Bio-Rad Laboratories, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Solid execution across the business with revenue consistent with outlook and operating margin exceeding consensus.
• Clinical Diagnostics segment stable except for China reimbursement headwind, expected to annualize in Q4.
• Life Science segment had strong process chromatography performance, offsetting softness in academic research and biotech funding. Disciplined cost management achieved margin outperformance.
• Progress in Droplet Digital PCR strategy, including global sales training on new QX platforms and positive customer receptivity, though selling cycles remain extended.
• Expanded ddPCR-based diagnostic strategy through partnerships with Gencurix and Biodesix.
• Continued execution on lean initiatives and cost discipline.

Segment Performance

• Clinical Diagnostics Segment: In Q3 2025, sales were approximately $391 million, a 0.6% increase on a reported basis and a 1.8% decrease on a currency-neutral basis. The decrease was primarily due to lower reimbursement rates for diabetes testing in China, which is expected to annualize in the fourth quarter. On a geographic basis, currency-neutral sales decreased in Asia Pacific, partially offset by increases in the Americas and EMEA.
• Life Science Segment: Q3 2025 sales were $262 million, essentially flat on a reported basis and a 1.5% decrease on a currency-neutral basis due to constrained academic research and biotech funding. Process chromatography within this segment had strong double-digit year-over-year growth, but core Life Science revenue excluding process chromatography decreased 6% year-over-year and 7.8% on a currency-neutral basis.

Guidance

• Maintaining 2025 full year outlook with total currency-neutral revenue growth in the range of flat to 1%. Full year non-GAAP gross and operating margin outlooks remain unchanged at 53.5% to 54.5% and 12% to 13%, respectively.
• Anticipate modest revenue improvement in Q4 for Life Science, with process chromatography revenue expected to be lower sequentially and year-over-year. Expect return to growth in Diagnostics in Q4 with China reimbursement headwind annualizing and quality controls portfolio revenue timing.
• Cautious on academic segment recovery into 2026 due to funding uncertainties, but see gradual improvement in biotech customers. Anticipate slight step-up in Q4 gross margin and at least 80 basis points sequential improvement in operating margin.

Risks

• Macro environment challenges impacting academic research and biotech funding.
• Continued softness in China's macro environment potentially dampening demand for Clinical Diagnostics products.
• Uncertainties surrounding NIH budget and U.S. government shutdown affecting research customer spending.

Question and Answer

Q: Can you talk about the expectations for 4Q, including government shutdown and process chrome?

A: From both Life Sciences and Diagnostics, there's a slight uptick. Life Science has process chromatography headwind in Q4 but expects strength in ddPCR. Diagnostics expects jump from quality controls. Demand was on plan in October.

Q: Initial thoughts on 2026, especially academic government, China diagnostics, biotech?

A: Academic in U.S. still cautious; China diagnostics open question but quality controls expected strong; biotech expected to gradually improve. Process chromatography expected to be high single-digit growth in 2026.

Q: Quantify diabetes pricing headwind in China on the quarter?

A: Last Q4 had mid-single-digit price cut and channel cutting headwinds.

Q: Color on ddPCR instruments vs consumables in Q3, franchise flat for year, integration disruption?

A: Consumables slow in Q3, expected to rebound in Q4; instrumentation expected to rebound in Q4 and 2026. Integration not disruptive, pipeline growing nicely.

Q: Growth in 2026, margin expansion, moving parts in P&L?

A: Ideal for low to mid-single-digit growth, seeking margin expansion through operational initiatives, supply chain buying power, and OpEx productivity improvements.

Q: Stress test China assumptions in 2026, VBP spillover?

A: VBP not a significant effect, strength in China lies in quality controls; macro improvement could help.

Q: Life Science base business tough comp, magnitude?

A: Low double-digit magnitude, gets to low single-digit growth.

Q: ddPCR demo activity, funnel building for 2026, revenue contribution?

A: Pipeline growing strongly, demos in demand; revenue contribution still targeting single millions.