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Afternoon, everyone, and thank you for joining us. Today, we will review the first quarter twenty twenty five financial results and provide an update on key business trends for Bio Rad. With me on the call today are Norman Schwartz, our Chief Executive Officer John DiVincenzo, President and Chief Operating Officer and Luke and Roop Lakaragi, Executive Vice President and Chief Financial Officer. Before we begin our review, I would like to remind everyone that we'll be making forward looking statements about management's goals, plans and expectations, our future financial performance and other matters. These statements are based on assumptions and expectations of future events that are subject to risk and uncertainties. Our actual results may differ materially from these plans goals and expectations. You should not place undue reliance on these forward looking statements and I encourage you to review our filings with the SEC where we discuss in detail the risk factors in our business.
12m 11s
The company does not intend to update any forward looking statements made during the call today. Finally, our remarks today will include references to non GAAP financials including net income, and diluted earnings per share, which are financial measures that are not defined under generally accepted accounting principles. Investors should review the reconciliation of these non GAAP measures to the comparable GAAP results contained in our earnings release. With that, I'll now turn the call over to our Chief Operating Officer, John Stevencenzo. Hello, and thank you for joining today's call. Despite a challenging macro environment with academic headwinds due to government funding, and global trade disruptions from tariffs, we delivered solid Q1 results exceeding consensus for both revenue and operating margin. Our Clinical Diagnostics business performed slightly better than forecast while our Life Science segment experienced softness in academia and biopharma research. Notably, our bioproduction business saw positive momentum with year over year growth returning to our process chromatography business. We continue to prioritize bringing innovative products to our customers. In Q1, we launched several key menu expansions for our core life science portfolio including a new PCR based salmonella test for food safety and advancements to our portfolio of ddPCR VeriCheck assays for cell and gene therapy.
13m 36s
We are also strategically advancing Droplet Digital PCR as a valuable tool for oncology diagnosis and management through high valued assays and key partnerships. Recent compelling clinical trial data published in Clinical Cancer Research utilizing Bio Rad's ddPCR technology demonstrated a strong correlation between circulating tumor DNA changes and treatment outcomes in lung cancer. This highlights the significant impact of our ddPCR platform on clinical decision making and patient outcomes. Our team also demonstrated exceptional execution in driving productivity improvements and effective cost management. Building on our lean initiatives. We proactively evaluated are implementing mitigation strategies for tariff impacts in response to escalating geopolitical and trade tensions. In Diagnostics, we continue to show solid demand offsetting reimbursement reductions in China with nearly 3% growth in the rest of the world. And in Life Science, we navigated academic, and biopharma research funding headwinds particularly in The U. S, while maintaining strong demand for consumables. Process chromatography returned to growth as I stated our ddPCR portfolio maintained its [indiscernible] And strong reagent and consumables growth. Our acquisition of Stila Technology remains on track for closing by the end of the third quarter. We are excited about the Sila platform. As it expands our offering in the digital PCR segment from gene expression to targeted rare mutation detection.
15m 11s
We're planning a webinar following the close of the Sila transaction to outline our strategy in digital PCR with the addition of the Stila and Continuum platforms. During the quarter, I visited several of our global teams across three continents including nine manufacturing sites and customer visits both our Life Science and Clinical Diagnostics segments. These visits reinforce my confidence in our team's commitment strength of our global organization, and fantastic relationships with our customers. Our investments in efficiency and productivity within our manufacturing sites and distribution distribution centers are yielding tangible results My travels including a meeting with the leaders of the German Red Cross blood donation service. Where we were recently awarded a multiyear contract renewal for our immunohematology platform a testament to the quality and reliability of our solution. At Bio Rad, we continue to advance in our ability to develop innovative products drive operational excellence and build upon our relationships with customers in over 133 countries. As we are laser focused on delivering sustainable profitable growth. We thank you for your ongoing support I will now turn the call over to Roop for a review of our financial performance. Thank you, John, and good afternoon. I'd like to start with a review of the first quarter twenty twenty five results Overall, we executed well during the quarter, which allowed us to deliver revenue and operating [indiscernible] And margin ahead of consensus estimates for Q1.
