The conference call for Bio-Rad's first quarter 2025 earnings results is being introduced by operator Desyree, with Edward Chung leading the call. Key participants include Norman Schwartz, Jon DiVincenzo, and Roop Lakkaraju. Chung cautions that forward-looking statements involve risks and uncertainties, meaning actual results could differ from expectations. Investors are advised not to overly rely on these statements and to review the company’s SEC filings. The call will also discuss non-GAAP financial measures, with a reconciliation available in the earnings release. Jon DiVincenzo, the Chief Operating Officer, will now speak.

In the call, Jon DiVincenzo reports that the company delivered solid Q1 results despite challenges such as government funding issues and global trade disruptions. Key achievements include exceeding revenue and operating margin forecasts, positive momentum in the bioproduction business, and significant advancements in their product offerings, particularly in life sciences with new PCR-based diagnostics. The company is focusing on innovation and strategic partnerships, specifically highlighting their ddPCR technology's impact on cancer treatment outcomes. They also managed to improve productivity and mitigate tariff impacts effectively. While facing funding challenges in academia and biopharma research, they maintained strong demand for diagnostics and consumables globally, offsetting reductions in China.

The paragraph discusses the ongoing growth and developments at Bio-Rad, highlighting the return of Process Chromatography to growth and the continued momentum in their ddPCR portfolio. The company’s acquisition of Stilla Technologies is on track, which will expand their capabilities in the digital PCR segment. CEO Jon has visited global teams to reinforce his confidence in the organization and met with the German Red Cross, resulting in a contract renewal for their immunohematology platform. Bio-Rad continues to focus on innovation, operational excellence, and building customer relationships, achieving sustainable growth. The financial performance for the first quarter of 2025 exceeded expectations, as reported by Roop Lakkaraju.

In the first quarter of 2025, net sales were $585 million, a 4.2% decline from $611 million in Q1 2024, with a 1.5% decrease on a currency-neutral basis, mainly due to lower sales in the Life Science Group. Life Science sales fell to $229 million, largely because of reduced demand in biotech and academic research, particularly in the Americas. While Process Chromatography saw mid-teens growth, the Core Life Science Group's revenue dropped by 7.5%. The Clinical Diagnostics Group's sales decreased by 3.2% to $357 million, as increased demand for quality control products was offset by lower diabetes testing revenue, particularly in China. Regionally, currency-neutral sales declined in Asia-Pacific but increased in EMEA and the Americas. The gross margin fell to 52.3%, down from 53.4% in Q1 2024, primarily due to restructuring expenses from workforce reductions.

In the first quarter of 2025, the company reported an SG&A expense of $209 million, representing 35.7% of sales, slightly down from $215 million or 35.2% in Q1 2024, due to reduced discretionary spending and employee-related costs, though restructuring costs partially offset these savings. R&D expenses increased to $74 million (12.6% of sales) from $66 million (10.9% of sales) the previous year due to restructuring costs. Operating income fell to $24 million (4% of sales) from $45 million (7.3%) in Q1 2024, mainly due to higher restructuring costs. Net other income improved to $28 million, partly influenced by the value change in equity holdings, resulting in a net income of $64 million or $2.29 per share. The effective tax rate rose to 23.3% from 21.8%, influenced by the geographical earnings mix. Non-GAAP results showed a slight decrease in gross margin to 53.8%, and an increase in operating margin to 10.8% from 9.7% in 2024. The non-GAAP effective tax rate was 20.6%, down from 22.4%, driven by geographical earnings distribution.

The company reported a non-GAAP net income of $71 million for Q1 2025, with $2.54 earnings per share. Their balance sheet showed total cash and short-term investments of $1,660 million, slightly down from $1,665 million in Q4 2024, and increased inventory of $790 million. Operating cash flow for Q1 2025 was $130 million, significantly higher than the previous year, and free cash flow rose to $96 million from $30 million in Q1 2024. Capital expenditures and depreciation costs were $34 million and $38 million, respectively. They repurchased shares worth $101 million in Q1 and $99 million in April, maintaining $377 million for further buybacks. The company aims for a $310 million to $330 million full-year free cash flow and updated its 2025 guidance to reflect Q1 outcomes and changes in macroeconomic conditions.

