Q12023 Bio-Rad Laboratories Inc Earnings Call

May 4, 2023

Operator: Good afternoon. Thank you for attending the Bio-Rad Q1 2023 Earnings Conference Call. My name is Matt, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call for an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to our host, Ed, Ed Chung, Head of Investor Relations. Ed, please go ahead.

Operator: Good afternoon. Thank you for attending the Bio Rad first quarter 2023 earnings conference call. My name is Matt, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call. There will be an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad.

If you would like to ask a question. Please press star one on your telephone keypad.

Operator: I'd now like to pass the conference over to our host Ed Chung, Head of Investor Relations. Ed, please go ahead.

Please go ahead.

Edward Chung: Thanks, Matt. Good afternoon, everyone, and thank you for joining us. Today we will review the Q1 2023 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, Ilan Daskal, Executive Vice President, Chief Financial Officer, Andy Last, Executive Vice President and Chief Operating Officer, Simon May, President of the Life Science Group, and Dara Wright, President of the Clinical Diagnostics Group. Before we begin our review, I'd like, I would like to caution everyone that we will 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 risks and uncertainties. Our actual results may differ materially from these plans, goals, and expectations.

Ed Chung: Thanks Matt. Good afternoon, everyone and thank you for joining us. Today, we will review the first quarter 2023 financial results and provide an update on key business trends for Bio Rad.

Ed Chung: With me on the call today are Norman Schwartz, our Chief Executive Officer, Ilan Daskal, Executive Vice President, Chief Financial Officer, Andy Last, Executive Vice President and Chief Operating Officer, Simon May, President of the Life Science Group and [inaudible], President of our Clinical Diagnostics Group.

Ed Chung: Before we begin our review, I would like to caution everyone that we will be making forward-looking statements about managements 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 risks and uncertainties. Our actual results may differ materially from these plans, goals, and expectations.

I would like to caution everyone that we will be making forward looking statements about managements 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 risks and uncertainties actual results may differ materially from these plans and goals.

Ed Chung: 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. The company does not intend to update any forward-looking statements made during the call today.

Edward Chung: 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. 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 will now turn the call over to Ilan Daskal, our Executive Vice President and CFO.

Ed Chung: 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.

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.

Ed Chung: With that, I will now turn the call over to Ilan Daskal, our Executive Vice President and CFO.

The call over to Lon basketball.

Executive Vice President and CFO .

Ilan Daskal: Thank you, Ed. Good afternoon, and thank you all for joining us. Before I begin the detailed first quarter discussion, I would like to ask Andy Last, our Chief Operating Officer, to provide an update on Bio-Rad's global operations. Andy?

Ilan Daskal: Thank you Ed. Good afternoon, and thank you all for joining us. Before I begin the detailed first quarter discussion, I would like to ask Andy Last, our Chief Operating Officer to provide an update on our global operations. Andy?

Before I begin the detailed first quarter discussion I would like to ask Andy last our chief operating officer to provide an update on <unk> global operations Andy.

Andy Last: Thank you, Ilan. Good afternoon, everybody. Q1 2023 was characterized by solid growth for our core business, coupled with a significant reduction of COVID-related sales. However, we also experienced a number of market and operational challenges, which overall resulted in a lower than expected performance for the quarter. While demand generally across the portfolio was in line with our expectations, there was some softness in smaller biopharma companies, where we have seen historically strong demand for our life science products. This correlates with funding constraints the industry started to experience in Q1. We also saw a lower quarter for our process chromatography products, primarily reflecting the softness due to the timing of orders. In addition, we saw a further tightening of sanctions, which impacted our business in Russia with a negative impact on sales in the quarter.

Andrew Last: Thank you, Ilan. Good afternoon, everybody. Q1 2023 was characterized by solid growth for our core business, coupled with a significant reduction of COVID-related sales. However, we also experienced a number of market and operational challenges, which overall resulted in a lower than expected performance for the quarter. While demand generally across the portfolio was in line with our expectations, there was some softness in smaller biopharma companies, where we have seen historically strong demand for our life science products. This correlates with funding constraints the industry started to experience in Q1. We also saw a lower quarter for our process chromatography products, primarily reflecting the softness due to the timing of orders. In addition, we saw a further tightening of sanctions, which impacted our business in Russia with a negative impact on sales in the quarter.

Andrew J. Last: Thank you Ilan. Good afternoon everybody.

All right good afternoon everybody.

Andrew J. Last: Now the first quarter of 2023 was characterized by solid growth for our core business, coupled with a significant reduction of COVID related sales. However, we also experienced a number of market and operational challenges, which overall resulted in a lower than expected performance for the quarter. While demand generally across the portfolio in line with our expectations, there was some softness in smaller biopharma companies where we have seen historically strong demand for our life science products. This correlates with funding constraints the industry started to experience in the first quarter.

Coupled with a significant reduction of Covid related sales.