16m 44s
Net sales for the first quarter of twenty twenty five were approximately $585 dollars which represents a 4.2% decline on a reported basis versus $611,000,000 in Q1 of twenty twenty four. On a currency neutral basis, this represents a 1.5 year over year decrease and was primarily driven by lower sales in our Life Science group. Sales of Life Science Group in the first quarter of twenty twenty five two twenty nine million compared to $242,000,000 in Q1 of twenty twenty four. Which is a decline of 5.4% on a reported basis and 3% on a currency neutral basis. Primarily reflecting ongoing softness in the biotech and academic research market particularly in The Americas. Currency neutral sales decreased in The Americas and Asia Pacific partially offset by increased sales in EMEA. Our process chromatography business experienced mid teens growth on a year over year basis The strength in Q1 was due to the timing of customers' orders. And we continue to expect high single digit growth for this area in 2025. Excluding process chromatography sales, Core Life Science group revenue decreased 7.5% year over year and 5.5% on a currency neutral basis due to the softness across the markets for instrument demand.
18m 8s
Sales of the Clinical Diagnostics Group in the first quarter of twenty twenty five were approximately $357,000,000 compared to $369,000,000 in Q1 of twenty twenty four. Which is a decrease of 3.2% on a reported basis and effectively flat on a currency neutral basis. Increased demand for our quality control products was offset by the expected lower diabetes testing revenue. And we currently do not expect further reimbursement changes in China this year. On a geographic basis, currency neutral sales decreased in Asia Pacific partially offset by increased sales in EMEA, and The Americas. Q1 reported GAAP gross margin was 52.3% as compared to 53.4% in the first quarter of twenty twenty four. The decrease in gross margin was primarily driven by restructuring expenses related to the workforce reduction announced during the first quarter of twenty twenty five. SG and A expense for the first quarter of twenty twenty five was $2.00 $9,000,000 or 35.7% of sales compared to $215,000,000 or 35.2% in Q1 of twenty twenty four. The decrease in SG and A expense was primarily due to lower discretionary spending and employee related costs partially offset by restructuring costs. Research and development expense in the first quarter was $74,000,000 or 12.6% of sales compared to $66,000,000 or 10.9% of sales in Q1 of twenty twenty four.
19m 44s
The higher year over year R and D was primarily due to restructuring costs partially offset by lower employee related expenses. Q1 operating income was approximately $24,000,000 or 4% of sales compared to 45,000,000 or 7.3% of sales in Q1 of twenty twenty four.
20m 1s
Lower operating income is driven by higher restructuring costs partially offset by the revenue mix continued proactive expense management initiatives.
20m 11s
During the quarter, interest and other income resulted in net other income of $28,000,000 compared to the to net other income of $24,000,000 last year. The change in fair market value of equity security holdings primarily related to the ownership of Sartorius AG shares contributed to our reported net income of 64,000,000 or $2.29 per diluted share. Effective tax rate for the first quarter of twenty twenty five was 23.3% compared to 21.8% for the same period in 2024. The higher rate in 2025 was driven by a geographical mix of earnings. Moving to the non GAAP results. Non GAAP financial measures, which exclude certain atypical unique items that impact both gross and operating margins, and other income are detailed in the reconciliation table in our press release. First quarter non GAAP gross margin was 53.8% in line with consensus lower than Q1 twenty twenty four's results of 54.2%. First quarter non GAAP operating margin was 10.8% compared to 9.7% in Q1 of twenty twenty four. The non GAAP effective tax rate for the first quarter of twenty twenty four was 20.6% compared to 22.4% the same period in 2024. The lower rate in 2025 was driven by our geographical mix of earnings.
21m 37s
Finally, non GAAP net income for the first quarter twenty twenty five was $71,000,000 or $2.54 diluted earnings per share. Moving on to the balance sheet.