The paragraph discusses the company's revised financial outlook, now expecting a currency-neutral revenue range from a 1% decline to 1.5% growth, which is about 225 basis points lower than previously projected. The revisions stem from reduced academic research funding in the U.S. impacting life science purchases, cautious equipment spending by biotech firms amid capital market volatility, and a softer economic environment in China affecting diagnostics. Consequently, life science business growth is now expected to range from flat to a 3% decline, and diagnostics growth from 0.5% to 2.5%. Market softness and tariffs, especially on U.S. products imported into China, present significant headwinds to operating margin, though the company is mitigating tariff effects through various strategic measures. The updated full year non-GAAP gross margin is projected at 53% to 54.5%.

The company is adjusting its 2025 financial outlook due to recent market conditions, including the impact of tariffs and a weakening U.S. dollar, which are affecting revenue and operating margins. Despite these challenges, they expect to achieve a key development milestone for Saber Bio in Q3 2025, with a $10 million R&D charge. The non-GAAP full-year tax rate has been revised to 22% from 23% due to changes in investment value. Management aims to be transparent about market headwinds and is focused on mitigating impacts from tariffs and trade disruptions while remaining committed to driving topline growth and margin expansion.

The paragraph discusses Bio-Rad's confidence in improving operational efficiency and expanding profit margins. The company's leadership highlights the challenges posed by prolonged macroeconomic headwinds, especially in the life sciences sector, but remains optimistic due to the ongoing advancements in biology. Bio-Rad is committed to its customers and markets, leveraging a strong balance sheet to invest in the business and explore acquisitions. Despite market volatility, the company sees potential opportunities due to moderated asset valuations. With over 70 years of resilience, Bio-Rad is confident in emerging stronger from current challenges.

The paragraph discusses the impact of tariffs on the company's operations, with a focus on mitigating these effects. The company is experiencing tariff challenges primarily on U.S. products shipped to China and European products shipped to the U.S. Roop Lakkaraju notes the company's lack of a China manufacturing footprint but emphasizes their strategy to manage the situation. This includes implementing potential surcharges and prepositioning inventory. Longer-term strategies involve exploring regional manufacturing opportunities and enhancing supply chain vitality to support these manufacturing efforts.

The paragraph discusses the company's financial and operational challenges, particularly in its diagnostics business. The gross margin is impacted largely by tariffs, and the company plans to manage these effects by 2025, although the future remains uncertain. The conversation shifts to the academic side, where funding has recently decreased significantly, including a 28% overall reduction, which has affected the company's performance, particularly in instruments. Despite this, consumable sales have remained stable. The situation worsened throughout the first quarter.

The paragraph discusses challenges and trends in funding levels and sales activity for a company. There's uncertainty about funding thresholds, affecting the company's operations, especially with instruments remaining a challenge compared to consumables. The company notes a decline in instrument sales by around 10%, while consumables have remained relatively stable. The conversation shifts to tariff exposure, where it’s clarified that the company has no manufacturing in China; thus, revenue to China comes predominantly from the U.S. There are questions regarding tariff impacts on revenue, particularly how they are managing tariffs and if they’re offsetting costs with surcharges or absorbing them.

The paragraph discusses the impact of U.S. tariffs on goods coming into China, particularly affecting the diagnostics sector. Roop Lakkaraju mentions evaluating and implementing surcharges to offset these tariffs while considering geographic developments, especially between the U.S. and China. There are plans to adjust prices and apply surcharges, though long-term contracts in diagnostics pose limitations. Norman Schwartz adds that tariff surcharges could result in reduced customer purchases due to budget constraints. Brandon Couillard from Wells Fargo expresses interest in further discussing this issue.

The paragraph discusses the challenges and strategies related to shipping products to China amid tariffs and potential revenue losses. Roop Lakkaraju explains that surcharges are considered in the company's guidance to preserve customer continuity and market share. Norman Schwartz mentions that products destined for China originate from various regions, reducing the impact of tariffs. Brandon Couillard questions the feasibility of the company's projected revenue growth, particularly in the latter half of the year. Roop Lakkaraju acknowledges the cautious approach they've taken regarding the demand profile and notes that while there is a slight increase expected in Q4, certain product lines like Process Chrom are expected to remain consistent.

