Bio-Rad(BIO) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q4 2025 were approximately $693 million, a 3.9% increase from $668 million in Q4 2024. On a currency neutral basis, this represents a 1.7% year-over-year increase driven by the clinical diagnostics segment [11] - Full year net sales for 2025 were $2.583 billion, a 0.7% increase from $2.567 billion in 2024. On a currency neutral basis, sales were essentially flat compared to 2024 [18] - Q4 GAAP gross margin was 49.8%, down from 51.2% in Q4 2024. Non-GAAP gross margin was 52.5%, compared to 53.9% in the previous year [13][14] - Full year non-GAAP gross margin was 53.3%, down from 55% in 2024, primarily due to reduced fixed manufacturing absorption and higher material costs [20] Business Segment Data and Key Metrics Changes - Clinical diagnostics segment sales in Q4 2025 were approximately $425 million, an increase of 8.4% on a reported basis from $393 million in Q4 2024, driven by higher sales of quality control and blood typing products [13] - Life science segment sales in Q4 2025 were $268 million, a 2.6% decrease from $275 million in Q4 2024, impacted by a constrained academic research and biotech funding environment [11] - The ddPCR portfolio posted mid-single-digit year-over-year growth in Q4, driven by the success of the QX700 platform [12] Market Data and Key Metrics Changes - Currency neutral sales decreased in the Americas, partially offset by increased sales in EMEA and Asia Pacific [12] - In biopharma, funding conditions improved during the second half of 2025, with expectations for a modest recovery in 2026 [9] - Academic institutions remain cautious in spending, focusing on maintaining staffing levels rather than purchasing capital equipment [8] Company Strategy and Development Direction - The company plans to advance several product launches in 2026, including an IVD version of the QX600 and additional high-value ddPCR assays across oncology [10] - Bio-Rad remains focused on disciplined innovation as a core part of its long-term growth strategy [9] - The company is looking for additional assets to help accelerate top-line growth and margin expansion [31] Management's Comments on Operating Environment and Future Outlook - Management noted early signs of stabilization across core markets, with improvements in NIH funding and biopharma funding [29] - The company is confident that actions taken to improve operational performance and expand margins will translate into better financial results over time [10] - Management remains cautious about the potential impact of policy developments in China on reimbursement rates [6] Other Important Information - Free cash flow for the full year 2025 improved to approximately $375 million, representing a conversion ratio of 138% for free cash flow to non-GAAP net income [23] - The company retired 1.2 million shares through its buyback program at a total cost of approximately $296 million during 2025 [23] Q&A Session Summary Question: Can you elaborate on the ddPCR business growth and the contribution from Stilla? - Management indicated that the strong growth was driven by the QX700 platform and a large installed base, with ongoing reagents being a significant part of the portfolio [35][36] Question: What are the recent changes affecting Process Chromatography? - Management explained that changes in vaccine production strategies and government regulations impacted demand, leading to a conservative outlook for this segment [38] Question: What is the outlook for operating margins in 2026? - Management provided a realistic outlook, factoring in the impact of Process Chromatography and operational improvements, guiding for an operating margin between 12% and 12.5% [39][41] Question: Why is clinical diagnostics growth muted compared to pre-COVID levels? - Management attributed the muted growth to a mix of product performance and geographic factors, particularly reliance on markets like China [60] Question: What is the long-term growth outlook for Process Chromatography? - Management suggested a possibility of returning to low single-digit growth by 2027, with potential for acceleration depending on customer transitions from clinical to commercial phases [62]