and actual results, we estimate the aggregate impact on sales was approximately GBP30 million. We estimate this headwind negatively impacted revenue growth by approximately 10% on a reported and 9% on a constant exchange rate basis growth rate has significantly impacted working capital.

Overall, in-house revenue was the key driver of our results with 18% constant exchange rate revenue growth. In-house sales, defined as Abcam produced Catalogue products, including BioVision, plus Custom, Products & Licensing CP&L, now represent 67% of reported total sales. The period contained a full-year of BioVision revenues within in-house revenues. Recall, BioVision was a third-party supplier before the acquisition and the prior year's sale pre-October acquisition are accounted for as third-party revenue.

Moving to adjusted gross margin, we achieved a 330 basis point expansion to 75.5%, as compared to 72.2% in the full year of 2021. Margins benefited from in-house product mix, the inclusion of the sale of BioVision products at higher margins and ongoing commercial activities. Adjusted operating profit margin increased by 190 basis points to 21.1% year-over-year, driven by gross margin expansion, slower operating expense growth in our base business and the incremental costs for BioVision. Adjusted diluted earnings per share were GBP0.249, up 21%. Finally, as you have seen, our adjusted profit margin improvement drove our return on capital employed to 8.9%, obviously negatively impacted by the sales and distribution implementation of Oracle, ERP system and China COVID impact on revenue.

Let's move to slide 10 to review Catalogue revenue. Catalogue sales exclude revenue from custom products and licensing. It includes both in-house and third-party sales. The Americas, representing approximately 43% of Catalogue sales grew 16% at constant exchange rate. Excluding the estimated headwinds to revenues, revenues in the Americas would have grown 20% on a constant exchange rate basis. Revenues in EMEA, which represents 26% of Catalogue sales, grew at 6% constant exchange rates. Excluding the estimated headwinds to revenues, EMEA would have grown at low-teens on a constant exchange rate basis. China, which represents 18% of sales, reported revenue that declined 2% at constant exchange rates. Excluding the estimated headwinds on revenues, China would have grown mid-teens on a constant exchange rate basis.

From a customer perspective, academic revenues represent approximately 43% of our Catalogue revenue and grew at 4% globally at constant exchange rates. Biopharma revenues represent approximately 27% of Catalogue sales and grew at 10% globally at constant exchange rates with high-teens growth rates in the Americas and EMEA. Our products are purchased by 1,000s of customers with no customer accounting for more than 3% of revenue. We continue to experience strong demand for our recombinant antibody and in-house assay technology, which includes BioVision, which grew over 80% at constant exchange rate. Distributors represent approximately 30% of Catalogue sales and grew at 12% globally at constant exchange rates.

Let's move to slide 11. We reported in-house Catalogue revenue of GBP222 million, up 20% on a constant exchange rate basis. Our results continue to benefit from favorable trends as we expand new adjacent products and the inclusion of BioVision products. The market continues to shift to recombinant antibodies across all customer segments, driving good demand for Abcam’s products enabled by our vast, vast consistency, validation data and coverage across 1,000s of relevant targets.

Assay sales were driven by our simple steps, ELISA, that's enzyme-linked immune-absorbent assay kit and the inclusion of BioVision assay. We win by serving our customers with our extensive and growing portfolio of in-house products, offering high quality ease of use and consistent supply. We continue to experience the benefits from Life Science Research, particularly biopharma's investments from the bench to the clinic especially in cell-based therapies. This has been a key driver of our sample prep and detection, protein, cell engineering category, which now accounts for 10% of in-house Catalogue sales.

In 2022, we continued our focus on removing constraints, building out our in-house capability and returning to business as usual environment with the broader expansion of travel. As our investment build out is largely complete, we are moving to refining what we have implemented. Cost growth in our base business has moderated and we expect it to continue in 2023 and 2024. Our focus on driving operating leverage would have resulted in a materially lower reported operating expenses as a percentage of revenue, that's excluding the implementation of the ERP system, sales and distribution components of Oracle and COVID-19 impact in China.

Looking to 2023, we anticipate operating expenses that reflect continued refinement of our prior periods investment, including a continuing focus on improving invoicing and collections that were hampered in the second-half of 2022 by the Oracle Cloud ERP implementation. To conclude, we are laser focused on delivering operating leverage consistent with our five-year commitment by 2024.

