The operator introduces the Bio-Rad Fourth Quarter and Full Year 2023 Earnings Results Conference Call and turns it over to Edward Chung. Chung cautions listeners about forward-looking statements and mentions the presence of non-GAAP financial measures. He also encourages listeners to review the company's filings with the SEC for risk factors.

In the fourth quarter of 2023, Bio-Rad's global operations performed as expected, with revenue picking up compared to the previous quarter. The company faced challenges in the Life Science business due to declines in the core business and a lack of budget flush. However, the Clinical Diagnostics business saw growth, particularly in the Asia-Pacific region. Bio-Rad also overcame supply chain challenges and is optimistic about maintaining its market share and the launch of the QX Continuum later this year.

The company is prioritizing investment in application and assay expansion for their platform and is excited about the launch of new products. They saw double-digit growth in their clinical diagnostics business in Asia-Pacific and have been working on reducing back orders and improving production in Singapore. The company expects a more normalized year for customer demand in 2024 in their clinical diagnostics business, but remains cautious about the pace of recovery in their life science business. They anticipate improvement in the second half of the year as funding improves and the biopharma market stabilizes. China remains a priority market for future growth.

In summary, the article discusses the outlook for 2024 for the Life Science business, with a recovery expected in the second half of the year. The company also faces challenges in the bioprocessing industry due to a softer order book and increased costs for employee incentives. However, they remain focused on their strategy and investing in innovation and efficiency. The fourth quarter and full year results for 2023 showed a decline in net sales compared to the previous year.

In the fourth quarter of 2023, the company experienced a decline in revenue, primarily due to weaknesses in the biotech and biopharma end markets and weak demand for Life Science products in China. COVID-related sales were not a significant factor in the decline. The Life Science Group saw a 19.1% decline in revenue, while the Clinical Diagnostics Group saw growth. The decline in Life Science revenue was driven by difficult compares, backorder burn down, and other factors. On a geographic basis, all regions saw a decrease in Life Science revenue, while the Clinical Diagnostics Group saw growth.

In the fourth quarter of 2023, the Clinical Diagnostics Group saw a 5.3% growth on a reported basis and a 4.2% growth on a currency-neutral basis. This was driven by strong sales in diabetes products and a reduction in backorders. Gross margin declined due to lower manufacturing volume, inflation, and inventory reserves. SG&A expenses were lower due to employee-related expenses, but were partially offset by a weaker dollar and a facility lease impairment. Operating income was $95.3 million. The change in fair market value of equity security holdings added $324.3 million to the reported results.

In the fourth quarter of 2023, the company saw an increase in net other income due to higher interest income from investments. The effective tax rate for the quarter was lower than the same period in 2022 due to changes in the geographical mix of earnings. The reported net income and diluted earnings per share were lower compared to the fourth quarter of 2022, mainly due to changes in the valuation of Sartorius holdings. Non-GAAP results were also provided, which excluded certain atypical and unique items that impacted gross and operating margins, as well as other income. These exclusions resulted in a slightly lower non-GAAP gross margin and a higher non-GAAP SG&A compared to the fourth quarter of 2022. Non-GAAP R&D expenses remained consistent.

In the fourth quarter of 2023, non-GAAP adjustments resulted in a 15.5% operating margin, compared to 17.4% in the same period of 2022. Certain items were excluded, resulting in a lower tax rate and net income of $89.3 million. For the full year, net sales were $2,671 million, a 4.7% decline on a reported basis, with a 4.1% decline on a currency-neutral basis. COVID-related sales were $4 million, compared to $109 million in 2022. Sales for the Life Science Group were $1,178 million, a 12% decline on a currency-neutral basis, with a 4.9% decline when excluding COVID-related sales. The decline was driven by process chromatography, qPCR products, and Western blot.

In 2023, Life Science's currency-neutral full year core revenue declined in Asia and Europe, but showed modest growth in the Americas. Sales for Clinical Diagnostics products increased by 3.2% on a currency-neutral basis, driven by diabetes, quality control, and blood typing products. The company's non-GAAP gross margin decreased mainly due to product mix, lower COVID sales, and inventory reserves. SG&A expenses were higher due to SAP implementation and legal fees, while R&D expenses remained relatively stable. Non-GAAP operating income also decreased, and the effective tax rate remained consistent. The company's total cash and short-term investments decreased compared to the previous year.

