Bio-Rad Laboratories, Inc. Q1 FY2026 earnings call

Teams executed in dynamic environment. Reported Q1 results within revenue guidance despite Middle East conflict which impacted the region's fast-growing market. In life science, net sales flat, academic demand constrained in Americas. Biopharma showing early signs of stabilization. Commercial teams focused on segment level prioritization. Digital PCR product area a strategic differentiator with DD PCR instrument revenue up 24% y-o-y. Operational priorities include increasing manufacturing flexibility in China, re-engineering R&D engine, concentrating investment in areas with strong commercial potential.

Net sales for Q1 2026 were approx. $592 million, a 1.1% increase on reported basis vs $585 million in Q1 2025. On currency neutral basis, it's a 4.2% year-over-year decrease. Life science segment sales in Q1 2026 were $229 million, flat on reported vs Q1 2025, and a 4.3% decrease on currency neutral basis, mainly due to academic research market challenges in Americas. Clinical diagnostic segment sales in Q1 2026 were approx. $364 million, a 1.9% increase on reported basis vs $357 million in Q1 2025, and a 4.1% decrease on currency neutral basis, primarily driven by revenue declines from EMEA region due to Middle East conflict. Life science segment's DDPCR portfolio was flat in Q1 due to softer biopharma consumables despite instrument growth. Clinical diagnostic segment was affected by Middle East conflict which had an $11 million impact in the quarter.

Updated 2026 guidance: currency neutral revenue growth full year between -3% and +0.5%. Life science segment currency neutral revenue growth between -3% and -1% due to academic funding challenges and Middle East conflict. Diagnostic segment currency neutral revenue growth between -3% and +1%. Full year non-GAAP gross margin projected between 53% and 54%. Full year non-GAAP operating margin projected between 10% and 12%. Non-GAAP full-year tax rate approx. 22%. Full-year free cash flow estimate in range of approx. $290 to $340 million. Continue to be opportunistic with share repurchases, approx. $237 million available for additional buybacks under current board-authorized program.

Middle East conflict is a significant headwind for revenue and margin in 2026. Supply chain cost pressures affecting diagnostics margin. Early-stage biotech remains cautious in biopharma, which could impact business. Geopolitical disruption in Middle East affecting demand and logistics for diagnostics products.

Q: Just get a little bit more color on the Middle East. Why that might be the case in terms of exposure to the region or how it impacted logistics?

A: The region was a fast-growing market for diagnostic business, 9% of diagnostic segment in 2025. Exposure led to lower revenue in Q1 2026 than expected. Channel slowed down, and it'll be a headwind for full year 2026.

Q: Reiterated ambition to get up to the mid-teens operating margins. What cost actions planned to protect and grow earnings?

A: Begun to tamp down discretionary spend. Evaluating broader structural things to run the business more efficiently, effectively, and nimbly.

Q: Any color on 2Q, 3Q revenue phasing?

A: Q1 typically low quarter. Expect about 5% lift from Q1 to Q2, then slight lift into Q3. Revenue picks up a bit, gross margin ticks down a tad in Q2 due to freight.

Q: On the DDPCR business, consumables down low double digits in the quarter. Any acceleration in cannibalization of qPCR?

A: Consumables soft due to projects going forward and when. Growing installed base by taking share within QPCR and competitively holding own. GDPCR portfolio healthy with larger pipeline.

Q: Comments around M&A priorities. Should we interpret that as an indication that the pipeline is full and maybe something more actionable?

A: Focus on continuing to develop the business, growing organic business. M&A as key lever for accelerating top line growth and margin expansion, focus on companies with demonstrated revenue and margin profiles within $100 million to $500 million revenue range.

Q: On R&D, spending 12% relatively high vs peers. What can expect from that, is R&D a source of leverage over time?

A: Reset bar on projects, redirected resources, disciplined approach to portfolio life cycle. Applying AI into platforms, have comprehensive management and governance of investment.

Q: Clarification on 2Q comments, down mid single digit core?

A: Revenue will pick up a bit, gross margin tick down a tad in Q2 due to freight. Mitigating actions in place but not full impact yet.

Q: Actions, how much of this is wait and see on backdrop?

A: Factoring Middle East conflict as transitory. Focus on making business more agile, working on what can be controlled to improve operations and capabilities.

Q: Process Chrome business performance and visibility. Any updated thoughts on path to recovery?

A: Q1 played out as expected. Projecting forward to bring balance to revenues. Path to recovery still a low single digit number next year.

Q: Changes competitively in digital PCR market. Updated growth outlook?

A: Feel confident, commercial and marketing teams working strongly. Have new assays being built out. Teams feel good about holding own and taking share from QPCR.