Let's move to slide 13. Before we move to guidance, I want to provide a brief review of Abcam today. And just a few accomplishments from 2022, I'm really pleased that we are entering the final phase of our Oracle ERP implementation, which ultimately will allow us provide the best digital experience for our customers. I'd like to thank our team that works hard to remove our three material weaknesses relating to our first-year of [serving of the compliance] (ph) as a first time full U.S. compiler, and in line with our guidance for 2024, we will continue to grow gross margins for expansion of our in-house product portfolio, as well as expand adjusted operating margins by driving down OpEx.

We built a global life sciences company with market leading innovation capabilities and the infrastructure to allow us to manufacture, sell and distribute our growing portfolio of products. This foundation is enabling us to bring researchers high quality products that generate reproducible scientific results the first time every time. Our strategic initiatives over the last several years will enable us to deliver durable organic revenue growth with strong operating margins.

Let's move to slide 14 and guidance. For 2023, we are reiterating full-year 15% to 20% constant currency revenue growth guidance provided on January 30, 2023. At current exchange rates, this would result in reported revenues of approximately GBP420 million to GBP440 million. In terms of cadence, we expect slower first-half revenue growth as we're facing tougher prior period comparisons and expect modest growth in China. Higher second-half revenues are anticipated due to favorable comparisons and a normal China growth outlook.

For modeling purposes, you should expect an approximate split of our full-year revenues along historic lines as follows: approximately 45% of full-year revenues in the first-half and approximately 55% in the second-half. We're forecasting ongoing adjusted operating margin expansion consistent with our 2024 targets. We're also reiterating our 2024 guidance goal.

I'd like to thank you for your time. I'll turn the call back over to the operator and we can begin our question-and-answer session. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question for today comes from Tejas Sevant from Morgan Stanley. Tejas, your line is now open. Please go ahead.

Tejas Sevant

Hey guys, good morning, and thanks for the time here this morning. Maybe Michael, I'll start with one on the top line here in terms of the China impact. Can you just talk to us a little bit about, sort of, some color on the reopening trajectory there, particularly following the Lunar New Year. And any differences and trends across your academic versus biopharma customer base in the region?

Michael Baldock

Sure, Tejas. Good morning. We are -- as you rightly point out, the Chinese New Year followed the end of the year and the impact we were seeing from COVID in November, particularly December. And we've seen, sort of, the end of January and February, the market start to pick up, it’s still not returning to former levels, but it is slowly returning. But, you know, we've been through this for three years now and it's hard to predict, sort of, how that market will swing.

Tejas Sevant

Got it. Fair enough. And then one on the ERP upgrade, you called out about a GBP20 million impact here in ‘22. Can you just provide some context around what drove that, sort of, impact versus your prior expectations? And are you now confident that all of that is now essentially behind you with the benefits of the rollout starting to come through here in the first-half and ramping in the second-half in ‘23?

Michael Baldock

We're certainly seeing business returning back to normal. Now most orders are getting out within a more normalized period. I would say that we're expecting to get the benefits of this over the next couple of years as we began to leverage it, but we're certainly seeing a return in the levels. As we mentioned, I think in the last conference call when we talked about the preliminary update, the biggest issue was getting product shipped, that, you know -- order levels and order to customer demand remained about where we expected it to -- it was about the same event prior to our launch. But it was a slowdown in our ability to actually get products out the door and shipped, but we're certainly seeing that returning to normal levels. And I guess, because the question we'll comment is just say that we're currently for the year to where we are right now trading at expected levels right now.

Tejas Sevant

Got it, that's helpful. And then final one here for me on margins, you've talked about reiterating that 30%-plus operating margin target for ‘24. Obviously, there was a delta between your first-half and second-half margins in ‘22, because of China and the ERP situation. But as we try to frame ‘23, any bookends that you're willing to provide? I know you mentioned it's tracking towards that 30% target. But so should we interpret that to mean that something in the mid-20s range is probably fair for this year?

Michael Baldock

I mean, we haven't give a specific guidance as you know, but yes, that makes sense to be draw a straight line, you have to kind of get there. And as you know, it's all about revenue, so for trading at revenue expectations, remember that the constant currency increase in OpEx last year, it was 12% constant currency is 8% of that was the addition of BioVision -- a full-year BioVision operating expenses and the underlying increase in operating expenses was 4%. And we're continuing to see that…

Tejas Sevant

Got it. Super helpful. Thanks.