21m 49s
Total cash and short term investments at the end of Q1 were $1,660,000,000 compared to $1,665,000,000 at the end of Q4 twenty twenty four. Inventory at the end of Q1 was $790,000,000 up from $760,000,000 in the prior quarter. For the first quarter of twenty twenty five, net cash generated from operating activities was 130,000,000 compared to $70,000,000 for Q1 of twenty twenty four. Net capital expenditures for the first quarter of twenty twenty five were $34,000,000 and depreciation and amortization for the first quarter was 38,000,000 Regarding free cash flow for the first quarter of twenty twenty five, we were pleased with the generation of $96,000,000 which compares to 30,000,000 in Q1 of twenty twenty four. We continue to target full year free cash flow of approximately $310,000,000 to $330,000,000 for 2025. During the first quarter, we purchased 399,205 shares of our stock for a total cost of $101,000,000 or an average purchase price of approximately $253 per share. In April, we purchased an additional $422,648 shares of our stock for a total cost of $99,000,000 or an average purchase price of approximately $234 per share. We will continue to be opportunistic with our buyback program and still have $377,000,000 available for share repurchases under the current Board authorized program.
23m 26s
Moving on to the non GAAP guidance for 2025. We are updating our 2025 full year guide to reflect the Q1 results the evolving state of the academic and biotech research funding, and the impact of recent changes in the macro economy including tariffs. We recognize that the recent macro changes are causing uncertainty and remain fluid. However, in the interest of full transparency, we're providing our best estimates of the impact of the known changes as of today. Overall, we now expect total currency neutral revenue to be in the range of approximately a 1% decline to 1.5% growth or approximately two twenty five basis points lower than our previous guide. I'll start with the effect of the softer academic research funding as a result of changes in U. S. Policy. We now expect these life science purchases to be more muted 2025 in particular demand for instruments.
24m 21s
As customers evaluate the impact of potential changes to government funding. We are also seeing reduced demand from biotech customers particularly among small and mid sized development stage companies that have become more conservative with equipment spending due to the increased volatility in the capital markets. As such, we now expect our Life Science business to be in the range of flat to down 3% for the full year versus a growth of approximately 1.5% to 3.5% previously. Next, we are derisking our Diagnostics growth outlook by approximately 100 basis points to reflect a softer macroeconomic environment particularly in China and now anticipate full year growth of approximately 0.5% to 2.5%. The net effect of the market softness in our business group is approximately 100 basis point headwind to operating margin. Finally, the impact of tariffs. Our updated guidance considers tariffs that are in effect effect globally as of today and assumes no change in the current U. S. Policy. The net impact of the tariffs is 130 basis point headwind to operating margin primarily due to U. S. Manufactured products that are imported into China. Included in this updated view are our we are taking to partially mitigate the effects of the tariff. [indiscernible] such as surcharges pre positioning inventory in certain countries, further regionalizing supply chains, and identifying additional in region manufacturing opportunities.
25m 55s
Factoring in the above, the updated full year non GAAP gross margin is projected to be between 5354.5%. Note that we were able to offset the impact from market softness through our actions and the difference relative to our prior full year gross margin outlook. Of 55% to 55.5% is entirely due to the impact of tariffs. Full year non GAAP operating margin is projected to be between 1012% included in this range are the above considerations. I just spoke of. Additionally, we continue to be on track to achieve a key development milestone in Q3 twenty twenty five related to Sabre Bio which as discussed previously would result in a one time in process R and D charge of $10,000,000 As a result of the recent weakening U. S. Dollar, expect less of a headwind to our revenue and operating income than our prior guidance. We now expect approximately a 100 basis point headwind to 2025 revenue and approximate 20 basis point impact on operating margin versus the prior 40 basis point effect. We estimate the non GAAP full year tax rate to be approximately 22 versus 23% previously due to the change in the equity value of Sartorius investment.
27m 14s
With our updated outlook for 2025, we recognize that there are many moving pieces and the situation is evolving rapidly. There's a wide range of scenarios that could ultimately play out. That said, we're trying to be prudent and transparent in providing the key headwinds that we are currently seeing in the marketplace. Where possible, we are focused on mitigating the impacts from proposed tariffs and global trade disruptions to deliver results for shareholders. As you've seen in the past year, management's approach to guidance is to be realistic and setting expectations. While we are adjusting our 2025 outlook, this does not shift our focus from the significant opportunities we see in enhancing business performance. Driving consistent top line growth remains central to our strategy and a key enabler of substantial margin expansion. We are confident that our ability to improve operational efficiency and strategically optimize our footprint will allow us to capture hundreds of basis points of margin expansion over the coming years. We're eager to share more about this opportunity and other critical aspects of our business at our Investor Day this fall. I'll now turn the call over to Norman for his remarks. Okay. So I think as Rupert alluded to, you know, continue to operate in a what I think of as in a very dynamic environment.
