Bio-Rad Laboratories, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Joined Bio-Rad 5 months ago and aligned strategic priorities, focusing on execution and transformation. Met revised 2024 guidance for revenue and operating margin.
• Entered binding offer to acquire Stilla Technologies to complement digital PCR portfolio, expected to close by end of Q3 2025.
• Streamlined cost structure with 5% workforce reduction, expecting $50-$55M savings in 2025 and $60-$65M fully annualized in 2026.
• Clinical diagnostics had broad-based global demand except Asia Pacific due to China diabetes testing reimbursement change. Life science saw modest recovery, process chromatography sales improved in H2 2024, expecting growth in 2025.
• Droplet digital PCR had strong demand for reagents/consumables, interest in oncology/cell therapy apps. 2025 focus on operational/commercial excellence, innovation, and portfolio updates including refreshed chromatography platform and new digital PCR system.

Segment Performance

• Life Science Group: Fourth quarter 2024 sales were $275 million, a 5.5% decline on a reported basis and approximately 6% on a currency-neutral basis. Full year 2024 sales were approximately $1.028 billion, a 12.8% decline on a reported basis and 12.6% on a currency-neutral basis. Core life science group revenue excluding process chromatography increased 2.5% year over year and 2% on a currency-neutral basis in Q4 2024.
• Clinical Diagnostics Group: Fourth quarter 2024 sales were approximately $393 million, a 0.9% increase on a reported basis and 0.7% on a currency-neutral basis. Full year 2024 sales were $1.538 billion, a 3.3% increase on a reported basis and 3.7% growth on a currency-neutral basis. Growth was driven by increased demand for quality control and blood typing products, offset by diabetes portfolio decline due to China reimbursement change.

Guidance

• Currency-neutral revenue growth for 2025 full year between 1.5% and 3.5% (excluding acquisitions). Q1 2025 expected to be approximately 5.75%-7% lower YOY then sequentially improving.
• Life Science Group currency-neutral revenue growth 1.5%-3.5%, process chromatography high single-digit growth.
• Diagnostics group currency-neutral revenue growth 2%-3%, considering China reimbursement and donor exit impacts.
• Full-year non-GAAP gross margin 55%-55.5%, operating margin 13%-13.5%. CapEx $160M-$180M, free cash flow $310M-$330M for 2025.

Risks

• Soft biopharma market affecting life science segment performance.
• China diabetes testing reimbursement change impacting diagnostics revenue.
• Uncertainty around NIH funding impact on academic segment, with US academic/government segment representing high single-digit percent of revenue.
• Competition in digital PCR market.

Question and Answer

Q: On life sciences guide, is the acquisition of Stilla included?

A: No, the acquisition isn't included in the range, and it could be additive if closed this year.

Q: Walk through gross margin guide for 2025?

A: Midpoint around 13.25%, affected by end market dependence, academia softness, biotech/biopharma softness, and China evolution.

Q: Process chromatography decline in Q4 and full year?

A: Process chromatography declined more than 50% in Q4 and full year, but expected high single-digit growth in 2025 due to customer conversations and destocking.

Q: Operating margin bridge for 2025?

A: Includes 60 basis points from China reimbursements, 40 basis points from dollar strengthening, and $10M one-time R&D expense from Sabre Bio acquisition.

Q: Why acquire Stilla?

A: Stilla's platform complements digital PCR portfolio, allows entry into new market segments, and expands product strategy for research and diagnostics.

Q: First quarter revenue forecast?

A: Q1 2025 revenue down 5%-7% YOY, sequential improvement expected later in the year due to recovery in diagnostic and life sciences spaces.

Q: NIH exposure impact?

A: NIH funding not a significant component, US academic/government segment is high single-digit percent of revenue, federally funded research exposure ~4%.

Q: DDPCR franchise outlook?

A: Reagents/consumables strong, instrument demand soft, Stilla acquisition helps compete in new market segments, expecting gradual recovery in biopharma sector.

Q: Pricing assumptions?

A: Excluding China diagnostic dynamics, pricing assumptions are around 1% to 1.5% growth.