In the fourth quarter of 2023, Bio-Rad saw changes in cash and short-term investments due to share repurchases, working capital, and tax payments. They also secured a new $200 million credit agreement and anticipate inventory levels decreasing in the next six to eight quarters. Net cash generated from operating activities increased compared to the previous year, mainly due to changes in working capital. Bio-Rad also purchased 659,000 shares of their stock and still have $280 million available for share repurchases. Adjusted EBITDA for the fourth quarter of 2023 was $136.8 million, slightly lower than the previous year.

The company's full year adjusted EBITDA for 2023 was $535.9 million, with net capital expenditures of $42.1 million in the fourth quarter and $156.5 million for the full year. Depreciation and amortization for the fourth quarter was $37.2 million and $145.9 million for the full year. The company expects 2024 to be a recovery transition year with higher levels of uncertainty and a difficult margin expansion. Revenue is expected to be back-end loaded with soft growth and operating margins in the first half of the year, improving in the second half as the market recovers. The company is guiding for currency-neutral revenue growth of 1% to 2.5%, with the Life Science Group expected to have zero to 2% growth.

The Diagnostics Group is projected to have a currency-neutral revenue growth of 2.5-3%. The company is targeting to achieve a similar level of price realization as last year, mainly through the Life Science Group. A non-core contract manufacturing business was sold in December, which had a minimal impact on financial results. The full year non-GAAP gross margin is expected to be between 54-54.5%, with improvement throughout the year. The non-GAAP operating margin is projected to be between 13.5-14%, and the tax rate is estimated to be between 22-23%. CapEx is expected to be around $160-180 million, and the non-GAAP EBITDA is projected to be between 18.5-19%. The company is currently undergoing a corporate transformation and has set key goals for 2024. Despite external factors, they are optimistic about their outlook for 2024 and have resolved supply chain constraints.

The company has successfully transitioned key diagnostics platforms to their Singapore manufacturing facility and completed their global SAP implementation. They have also made progress on their journey of transformation and have a number of exciting products in their pipeline. Over the last four years, their underlying business has grown at a currency-neutral compound rate of 4.6%, with Life Science growing at over 8%. The company expects margins to ramp up with sales throughout the year and is still in the process of searching for a new CFO.

The company is making good progress and hopes to have a new CFO by the next earnings call in a few months. The outlook for China is uncertain and the days of double-digit growth are not expected in the near future. The Life Sciences business has been affected by anti-corruption measures and a tough funding environment, while the Diagnostics business continues to see steady growth but is monitoring the situation with value-based pricing tenders. In terms of the Life Sciences business, there has been backlog burn down in the PCR and ddPCR businesses, but it is unclear how long this will persist in 2024 and when it will start to improve.

The company believes they have largely resolved their backlog burn down issue as they head into 2024. They also mentioned that the Life Science division had a significant contribution from backlog burn down in 2022 Q4. The process chromatography division continues to be affected by destocking, but there are some positive signs from certain customers. The company expects some recovery in the second half of the year, but there is still uncertainty. The guidance for the year includes some below the line items, but no specific details were given.

Sartorius has announced a cut in their dividend, which was expected due to cash constraints. The phasing for 2024 is expected to be more back-end loaded than usual, with a wider spread between the first and second half. Growth assumptions for process chromatography and Droplet Digital PCR are uncertain due to competing forces, but the net result is expected to be negative. New product launches, such as the Continuum and ddSEQ, may contribute to the year's results.

The company faced challenges in the fourth quarter and throughout the year for Digital PCR due to market conditions, but they anticipate growth in 2024 with the recovery of the biopharma market and new product launches. The negative growth in equipment and consumables for ddPCR was primarily due to biopharma headwinds. The company has a healthy mix of consumables and instruments and plans to prioritize buybacks for capital deployment in 2024.

The company plans to be opportunistic with share repurchases, but also has a focus on finding complementary business opportunities through tuck-in acquisitions. This is a two-pronged approach, with a combination of buybacks and acquisitions. The company will be attending the Citi Unplugged Life Sciences Access Day in New York at the end of February.

This summary was generated with AI and may contain some inaccuracies.