28m 40s
And I would say that in all my years in this business, I've never experienced such a prolonged period of macroeconomic headwinds. And their impact on the growth of our business. I would say, for for life science. However, we are still in the golden age biology, and I can to see a long runway ahead for for life science research, and for diagnostics, the two principal markets that we serve. Remain committed to our customers the attractive markets that we serve, and certainly the contributions we can make which position Bio Rad for consistent profitable growth.
29m 28s
Second, I would say that with our strong balance sheet, we have tremendous optionality. We continue to invest in our business. And remain active in evaluating inorganic opportunities opportunities that potentially offer values to customers [indiscernible] With the increased volatility in the equity market and the past few months, we are seeing more opportunities as valuations for assets have moderated relative to where they have been in recent years. And finally, I guess I would note that Bio-Rad has been resilient and has persevered through many cycles our seventy plus year history To the credit and determination of Bio-Rad employees around the world, We continue to advance our corporate transformation and believe we'll come through this dynamic period even stronger than before. So, Ed, that's, that's all I have. Turn it back to you. That concludes our prepared remarks, and now we'll open the line to take your questions.
30m 38s
Operator?
30m 41s
Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, If you are called upon to ask your question and are listening via speakerphone in your device, pick up your handset to ensure that your phone is not on mute when asking your question. Again? Press 1 to join the queue. And our first question comes from the line of Patrick Donnelly with Citigroup. Your line is open.
31m 19s
Hey, guys. Thank you for taking the questions.
31m 22s
Ruth, probably one for you to start, not surprisingly, on tariffs. It sounds like you guys are layering in some impact into the guide. Can you just talk about maybe the gross impact? What mitigation efforts you guys are doing? It sounds like potential surcharges. I'm sure some acceleration on the cost side. And what's the ability to contain this impact into '25? Does some of it linger? Maybe just walk us through what you're seeing, what the mitigation efforts are and how to think about this?
31m 50s
Yeah. Of course. Thanks, Patrick, for the for the question. Not surprising also in terms of leading up with tariffs, right? So there are a number of different factors. Step back first of all maybe just to understand where the tariff impacts are coming from. I think there's there's a few different aspects. One is you know, our our global footprint is is a positive for us. However, we don't have China manufacturing footprint today. So that's one consideration here. Where the tariffs are most significantly impacting us is obviously U. S. Products being shipped into China. But also Europe products that are being shipped into The U. S. And so we're very mindful of that. And then there's, of course, supplier considerations. As we think about these different tariff pieces, we are taking actions in terms of potential surcharges as I've mentioned in my prepared remarks. But we also have been seeking to pre position inventory and that's been another aspect of it. The other pieces of this are longer term, right, in terms of looking at in region manufacturing opportunities, but also then how do we drive further supply chain vitality in region as well. And support of the manufacturing.
33m 4s
And so all of the but those those last two that I just mentioned are longer term in nature. And especially for our diagnostics, part of the business. Which as you think about the regulatory considerations it's a multiyear journey. And so as we think about the gross margin and operating margin effect here, gross margin, as I mentioned, movement from the original guide is effectively all tariff related. We were able to mitigate the operational softness we're seeing or I'm sorry, market softness we're seeing.
33m 37s
And so when you think about that, it's how can we look at, within 2025, any further actions we can take. And we'll seek to limit it to 2025. However, I think it's still a fluid environment, and so it's hard to say what '26 might hold this point in time.
33m 59s
Okay. That's helpful. Then just the academic side, you know, obviously, that's worsened here over the past, you know, past couple months. What have you guys seen as we work our way through March and April? Obviously, the NIH proposal came out with that 40% cut. What's the expectation now for academic? And again, maybe just the cadence of what you saw as we worked our way through the quarter and into April on that segment? Would be helpful.
