Bio-Rad Laboratories, Inc. Q3 FY2025 earnings call

• Clinical Diagnostics segment stable except China reimbursement headwind, expected to annualize in Q4. - Life Science segment: process chromatography strong, offsetting softness in academic research and biotech; Droplet Digital PCR strategy progress with new QX platforms, sales training completed, and partnerships with Gencurix and Biodesix. - Operational execution: lean initiatives, cost discipline maintained. - Margin outperformance achieved through disciplined cost management.

For the Life Science segment, sales in Q3 2025 were $262 million, essentially flat on a reported basis compared to $261 million in Q3 2024, with a 1.5% decrease on a currency-neutral basis due to constrained academic research and biotech funding. Process chromatography within Life Science had strong double-digit year-over-year growth. Excluding process chromatography, core Life Science revenue decreased 6% Y/Y and 7.8% currency-neutral. For the Clinical Diagnostics segment, sales in Q3 2025 were approximately $391 million, a 0.6% increase on a reported basis but a 1.8% decrease on a currency-neutral basis primarily due to lower reimbursement rates for diabetes testing in China. Revenue contribution: Life Science was $262 million out of $653 million total sales (≈40.1%), Clinical Diagnostics was $391 million (≈59.9%).

• Maintains 2025 full year outlook: total currency-neutral revenue growth flat to 1%. Non-GAAP gross and operating margin outlooks unchanged at 53.5%-54.5% and 12%-13% respectively. - Life Science expected modest revenue improvement in Q4; Diagnostics expected growth in Q4 with China reimbursement headwind annualizing. - Anticipates slight step-up in Q4 gross margin due to revenue mix, operating margins to improve sequentially by at least 80 basis points.

• Soft macro environment in China dampening demand for Clinical Diagnostics products. - Uncertainties in academic research funding and government shutdown impacting research customer spending. - Volatility in process chromatography market demand.

Q: Maybe one for you, just given those last comments there. Can you talk about the expectations for 4Q? Obviously, you have the government shutdown, as you touched on. You have some of the process chrome pull forward or bolus of strength there in the last couple of quarters. Maybe just talk about the ramp into 4Q, the assumptions there would be helpful.

A: Yes, absolutely. So I think from both Life Sciences and Diagnostics have a slight uptick on both sides of the business. So that's nice to see. I think from a Life Science standpoint, obviously, as we talked about, we got process chromatography gives us a little bit of a headwind in the fourth quarter. With that taken into account, obviously, we've got some strength in ddPCR that we're expecting in that fourth quarter. So that helps lift that a little bit. In the diagnostics side, it really is about the quality controls area that we've spoken about in past quarters. We still expect to see that jump up based on those lot leases, and we're still driving towards that. So that's kind of the trajectory and how we see the fourth quarter unfolding.

Q: Follow-up on fourth quarter. I just want to check my math. I think the total year guidance implies a range of 1% to 5% organic growth assumed for Q4. I want to make sure that's right. And if it is, if you could talk about the magnitude of the range, what's embedded at the high end versus the low end? And how have you tried to embed a government shutdown assumption into that figure?

A: Yes. So Dan, I guess from the standpoint of -- I'll start with maybe the government shutdown. We obviously have seen that evolve here in October. And so our fourth quarter kind of contemplates that within our overall guide. I think with the moving pieces we have overall, we still felt good, obviously, in holding the guide for the full year, recognizing some of the comments I made around Life Sciences and Diagnostics sequentially getting better from Q3 to Q4. I think from a range perspective, I guess I'll kind of reiterate the guide overall as we think about it, right? We came into the quarter. I think folks were concerned about what that fourth quarter ramp could look like for us. Q3 came out fairly on target, if you will, for us, which gave us confidence in the fourth quarter, and that's why we felt comfortable holding that guide of 0% to 1% from a full year top line standpoint. And then keeping the margins, both gross and operating margin in line with the operating margin still at between that 12% to 13%. So you can see based on that last part, we're expecting sequential improvement in the operating margin from Q3 into Q4.

Q: Roop or Jon, I'd like to come back to ddPCR. Any color you can share on just instruments versus consumables in the third quarter? Do you still expect that franchise to be flat for the year? And was the integration at all disruptive to revenues in the period as you kind of retrained the sales force?

A: Yes. I think the last part, i don't think integration was disruptive. I think there was excitement about the expanded portfolio and the demand for demos extended some of the activity in the field. But the pipeline is growing nicely. I think it's a matter of a little bit extended sales cycles and the anticipation of those products coming to the market and customers just want to see it and kind of compare some data of our legacy products and the new products in the marketplace. So I don't think there was a disruption. We still believe we're going to be on plan for the full year for the portfolio. Consumables were a little slow in the third quarter. We expect that to come back in the fourth quarter, and we certainly see a rebound of the instrumentation now Q4 and into 2026.

Q: I want to stress test your kind of assumptions around China in '26. We have heard from others, Danaher and Roche, that VBP will spill over. Can you maybe just talk about why you don't think you're going to have China diagnostic headwinds next year?

A: Yes, Tycho. So first of all, others have spoken about VBP. I think we've been pretty clear. VBP hasn't been necessarily an effect for us this year. I think there are some things from a headwind standpoint, just the macro market within there is something to call out. I think part of our strength in China lies in our quality controls, and we expect to see that continue to be strong next year. And that's probably the strongest component of the offset to some of those headwinds from a broader. And the other part is, from a macro standpoint, if China macro improves, I think all boats rise at that point for not just us, but possibly others, and that's the other piece.

Q: I wanted to follow up on where you just left off on digital PCR. I was wondering if you could talk about both QX Continuum and Stilla, just in terms of the demo activity, how is the funnel building for 2026? And sorry if I missed this, but any change in your revenue contribution assumption for the second half?

A: So Jack, I guess, from a revenue contribution standpoint, we're still driving towards kind of these single millions that we talked about before. Obviously, we'd love for the broader market to cooperate a little bit more, but that's still what we're driving towards and funnel development, we feel good about. In terms of Continuum and QX, both have gotten very strong feedback from customers and interest, that's been actually incredibly encouraging for us. Obviously, from a QX standpoint, as you know, we've got 3 flavors of it. Probably the ones that is getting most interest, not surprisingly because of the macro backdrop is on the lower end where the feedback we've gotten is it's incredibly competitive to maybe others out in the marketplace, and that's encouraging for us and also for our customers.