Operator

Thank you. Our next question comes from Puneet Souda from SBV Securities. Puneet, your line is now open. Please go ahead.

Puneet Souda

Yes. Hi. Thanks for taking the questions. Michael, first one for you on gross margin slightly ahead of us, despite the impact in China and the ERP implementation ongoing. So just wondering how much of that contribution was from pricing? Just trying to think about that and how should we think about, sort of, the gross margin cadence here as well in ‘23?

Michael Baldock

So most of it was product mix and BioVision. And as you know, we've talked about fairly consistently, we don't -- well, we obviously take inflationary price increases. And as we add value to our price, we increase prices. But pricing is not a strategy, we use to drive gross margins is an outcome of adding value to our products. So we expect as the product mix continues to change, which we see happening over time, it increasing slightly, but we're expecting it to moderate around where it is now. And I wouldn't drive the expectations from modeling perspective much above that sort of 75%, 76%.

Puneet Souda

Got it. Okay, that's helpful. And then as we think about overall capital deployment after BioVision looking at valuations in the market and whatnot antibody suppliers’ capabilities. Maybe can you elaborate what sort of what are the priorities or is it just about tying out whatever is on the loose ends for the ERP before you can think about, sort of, the next steps in capital deployment?

Michael Baldock

We're constantly looking at opportunities to see if they fit both our strategic plan and it can be done at a level which we think is at value to our shareholders. We're looking at a lot of companies, most of them don't fit with exactly what we want and many of the ones that do are going still at pretty high prices. Our price expectations are certainly not coming down where we expect them to be. And as you remember, our strategy and our long-term target are organic one, so anything we decided to buy will be incremental. So we are certainly looking at things, but it's not high in our list if we don't find the right thing at the right price.

Puneet Souda

Okay, fair. And then the last one for me and maybe for Alan, I mean Alan, how should we think about the efforts you have ongoing on the assays? And do you point it out in track as an example in IHC, but NTRK is also part of many gene panels. And obviously, those have been getting fair adoption out there. So when we think about assays, sort of, where are the areas of growth and how should we think about and so the opportunity there to employ your antibodies into those assays? Thank you.

Alan Hirzel

Hi, Puneet. Thanks for the question. The subtle point I was trying to make to NTRK is that, that was a commitment we made in our product development and innovation pipeline in 2014, so it's the insight about what biomarkers are relevant to disease and discovery that we get early that allows us to participate in a way that we did with that particular biomarker. And now six to eight years on if seeing that, kind of, early visibility to what could be relevant, that's what's driving 1,000 plus new antibody pairs or antibody content into these biomarker applications in the variety of IVD and proteomics applications.

So I would say to you that we can talk about NTRK now, because it's gone the distance. We have the insight from our data and our relationships and it's now in clinical applications helping patients. There are now more than 2,000 of those, kinds of, options that we built into the portfolio that are in that journey. It’s hard to predict how many of them will go through, but we have enough of them, we know we have a repeatable model for making this work.

Puneet Souda

Got it. Okay. Very helpful. Thank you. Thank you, guys.

Operator

Thank you. Our next question comes from Matt Larew from William Blair. Matt, your line is now open. Please go ahead.

Matt Larew

Thank you for taking the questions. Thinking about operating expenses here at 2023, obviously, your clearing this, sort of, ERP hurdle. Are there any other items to think about in terms of new investments? Obviously, you referenced moderating expense growth, but just as we think about the cadence of OpEx growth, any items to call out either from a BioVision integration or any of your investments aside?

Michael Baldock

No, I mean, I guess, look, we're trying -- we're continuing to moderate the growth. I just should say, a flip around the foreign exchange impact on a reported basis to OpEx is about 6%, BioVision was 4% and the underlying growth of operating expenses is about 8%. I think the only area that we're going to see growth that you should think about as we launch YETI, which is our front-end website and as we have now launched our -- the ERP system is the increase in depreciation we'll see over the next year. So it was GBP32.8 million for 2022, it will be about GBP40 million for 2023. But other underlying operating expenses, you will see moderating. And as we've said fairly consistently, if you look to the target we're setting in 2024, you should see a fairly straight line of operating expense.