However, we also experienced a number of market and operational challenges, which overall resulted in a lower than expected performance for the quarter.

While demand generally across the portfolio with in line with our expectations. So there was some softness in smaller biopharma companies wherever. We have seen historically strong demand for our life science products. This correlates with funding constraints the industry starting to experience in the first quarter.

So there was some softness in smaller biopharma companies wherever. We have seen historically strong demand for our life science products. This correlates with funding constraints the industry starting to experience in the first quarter.

We have seen historically strong demand for our life science products. This correlates with funding constraints the industry starting to experience in the first quarter.

This correlates with funding constraints the industry starting to experience in the first quarter.

Andrew J. Last: We also saw a lower quarter for our process chromatography products, primarily reflecting the softness due to the timing of orders. In addition, we saw a further tightening of sanctions, which impacted our business in Russia with a negative impact on sales in the quarter. And we now expect lower overall performance for the year in Russia, especially in our life science business.

In addition, we saw a further tightening of sanctions, which impacted our business in Russia with a negative impact on sales in the quarter.

Andy Last: We now expect lower overall performance for the year in Russia, especially in our life science business. On the operational front, we did not make the expected pace of progress within our supply chain to address our order backlog, and as a result, backorder reduction was modest. Of the estimated $30 million we expected to recognize from elevated 2022 backorders, we achieved a reduction of approximately $5 million in Q1, and we expect a similar amount for the remaining three quarters of the year. This was in part driven by a slower than expected ramp-up of production in our new Singapore facility. This also contributed to higher than typical finished goods inventory as we made the transfer. Our backlog was also impacted by the shift in sales mix, and by the placement of more clinical systems than expected at low margins.

Andrew Last: We now expect lower overall performance for the year in Russia, especially in our life science business. On the operational front, we did not make the expected pace of progress within our supply chain to address our order backlog, and as a result, backorder reduction was modest. Of the estimated $30 million we expected to recognize from elevated 2022 backorders, we achieved a reduction of approximately $5 million in Q1, and we expect a similar amount for the remaining three quarters of the year. This was in part driven by a slower than expected ramp-up of production in our new Singapore facility. This also contributed to higher than typical finished goods inventory as we made the transfer. Our backlog was also impacted by the shift in sales mix, and by the placement of more clinical systems than expected at low margins.

And we now expect lower overall performance for the year in Russia, especially in our life science business.

Andrew J. Last: On the operational front, we did not make the expected pace of progress within our supply chain to address our order backlog and as a result, backorder reduction was modest.

Andrew J. Last: Of the estimated $30 million, we expected to recognize from elevated 2022 back orders, we achieved a reduction of approximately $5 million in the first quarter, and we expect a similar amount for the remaining three quarters of the year. This was in part driven by a slower than expected ramp up of production in our new Singapore facility. This also contributed to higher than typical finished goods inventory as we made the transfer.

We achieved a reduction of approximately $5 million in the first quarter.

And we expect a similar amount for the remaining three quarters of the year.

This was in part driven by a slower than expected ramp up of production in our new Singapore facility.

This also contributed to higher than typical finished goods inventory as we made the transfer.

Andrew J. Last: Our backlog was also impacted by the shift in sales mix and by the placement of more clinical systems unexpected at low margins. We also experienced cost inflation that was higher than our net price realization in the quarter. All of these factors affected gross margins for the quarter.

Andy Last: We also experienced cost inflation that was higher than our net price realization in the quarter. All of these factors affected gross margins for the quarter. We saw an increase in demand for our clinical business globally, as the impact of COVID finally receded. In addition, demand for our newly launched ddPCR platform, QX600, continued a strong trend line from Q4 2022, and our pipeline is robust and growing, and we are seeing strong uptake in biopharma, translational research, and oncology. The market launch of QX Continuum, our more affordable digital PCR product, remains on track for year-end. We launched a few weeks ago the new PTC Tempo product line, our next generation of PCR thermal cyclers. We completed development and early access of our ddPCR microsatellite instability kit, and we'll be launching later this quarter.

Andrew Last: We also experienced cost inflation that was higher than our net price realization in the quarter. All of these factors affected gross margins for the quarter. We saw an increase in demand for our clinical business globally, as the impact of COVID finally receded. In addition, demand for our newly launched ddPCR platform, QX600, continued a strong trend line from Q4 2022, and our pipeline is robust and growing, and we are seeing strong uptake in biopharma, translational research, and oncology. The market launch of QX Continuum, our more affordable digital PCR product, remains on track for year-end. We launched a few weeks ago the new PTC Tempo product line, our next generation of PCR thermal cyclers. We completed development and early access of our ddPCR microsatellite instability kit, and we'll be launching later this quarter.

We also experienced cost inflation that was higher than our net price realization in the quarter.

All of these factors affected gross margins for the quarter.