34m 25s
Yeah. Maybe maybe I could start and then have Norman and John jump in as well. I think what we saw and there's been some recent articles just on level of funding decrease that's occurred. There was something that came out more recently in the last day or two. Talked about a 28% reduction in overall funding. I think through the first quarter, we were able to hold and especially because the consumables were maintained to be fairly strong. It really is the instruments where we saw the softness more so But it worsened as we have gone through Q1. And as we think about where we are in Q2 and moving forward, I think the continued lack of clarity on what is the funding level, where's the threshold is going to be maintained, what level of funding is is going to be provided, That's creating some some additional challenges for people from an activity standpoint. We're still seeing consumables activity. Or activity and especially on the consumable side. It's the instrument side that continues to be challenging. I think, for us at this point in time.
35m 41s
Okay. And maybe last So yeah.
35m 46s
Go ahead.
35m 49s
Our next question comes from the line of Dan Leonard with UBS. Your line is open.
35m 56s
Thank you.
35m 57s
Maybe just to riff off that last question there.
36m 1s
How wide is the gap at this point in growth between consumables and equipment?
36m 8s
I would say it's been a bit of a deterioration. If I just look at it sequentially in terms of the instruments, sales on a on a sequential basis, Dan, it's it's probably down about 10% further decline. Consumables actually had held up fairly well. From a sequential standpoint in Q1 versus Q4. Maybe just a tad down, but still very strong overall. Hopefully that gives you the the answer you or perspective you're seeking.
36m 39s
That's helpful. And then as a follow-up, I could use a little bit more help understanding exactly the tariff exposure. So a couple of specific questions. What proportion of your revenue in China is sourced from The U. S? What percentage of your revenue in The U. S. Is sourced from The U. S? And that's insulated from Europe or China tariffs? And And what assumption are you making regarding who eats the tariff? How much are you off setting with a surcharge versus absorbing the tariffs on your p and l?
37m 15s
Yes. So again, we don't have any China manufacturing Right? So that that's first and foremost to understand. So you can imagine that, the the the revenue that's going into China is either coming from The US or Singapore predominantly. Or there's a bit in Europe as well. And the biggest piece of the tariff impact is those pieces obviously coming from The US into China. And especially, on the diagnostic side of the house. And so that's where we're seeing the largest impact of of the tariffs. Overall in terms of what we've articulated.
38m
And then your assumption on do you observe that tariff on your P and L?
38m 6s
Yes. I mean I think it's something we're evaluating. Obviously we talked about surcharges that we're putting in place, and we're working through that. And have deployed that already. But as we think about how things are evolving, I think we're also mindful of how the situation is evolving on a geographic basis. Right, especially China with The US specifically.
38m 28s
Okay.
38m 29s
Thank you.
38m 30s
We prepared to put in some price adjustments and surcharges nearly effective immediately. Of course, on the diagnostic side, we have longer term contracts, which do have some ability to adjust, but not exactly the same as on life sciences. So the team is kinda just preparing how could we compensate for the tariffs if we can absorb it absorb it. Otherwise, applying that additional charges to customers.
38m 59s
Okay. Thank you.
39m
So just just one more thing to keep in mind that it's, you know, it's it's the tariff surcharges are not a free ride. Know, many of these customers have have limited budget. So to the extent you have a tariff surcharge, you might reduce the the amount of purchases that are made.
39m 24s
Yeah. I was wondering that as well, Norman. Thank you.
39m 32s
Next question comes from the line of Brandon Couillard with Wells Fargo.
39m 36s
Your line is open.
39m 39s
Hey, thanks. I want to follow-up on that line of questioning. So as it relates to products you're shipping to China, some of your peers have assumed that you know, that revenue just goes away, but it's not it's not feasible for customers to buy the product. So have you assumed demand destruction And are the surcharges in terms of like top line embedded in the guidance as of right now?
40m 2s
Yeah. So so two pieces there, Brandon. In terms of the latter, the surcharges are embedded. Or consideration of the surcharges are embedded within the guide. In terms of the former, we are looking at it from a so we're not looking at we're trying we are looking at it from the standpoint of preserving customer continuity and market share. And therefore, we are seeing it as strategic in terms of if we considering the tariff situation and how fluid it is, where surcharges ought to be applied and how we ought to do that. [indiscernible] Roop alluded to earlier, I mean, product going into China actually come from not just The Americas, but from Europe and from Asia. Specifically Singapore. So we've got that we've got a reasonable amount of mitigation of China tariffs. For those products.