Matt Larew

Okay. And then just going back to the question on the bridge to 2024. Given the split in revenue this year, you mentioned 45% first-half, 55% second-half. Given the sensitivity to the top line, is it fair to assume that operating income will be even more skewed towards the back half than revenue?

Michael Baldock

Yes, a little bit, but the -- but I think it should be fairly even, right? So because the increase -- you said there's an increase in operating expenses, it should be also fairly level. We also -- we're carrying some incremental expenses in the first-half still, as we finish off the implementation in the ERP system, which we won't have in the second-half. So I mean, we tried not to be too prescriptive in the past about the differences between the first-half and the second-half and even on revenues, it varies around those metrics. But I just wanted to give you some idea from a modeling perspective.

Matt Larew

Okay. Thank you.

Operator

Thank you. Our next question for today comes from Michael Ryskin from Bank of America. Michael, your line is now open. Please go ahead.

Michael Ryskin

Great. Thanks, maybe a quick one to follow-up on an earlier point. Just on China, given how much of a variable it was in fiscal year ’22? What's your expectation for China growth in ‘23? Is it sort of back to historical growth rates? Is it aligned with the broader company or even faster than that? What are you looking for right now?

Michael Baldock

I mean, we're expecting it to come back in line with historic growth rates. But again, it's quite hard to predict as it recovers from COVID. And as you know, they've swung back and forth quite consistently.

Michael Ryskin

Okay. And then on the 2023 versus ‘24 numbers, I mean, the long-term fiscal year ‘24 numbers, you've had them out there for a while, they've been tweaks and adjusted, but it's been a multiyear view as we're getting closer and closer. The jump from 23% to 24% is getting pretty tangible. So for example, you're looking for GBP420 million to GBP440 million next year and then GBP450 million to GBP525 million in fiscal year ’24. On the lower end of that, the GBP450 million, that's only 5% growth from next year and on the high end, it's 22%. So one, I guess, I would say is what's going to lead you to refine that fiscal year ‘24 revenue outlook?

And then second part of that would be, you commented on how so much of the operating margin leverage is really just driven by top line growth. So to hit the 30% margin targets, is that -- can you hit that at the midpoint of the GBP450 million for that GBP525 million, the high point or can you hit it in the GBP450 million as well?

Michael Baldock

We've been pretty consistent saying that we expect -- we hit it at the higher end. So I think we’ll continue to be consistent. You're right, the math is very accurate. So if we hit GBP440 million this year, the jump from GBP440 million to GBP450 million is pretty small. I expect as we get to the end of the year, that we'll revise that the 2024 targets based on where we end up. But don't forget, we have a significant FX movements in both our revenue line and our OpEx line. And so when we look at what our reported numbers are, we're trying to factor that in as well.

Michael Ryskin

Okay. And maybe last one for me. Just on [Multiples Speakers] Yes.

Tommy Thomas

Mike, just before you go, the outlook for China this year, we just want to clarify that we're expecting a mid-teens growth in China for the full-year.

Michael Ryskin

Okay. Thanks. Appreciate that, Tommy. And then one last one for me actually on the more near term factors, you talked about January, February trading essentially in line with expectations. Are you seeing any noise just in the last couple of months? We've heard a little bit of volatility both on the academia side and some of the pharma customers. Just from -- some of the macro dynamics. Obviously, you're saying trading is in line, but could you go a little bit deeper into order trends any conversation that you shift the behavior between the baskets?

Alan Hirzel

I was going to pick this up at the end. So thank you for asking Michael. The -- Abcam has built more and more of its own product portfolio, and we have that 67% of our revenue now coming from our own products, overwhelmingly. And the whole reason why we did it was to address biopharma as a greater opportunity, so we're growing very rapidly with customers who are on a more sophisticated discovery to clinic journey and that growth rate and our market share gains are so strong. That whatever noise there is in terms of short-term funding with small biotech’s get lost in that transition. And we see really healthy growth out there for us and pretty excited about it.

Michael Ryskin

Okay. Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from Charles Weston of RBC. Charles, your line is now open. Please go ahead.

