Bio-Rad Laboratories, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Execution: Solid execution across the business with revenue and operating margin exceeding consensus expectations in a challenging macroeconomic environment.
• Business Segments: Clinical Diagnostics business remained stable; Life Science segment benefited from strength in process chromatography portfolio. Signs of stabilization in academic market consumables, with Droplet Digital PCR consumables seeing high single-digit revenue growth.
• Product Developments: ddPCR team completed development of QX Continuum platform, acquired Stilla Technologies, launched rebranded QX700 Series ddPCR instruments. Combination of QX Continuum and QX700 Series products expands Droplet Digital PCR portfolio.
• Partner Progress: Key ddPCR partners made progress, e.g., Incyte Molecular Diagnostics announced positive clinical data for kidney transplant monitoring assay, Genoscopy advanced ColoSense colon cancer screening test powered by ddPCR technology.
• Operational Improvements: Teams drove improvements through lean initiatives, cost management, and tariff impact mitigation. In Diagnostics, strength outside of China offset local reimbursement pressures. Welcome Rajat Mehta as new Executive Vice President of Global Commercial Operations; Mike Crowley retired.

Segment Performance

• Clinical Diagnostics: Sales in the second quarter of 2025 for the Clinical Diagnostics business were approximately $389 million, essentially flat on a reported basis compared to $388 million in Q2 of 2024, and a decrease of 0.7% on a currency-neutral basis. The decrease was due to the lower reimbursement rate for diabetes testing in China, partially offset by increased demand for quality control and immunology products. On a geographic basis, currency-neutral sales decreased in Asia Pacific, partially offset by increased sales in EMEA and the Americas.
• Life Science: Sales of the Life Science Group in the second quarter of 2025 were $263 million, an increase of 4.9% on a reported basis and 3.8% on a currency-neutral basis compared to $251 million in Q2 of 2024. This was primarily driven by the increase in process chromatography and food safety product sales. The process chromatography business experienced strong double-digit growth, with orders representing approximately 20% of the quarter's process chromatography sales. Excluding process chromatography sales, the core Life Science Group revenue decreased 1.7% year-over-year and 2.7% on a currency-neutral basis, reflecting softness in the biotech and academic research market affecting instrument demand.

Guidance

• Revenue: Expect total currency-neutral revenue to be in the range of flat to 1% growth for 2025, midpoint higher than previous guide.
• Life Science: ddPCR portfolio revenue growth expected to increase to mid-single digits in 2025 due to Stilla acquisition and QX Continuum platform. Life Science business expected to be flat to 1% growth for full year.
• Diagnostics: Growth outlook for 2025 tightened to 0.5% - 1.5%.
• Margins: Tariff headwind reduced by ~30 - 40 basis points, updated full year non-GAAP gross margin projected to be 53.5% - 54.5%, non-GAAP operating margin projected to be 12% - 13%.
• Currency: Weakening of U.S. dollar expected to be a ~100 basis point tailwind to 2025 revenue and 10 basis point positive impact on operating income. Investor Day moved to spring 2026.

Risks

• Macroeconomic Challenges: Headwinds from constrained government funding in academic market, tariff uncertainties, and challenging macroeconomic environment.
• Academic Market: Continued impact of constrained government funding on academic market.
• Uncertainties: Currency exchange rate fluctuations and other uncertainties affecting business outlook.

Question and Answer

Q: On process chrome, can you talk about sustainability and contribution of Stilla?

A: Roop K. Lakkaraju mentioned process chrome growth is sustainable, and Stilla contributes to the increase in ddPCR growth rate to mid-single digits.

Q: On diagnostics market in China, how is Bio-Rad affected?

A: Roop K. Lakkaraju and Jonathan P. DiVincenzo stated China is soft, VBP not impacting portfolio, DRG impact already contemplated, and no new significant reimbursement changes negatively affecting.

Q: On second half revenue margin phasing and ddPCR instruments performance?

A: Roop K. Lakkaraju said Q3 similar to Q2 top line, Q4 expected to step up; ddPCR instruments were slightly better sequentially but weak year-over-year, with softness in academic market.

Q: On process chrome strength and food safety growth?

A: Jonathan P. DiVincenzo said process chrome is back to normal order patterns, and food safety business continued high single-digit growth with strong team focused on it.

Q: On U.S. federally funded research customers demand and Continuum response?

A: Roop K. Lakkaraju said demand was stable in Q2 and improved from Q1; Jonathan P. DiVincenzo said Continuum's flexibility is beneficial but early to see direct customer feedback.