41m 18s
Okay.
41m 19s
Ruth, in terms of the guide, I mean, based on where you came in, in the first quarter, it still seems to imply a big second half ramp, especially when you're looking at it on two year stacked comp basis.
41m 30s
So can you just help us understand like to what degree do you think you derisk the top line outlook enough? For the back half? [indiscernible] the the question, isn't it, Brandon? I I mean, we we tried to take a conservative view of the demand profile and and how we see that softness. The ramp from Q1 to Q2 two and q two, q three are relatively flat There's a little bit of a uptick It's Q4, but we've also and there's some specific nuances to let's say, QSE or is it part of its seasonality, part of its some quality systems revenue that we see uptick Process Chrome continues relatively consistent through the year. So we've tried to derisk it in terms of these moving pieces. I think we've as as we've tried to be over the course of last year or so, be reasonable in terms of our point of view. While while really taking a prudent approach on on what we're seeing in the marketplace. Brad, what we have done is, you know, we've worked obviously very closely with the commercial teams here, looking at number of proposals, win rates, sales cycle, and then the run rate business.
42m 53s
Run rate business has continued to be as modeled The run rate, as you can imagine, on the instrument side of things, the sales cycle is a little longer, although we've maintained our win rate, which is a positive. So we we believe that, you know, things will settle down here in the coming months, if not couple of quarters. And, team is pretty optimistic on the current forecast, achievability.
43m 18s
Yeah.
43m 20s
Okay. Last one. Norman, you mentioned the the balance sheet option optionality and availability of assets and valuations, which is [indiscernible] [indiscernible] update us on your your priority or your preference for capital allocation right now. You're buying back a lot of stock. Which is great. I mean would you consider a larger deal perhaps right now that's maybe north of $1,000,000,000 Or are you primarily still focused on bolt ons, just what are your preferences?
43m 47s
Yeah. Yeah. I think, you know, especially given some of the given some of the the I think of as attractive inorganic opportunities that are that are bubbling up. I think there is a there is a real appetite for doing something meaningful you know, obviously, the right deal is important for us. You know, especially those larger things to provide scale, We can leverage our our kind of global global commercial operations. Yeah. Lots of things we could do there, but I I think we are focused a little bit on on larger things. And, yeah, we've got plenty of capacity and you know, on balance sheet. And could, you know, certainly do something in the in the b range. Thank you.
44m 48s
Thanks, Brenda.
44m 51s
Our next question comes from the line of Tycho Peterson with Jefferies. Your line is open.
44m 58s
This is not on for Tycho. Maybe just to start out on Bio- Pharma Group. Think you talked about kind of softer trends on smaller and midsize. Obviously, Processed Chrome up mid teens in 1Q is good to see. I guess, on Process Chrome, is there any kind of initial early year stocking? You have easy comps there. Why wouldn't that trend kind of continue relative to the high single digit guide? And then terms of consumables versus instruments within biopharma and maybe more specifically a drop of digital PCR. Has your outlook changed at all for the year in terms of consumables and instruments within that end market? Thanks.
45m 35s
Yeah. Thanks, Matt. So in terms of bioprocessing to start with, you know, process chrome was was a positive for us. We it was nice to say to your question of why shouldn't that continue, It really is and we didn't pull anything forward, but customer demand drove it such that they wanted some uptake earlier in Q1 than what we they would have otherwise wanted a little later for their own from their own manufacturing production standpoint. We still see it as a high single digit growth for the year. And really just as we've expected the destocking has continued to decrease and it normalizing as we would expect So nothing unusual there and it's a very much a positive there for us. In terms of your question on consumables and instrumentation, the real softness is really around instrumentation. And that's the biggest challenge for us. Consumables has held fairly nicely. Even considering kind of the macro around academia, NIH, And so we're happy to see that. But where where the softness, we pulled it back specifically related to academia and biotech, if you will. And the instrumentation side of that.
46m 57s
Okay. Thanks. And then just wanted to clarify, I think you had baked in prior $15,000,000 for the year on the reimbursement dynamics in China. I guess just to clarify, did those kind of play out as expected in 1Q? And any way you can kind of quantify what the the reimbursement headwind was to your China business here in January? Yeah. Think you said it well. It played out just as we expected Nothing different. Nothing incremental. And just in terms of that number that you quoted just now, the $15,000,000, you just think of that as, you know, one quarter value of that. Is kind of played out. Effectively.