The paragraph discusses the company's efforts to minimize risk by being cautious and reasonable in their market approach. They've closely worked with commercial teams on proposals, maintaining a steady win rate despite a longer sales cycle for instruments. The team is optimistic about achieving their current forecast in the coming months or quarters. Brandon Couillard inquires about capital allocation priorities, asking if the company would consider a large deal over $1 billion, beyond buying back stock and smaller acquisitions. Norman Schwartz expresses interest in pursuing larger deals that offer scale and can leverage global operations, stating the company has enough capacity for such transactions.

In the article paragraph, an unidentified analyst named Matt inquires about trends in the Biopharma Group, specifically focusing on process chromatography (process chrom) and the performance of consumables versus instruments within the biopharma market, with a particular interest in Droplet Digital PCR. Jon DiVincenzo responds, noting that process chromatography has seen positive growth due to early customer demand, although it is expected to maintain high single-digit growth for the year. The destocking trend is decreasing and normalizing as expected. DiVincenzo highlights that consumables are performing well despite broader academic and funding challenges, but there is softness in the instrumentation sector, particularly related to academia and biotech. Matt also seeks clarification on a previous estimate of $15 million related to reimbursement dynamics in China.

In the discussion, Norman Schwartz confirms that their expectations for the first quarter in China, including a $15 million reimbursement headwind, played out as expected. Regarding the Stilla acquisition, which is on track for the third quarter, Schwartz mentions excitement among their teams and positive feedback from select customer interactions. The platform's global brand awareness and ease-of-use feature are highlighted as promising aspects, though full customer engagement will happen once the deal is finalized. Overall, there's significant enthusiasm about the potential applications and workflow improvements of the Stilla platform.

The paragraph is part of a conversation between Norman Schwartz, Conor McNamara, and others regarding the life science business' performance. It discusses the customer-driven demand for Process Chrom, clarifying it wasn't a result of pulling forward orders due to tariffs. The solid forecast for the year is confirmed. It addresses a $40 million reduction in the life science guide, explaining that it comes from federally funded academic and government sales, which represent 4% of total sales. The reduction is linked to a predicted 40% decline in these areas year-over-year, also considering broader academic sales and ongoing macroeconomic softness in China.

In the paragraph, Jon DiVincenzo discusses a significant decline in grants approved or renewed in February and March, impacting their business. Norman Schwartz hopes that the cautiousness of their customers will decrease as the year progresses and awaits Congress's decision on NIH funding. Conor McNamara questions a reduction in clinical diagnostics growth guidance by 100 basis points. Roop Lakkaraju attributes this to macroeconomic factors, particularly activities in China, and notes no significant changes in reimbursement rates. Jack Meehan asks about the impact of tariffs, which reportedly equate to around $30 million, or 130 basis points, on EBIT.

In the article, Jack Meehan inquires about the impact of reciprocal tariffs and their influence on revenue, highlighting increased export costs. Roop Lakkaraju explains that the impact depends on which tariffs are currently applicable, with some paused and others in effect, and mentions the surcharges as part of their guidance. The discussion shifts to Bio-Rad's Diagnostics business in China, where Norman Schwartz describes a significant portion involving quality systems that might be exempt from tariffs, though exact figures are not provided. Roop Lakkaraju notes that Bio-Rad's performance in China saw a mid-to-high single-digit negative impact and worsened throughout the quarter. Jack Meehan then asks about maintaining the free cash flow forecast despite lower operating margins, to which the response involves focusing on working capital and other measures to ensure the target is met.

In the paragraph, Roop Lakkaraju discusses the company's focus on managing working capital, particularly in inventory and supplier management, to maintain confidence in their free cash flow projections. The company is implementing specific initiatives in these areas. Jack Meehan thanks Roop, and then Edward Chung concludes the call by mentioning their upcoming participation in two healthcare conferences in New York, expressing appreciation for the interest shown by participants. The operator then wraps up the conference call.

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