Charles Weston

Thank you. My first is just to go back to the ERP system, please. Demand was as expected, you commented earlier, but the new guidance is significantly below prior expectations for 2023, implying there's some, sort of, hangover effect from ERP. So just wondered if you could give us some color around that? For example, is there a decline in the Net Promoter Score, which I can't see in the presentation or the press release? And are there any outstanding orders from last year still to be delivered?

Alan Hirzel

Hi, Charles Weston. Thanks for the question, the cycle that we went through with the go live in ERP was an important milestone in that [chem’s history] (ph). We had to replace the higher, kind of, in the end order to cash legacy architecture and software with something that we've been designing and planning for a long time. It was an epic achievement to get that done, while still running company. It did not go flawlessly. But the impact of that on orders and revenues was most sharply felt in September a little less sharply felt in October and started to get back to normal in November, December. Now we feel like we're in normal operation.

So I just say that when those, sorts of, things happen, we don't normally expect any, kind of, massive catch up or ramp up to flow into 2023, because we would have put science on hold for those customers, who were waiting for those products in September and October. And when we delivered them, they got on with their research, it’s not as if they suddenly said, okay, now that I have that, I'm going to order a bunch more in another way. So like other pauses in Abcam, where our Abcam’s customers, it tends to defer signs of buying rather than create some surge in the backside, and that's certainly what we've seen. It is not something we're pleased about to put signs on hold, our customers on hold, but we worked hard to regain their trust and as Michael said earlier, order delivery times are now much more in the normal set.

If there are orders that are still holding from last year that we’re holding, because they will -- then products that were purchased that were out of stock. And make them for that particular order. For example, [indiscernible] oftentimes if they're in the cutting -- sort of in the remote tail of our product portfolio, when we're not their holding inventory, it will take several months to make that product and it will be somewhere associated with that rather than ERP first.

Charles Weston

Okay, thanks. And can I move on to the CP&L line, please? Revenue was up 5% constant currency year-on-year, but revenues in each of the subcategories was down in H2 on H1. I appreciate these can be a bit volatile. But even though I would have expected the underlying trend to be up, particularly given the number of new products that you had, that you've sort of talked about over 1,000 new products commercially, sort of, license through the year. So what's -- is there anything particularly driving that any sort of one-off things that we should be noting?

Michael Baldock

Well, I'd say on the IVD line, it was the similar issue we had with normal orders, which was the backlog we had to build -- that we had to get out as we switched systems [lower] (ph) and try to get back to normal operations. On the royalty side, I mean, the royalty’s has been fairly consistent and we're now seeing that actually in much more normalized. And on the custom product side, that is a business that goes up and down based on demand for difficult antibodies to be produced or generated or other customed product areas. And that we've always had as always, Charles, you've never been a really volatile business, and that line is what has caused the volatility in the CP&L line altogether [Technical Difficulty] or so. It continues to be about 6% of our business and remember as our business grows, it's also staying consistent.

Charles Weston

Okay. And my last one, please. Just on the write-down of Firefly.

Michael Baldock

Yes. Just one more on external, as far as on clones, don't show up in the custom -- in the CP&L line. Remember, because they combine that they buy it straight off the Catalogue.

Charles Weston

Yes. Yes, good point. Thank you. And then just on Firefly, it looks like you're stopping the activity to develop your own multiplexed assays and it looks like you're aiming to serve the market there through all your partners. Are there any particular, sort of, learnings that you've taken from Firefly that you're, sort of, taking forward?

Alan Hirzel

Yes, Charles, absolutely. I mean, the good thing is that by having that technology, you learned a lot about how to validate and create antibody pairs and panels and that gave us a massive head start than as other multiplex technologies entered the market. And it's a big reason why we could give -- we could provide data sets to those partners and says, look, here's a [Technical Difficulty] antibody panel that doesn't interfere with one another. So in that sense, it was extremely valuable. What it became clear to us though was that companies were investing $40 million to $60 million a year negative cash flow to build out their technologies and that was not something we felt was the right investment for shareholders [Technical Difficulty] particular technology and we were better off serving that market and partners through the antibody content we had. But we could have had the choice to say to join the fray and kind of invest in that. We looked at that and said no.

Charles Weston

Okay. Thank you. Yes, just before I go Michael, I just wondered if I could clarify the BioVision, how much did that contribute to your growth for this year or for last year?

Michael Baldock

BioVision?

Charles Weston

Yes.