47m 36s
Okay. Thanks. And maybe just one more. Understand you haven't closed the the Stiller deal. May remain on track for third quarter, but just any kind of color update in terms of conversations you've had with with customers, you know, now there's been some some time you since you've announced it. I think you'll give a strategy update here in a few months. But just any feedback or color from from, your customers since you've kind of announced the deal? Maybe, you know, excitement levels around that. Any more color to add around the Still acquisition? Thank you.
48m 7s
Yes. I think, first of all, within our teams, I mentioned that I kind of traveled the globe, during the quarter and each of our teams are very excited about the platform and what we can do with our content on that platform. Even into the food applied application. So we remain very excited about it. We haven't been jumping the gun and engaging customers necessarily on certain things. But where it has come kind of across in certain areas, there's very positive feedback. I mean, was really surprised that the brand awareness that's out there on the platform in various geographies around the globe. So we're bullish. We still have a little ways to go here before we close the deal and really kind of engage with customers. But overall, there's a lot of excitement. And it's it's you know, I I think that the exciting thing is the ease of use and the workflow of that platform. Is, very, very exciting to the marketplace.
49m 7s
Great. Thank you.
49m 9s
Thanks, Matt.
49m 13s
Next question comes from the line of Connor McNamara with RBC Capital Markets. Your line is open.
49m 23s
Just first on the Life Science business, can you talk about the dynamics there First on the pull forward on Processed Chrome, was any of that ahead of tariffs or what can you comment on the strength of that and kind of your the cadence of that through the year? Maybe we'll start there. Yes. So Connor, I want to clarify. It wasn't necessarily a pull forward by us. It's something that was customer demand driven, right, in terms of and it it we don't think it was tariff related. And it wasn't tariff related. So it wasn't a prepositioning of of that revenue ahead of tariffs or anything like that.
49m 59s
Okay.
49m 59s
For that. And then The team has basically confirmed their full year forecast as we submitted and that's pretty solid. I'd say very solid forecast.
50m 10s
Okay. Perfect. And then if if my math is right, it looks like you're taking about 40,000,000 out of the life science guide, which I think you've said that the federally funded academic and government sales is 4% of your sales. So is that $40,000,000 all coming out of that? And kind of are you making the assumption that will be down 40% year over year? Is there anything else baked into the life science cut?
50m 32s
Yeah. I mean, it really is. So you're right. The federally funded slash NIH, you said, you said it's [indiscernible] Remember, academia broadly is a larger percentage of our overall revenue. Somewhere in that, let's call it 20 ish percent. So that's the other piece of that. That comes into play. Right? Overall. And and the other piece is as a function of that, geographically, continuing to be soft. From a macro and and just you know, situation. Standpoint.
51m 7s
The first quarter Thank as you've probably seen, Connor, there was a four, five, six week period of time there in February and March where there were almost no grants approved or renewed. So it's pretty dramatic impact there. Won't see that probably until a number of quarters from now. And it may be a little more dramatic in the first quarter than we're going see the rest of the year, but there's certainly soft and concern by our customers.
51m 30s
Yeah. I mean, hopefully, that will as we go through the year, that will that will moderate that that that that that that cautiousness will moderate, you know, still haven't seen the congress weigh in on the NIH going forward. So so Got it. We'll have to see how that goes.
51m 55s
Got it. Okay. Thanks for that. And just last one for me on the you said you derisked your clinical diagnostics growth by 100 basis points. Is that that just conservatism on weaker demand ahead of because of what's going on in the macro environment? Or is there anything that you saw within the quarter exiting the quarter that would imply that that 100 basis points cut is what you're actually seeing. It just sounded like you're taking a conservative tone on that. If you could give more color, I'd appreciate it. Well, I mean, again, let's keep in mind, right, I think it's the macro from a DX standpoint. On activity levels. Is is one aspect of it. China is another aspect of it. And and China may be the more significant aspect of it. Right? And so those those are the pieces. And and just you know, knock on wood, we haven't seen any further reimbursement rate changes or anything like that. VBP hasn't been, anything to note for us. And and so it really is just the macro dynamics and softness.
