BIO-RAD LABORATORIES, INC. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• The quarter was solid with revenue better than targeted and margins ahead, driven by product mix, productivity gains, and cost management.
• Clinical Diagnostics business back to normal with stronger-than-expected growth, broad-based across regions, especially quality control in Asia Pacific.
• Life Science group recovery modest due to soft biotech/pharma demand and China; gradual recovery expected into 2025.
• Process chromatography materials declined year-over-year due to destocking, but expected to return to growth in 2025.
• Droplet Digital PCR franchise grew mid-single digits, bolstered by IP-related royalties; strong interest in new assays for oncology and cell/gene therapy.
• Opened a new Asia distribution center in Singapore to improve logistics and customer service.
• Acquired Sabre Bio, a novel platform using Droplet technology; postponed Continuum QXd-PCR platform launch.

Segment Performance

• Clinical Diagnostics: Revenue was $389 million in Q3 2024, up from $368 million in Q3 2023 (+5.6% reported, +6.4% currency-neutral). Driven by increased demand for quality control products and immunology products. Contributes approximately 59.8% to total revenue.
• Life Science: Sales were approximately $261 million in Q3 2024, flat compared to Q3 2023 ($263 million). Excluding process chromatography sales, Life Science revenue increased 3.5% year-over-year and 3.9% currency-neutral. Contributes approximately 40.2% to total revenue.

Guidance

• Maintained full year 2024 revenue guidance with currency-neutral year-over-year revenue expected to decline 2.5% to 4%.
• Increased full year non-GAAP gross margin range to 55%–55.5% from prior 54.5%.
• Increased full year non-GAAP operating margin to 12.75%–13.25%.
• Adjusted EBITDA margin expected to be 18.5%–19%, including the Q3 in-process R&D expense with ~125 basis point impact.

Risks

• Customers cautious on funding environment and conservative on capital deployment.
• Large pharma continuing cost-cutting initiatives like restructuring and R&D reprioritization.
• Academic funding softer globally after strong prior years, with mixed European markets and Asia Pacific economic headwinds.
• Process chromatography sales impacted by ongoing destocking at some large customers.
• Postponement of Continuum QXd-PCR platform launch.
• Partner exiting donor screening business in China impacting Clinical Diagnostics.

Question and Answer

• Q: Patrick Donnelly on margins, process chrome, Sartoria stake A: Norman Schwartz discussed sustainable margin improvements, process chrome customers still working through destocking with sequential improvement expected, and Sartoria stake is monetizable but no immediate need for monetization.
• Q: Dan Leonard on 2025 guidance, free cash flow A: Roop Lakkaraju noted 2025 guidance is conservative, free cash flow focus on gradual inventory improvement via supply chain initiatives.
• Q: Brandon Couillard on revenue sequential, digital PCR, Continuum launch A: Roop Lakkaraju explained revenue sequential conservatism, digital PCR growing with gradual improvement, and Continuum QXd-PCR launch deferred for product refinement.
• Q: Jack Meehan on China, process chrome, tax rate A: Roop Lakkaraju discussed China market dynamics, process chrome destocking in low double-digit millions impact, and tax rate around 22% as placeholder for 2025.
• Q: Tycho Peterson on Continuum, ddPCR pricing, bioprocess, partner exit A: Roop Lakkaraju and Norman Schwartz addressed Continuum launch delay for product quality, ddPCR pricing reactive to competitive market, bioprocess destocking unique to specific customers, and partner exit impact in low double-digit millions.