Michael Baldock

You'll remember, Charles, there were some product lines in there that we got rid of. So the underlying -- the cellular assay business is growing fairly consistently with the rest of the business at about 4%.

Charles Weston

So is that like an organic number that you can provide us?

Michael Baldock

Well, we haven't -- remember when you look at Firefly’s, we were -- when you look at BioVision products, we were selling a bunch of them on our own. And that we brought those increase along the lines of the rest of our business and that we added what was being sold through other distributors and stuff. So it's a hard number to actually to separate that. We've decided not to actually actively go out and separate that now BioVision products as we fully integrated it into the business.

Charles Weston

Okay. Thank you.

Operator

Thank you. Our final question for today comes from Justin Bowers of Deutsche Bank. Justin, your line is now open. Please go ahead.

Justin Bowers

Hi, good afternoon/morning, everyone. Just in terms of the customer -- sorry, the in-house mix, that's the penetration there has been up pretty nicely year-over-year -- over the last few years. And as you look out to 2024, what's -- what are you envisioning in terms of like the penetration of in-house for catalogue there?

Alan Hirzel

Hey, Justin. Thanks. I hope, I've been consistent on this, but the ratio of in-house to third-party products and resources is totally defined by our customer demand and customers and we're quite happy if we've got great OEM products that grow really rapidly that we've not decided to make, so we have those, so it's not a planning assumption [Indiscernible]. That said, the level of investment and innovation that we've got going into the business we expect it to continue to drive higher growth of our in-house products and for that ratio to continue move on that basis. But I just wanted to make sure you and everyone understood that's not a targeted outcome measure, that's a result of market demand and products that we're innovating being more successful than what we're bringing in.

Justin Bowers

Understood. Appreciate that. And then in terms of what is the mix of assay revenue now and catalogue in-house roughly?

Alan Hirzel

I think Michael had that in the slide. I mean, it’s a routing number and it’s a wrong number. [Technical Difficulty] Chris, I saw it. So Michael what's it? But that was in your mix [Technical Difficulty] It's growing so rapidly the challenges, if I say a number, it’s going to probably…

Michael Baldock

Growing at like 80%. So, yes, that's basically -- that's what we gave is just the growth rate. We didn't get this whole. We just gave customer, we gave region and then we gave the growth rate. So we said assays were growing greater than 80% and advice, we're growing at 10% and sample preps is actually pretty and greater than 30%, but we didn't split out the amount.

Justin Bowers

Okay, okay. And then you cited some headwinds in Europe. And is that entirely related to ERP or were there some other factors there as well?

Alan Hirzel

It's entirely European. We find Europe is doing pretty well again the biopharma side of the equation is helping drive quite a lot of our share gains.

Justin Bowers

Okay. And then just one more to clarify on the commentary on Matt's question around the contribution. Were you saying that it should be in line with sort of the top line or it should be with the top line split or more balanced between first-half and second-half?

Michael Baldock

[Technical Difficulty] Justin?

Justin Bowers

Yes, I’m here, I’m sorry.

Michael Baldock

[Multiple Speakers] Operating margin question.

Justin Bowers

Yes, yes, yes. So it wasn't -- the question is it EBIT in line with, sort of, the revenue split that you talked about? Or is it more like 50:50 or pro rata throughout the year with some of the costs coming offline that wasn't…

Michael Baldock

Yes. So I mean, look if the revenue is going up and it's fairly fixed to decrease in cost base as we get this out of the ERP side, it will be more heavily oriented towards the back half.

Justin Bowers

Okay, understood. Appreciate it.

Operator

Thank you. We have no further questions for today. So I'll hand back to the speaker team for any further remarks.

Alan Hirzel

Thank you, [Alex] (ph). I hope that when you're thinking about the outlook of 2024, that you'll reflect on the consistency that we've had in terms of the outlook we have for the company and the case we've made for investment back in 2019. For me, I'm pleased about is we're well through most of the really hard change efforts that we had to make in order to deliver that outcome and we're excited about having this year and next year to refine and drive performance in the company and that's why we're continuing to offer the confidence and consistency of message around the business.

Clearly in 2024, we'll tighten up some of those numbers, but we can say to you we're still driving for the top end of the outlook on all of these things. And look forward to bring you an update to you next time when we meet. Thank you.

Operator

Thank you for joining today's call. You may now disconnect your lines.