53m 4s
And our last question comes from the line of Jack Meehan with Nephron Research. Line is open.
53m 11s
Thank you. Good afternoon, everyone.
53m 13s
Good afternoon.
53m 15s
I wanted to start just follow-up on the tariff assumptions here. This 30 bip op margin impact, so it's about 30,000,000 to EBIT. First, just wanna confirm, is this a threefour impact you're assuming for the reciprocal tariffs? And you assuming any revenue impact? Or is it really just like the increased cost on exports for those products? Yep. So so it it really depends on which tariffs are in place. So it's respective to the tariffs in play. Obviously, are certain tariffs that have paused right now. Some are in effect already, that's what's contemplated. In terms of that guide. What we also, what we also determined is the surcharges as a net effect of that. Within that overall guide.
54m 6s
Okay.
54m 8s
And then you mentioned for the within the diagnostics business, some of the a few times you've mentioned part of it is related to the China region. Can you just talk about how China Diagnostics did overall for Bio Rad in the first quarter? And do you think the increased tariff rates, like, is that like, what you're referring to in terms of the macro, or is it something broader there? So a good portion of our diagnostic business in China is actually the quality systems, which know, we're trying to understand clearly whether that's going to be excluded from tariffs or not. So looks like that's good news for us.
54m 57s
I don't if have the exact numbers with those things.
55m
Yes. I mean if you think about China overall for us, Jack it wasn't it was kind of mid single digits to, let's call it, mid to high single digits kind of effect, negative effect from what we had expected in China. Mhmm. And and, overall, I would say it got tougher as we went through the quarter. And I think that's the other aspect to keep in mind.
55m 24s
Got it. Okay.
55m 26s
And then just the last one about the free cash flow update. Was a bright spot, kind of maintaining that forecast despite you know, the lower op margin. Can you just talk about like, some of the levers you're pulling as a working capital? Just what else you're looking at to deliver on free cash flow? Yeah. It it really is the working capital. I mean, we we continue to focus on inventory and inventory inventory management. Obviously with the forecast changes. We're running that through the system looking at what else we can do in region in terms of the timing of those. The other aspect is, you know, looking at, supplier management as well as our DSO in terms of opportunities for improvement there. So we have specific initiatives on all of those fronts. Wherein it gives us confidence to still stand behind the free cash flow range that, that we provided.
56m 18s
Okay. Thank you, Roop.
56m 20s
Yep.
56m 25s
That concludes the question and answer session. I would like to turn the call back over to Edward Shang for closing remarks.
56m 32s
You for joining today's call. We'll be participating at the RBC Global Healthcare Conference in New York later this month and we'll also be back out in New York in early June for the Jefferies Global Healthcare Conference As always, we appreciate your interest. And we look forward to connecting soon. Bye bye.
56m 50s
Ladies and gentlemen, this concludes today's conference call. Thank you all for joining, and you may now disconnect.
Key Insights
Q1 2025 revenue and operating margin exceeded consensus, but net sales declined 4.2% year-over-year to $585M, mainly due to ongoing softness in the Life Science segment, particularly in academic and biopharma research.
Process chromatography business saw mid-teens year-over-year growth in Q1, with full-year 2025 growth expected in the high single digits; core Life Science revenue (excluding process chromatography) declined 7.5% year-over-year.
Updated 2025 guidance: total currency-neutral revenue expected to range from a 1% decline to 1.5% growth (down ~225 bps from prior guide); Life Science business now expected to be flat to down 3% (previously +1.5% to +3.5%), and Clinical Diagnostics growth outlook reduced by 100 bps to 0.5%-2.5%.
Tariffs are a significant headwind, with a 130 bps negative impact on operating margin for 2025; mitigation efforts include surcharges, pre-positioning inventory, and exploring regional manufacturing, but some impact may persist beyond 2025.
Full-year non-GAAP gross margin is now projected at 53-54.5% (down from prior 55-55.5% due entirely to tariffs), non-GAAP operating margin at 10-12%, and free cash flow guidance maintained at $310M-$330M for 2025 despite lower operating margin, supported by working capital initiatives.