Andrew J. Last: We saw an increase in demand for our clinical business globally as the impact of COVID finally receded. In addition, demand for our newly launched DD PCR platform, QX600 continued a strong trend line from Q4 2022, and our pipeline is robust and growing and we are seeing strong uptake in biopharma translational research and oncology.

In addition demand for our newly launched DD PCR platform <unk> 600 continued a strong trend line from Q4, 2022, and our pipeline is robust and growing and we are seeing strong uptake in biopharma translational research and oncology.

Sure.

Andrew J. Last: The market launch of QX continuum, our more affordable digital PCR product, remains on track for year end and we launched a few weeks ago, the new PTC Kimco product line, our next generation of PCR thermal cycles.

And we launched a few weeks ago, the new PTC Kimco product line, our next generation of PCI thermal cyclists. Yeah.

Yeah.

Andrew J. Last: We completed development and early access of our DD PCR microsatellite instability kits and we will be launching later this quarter. This assay kit includes an automated analysis package and enable clinical researchers to assess microsatellite instability status across multiple cancers, and as part of our expanding oncology assay menu for droplet digital PCR.

Andy Last: This assay kit includes an automated analysis package and enables clinical researchers to assess microsatellite instability status across multiple cancers, and is part of our expanding oncology assay menu for Droplet Digital PCR. Overall, we were pleased with the over 6% currency neutral core sales growth for Q1, despite the year-over-year decline in COVID sales. In particular, we are very encouraged by the high demand in our clinical diagnostics business, as we expand our install base, providing a solid foundation for increased reagent pull-through and continued long-term growth. Looking forward to the remainder of this year, we expect strong demand for our clinical systems to continue, and we also expect continued double-digit demand for our life science business. We expect to see strong growth for our process chromatography business, although this is now forecasted to be slightly lower than initial estimations.

Andrew Last: This assay kit includes an automated analysis package and enables clinical researchers to assess microsatellite instability status across multiple cancers, and is part of our expanding oncology assay menu for Droplet Digital PCR. Overall, we were pleased with the over 6% currency neutral core sales growth for Q1, despite the year-over-year decline in COVID sales. In particular, we are very encouraged by the high demand in our clinical diagnostics business, as we expand our install base, providing a solid foundation for increased reagent pull-through and continued long-term growth. Looking forward to the remainder of this year, we expect strong demand for our clinical systems to continue, and we also expect continued double-digit demand for our life science business. We expect to see strong growth for our process chromatography business, although this is now forecasted to be slightly lower than initial estimations.

This assay kit includes an automated analysis package and enable clinical researchers to assess microsatellite instability.

Status across multiple cancers, and as part of our expanding oncology assay menu for droplet digital Pcr.

Andrew J. Last: Overall, we were pleased with the over 6% currency neutral core sales growth for the first quarter, despite the year-over-year decline in COVID sales. In particular, we are very encouraged by the high demand in our clinical diagnostics business as we expand our installed base, providing a solid foundation for increased reagent pull through and continued long term growth.

In particular, we are very encouraged by the high demand in our clinical diagnostics business as we expand our installed base, providing a solid foundation for increased reagent pull through and continued long term growth.

Andrew J. Last: Looking forward to the remainder of this year, we expect strong demand for our clinical systems to continue and we also expect continued double digit demand for our life science business. We expect to see strong growth for our process chromatography business although this is now forecast to be slightly lower than initial estimations.

We expect to see strong growth for our process chromatography business. Although this is now forecast to be slightly lower than initial estimations.

Andy Last: On the supply chain front, we are expecting to clear our extended life science backlog by the end of Q2, and our clinical backlog by the end of the year. In addition, as we progress through the remainder of the year, we expect production to continue to ramp up in Singapore, as well as expansion of capacity for the QX600 ddPCR system, as initial demand in Q1 exceeded our ability to fulfill. And with that, I'll say thank you and pass you back to Ilan.

Andrew Last: On the supply chain front, we are expecting to clear our extended life science backlog by the end of Q2, and our clinical backlog by the end of the year. In addition, as we progress through the remainder of the year, we expect production to continue to ramp up in Singapore, as well as expansion of capacity for the QX600 ddPCR system, as initial demand in Q1 exceeded our ability to fulfill. And with that, I'll say thank you and pass you back to Ilan.

Andrew J. Last: On the supply chain front, we are expecting to clear our extended life science backlog by the end of the second quarter and our clinical backlog by the end of the year. In addition, as we progress through the remainder of the year, we expect production to continue to ramp up in Singapore as well as expansion of capacity for the QX600, DD PCR system as initial demand in Q1 exceeded our ability to fulfill.

In addition, as we progress through the remainder of the year, we expect production to continue to ramp up in Singapore as.

As well as expansion of capacity for the <unk> 600, DD PCR system has initial demand in Q1 exceeded our ability to fulfill.

Andrew J. Last: And with that, I'll say thank you and pass it back to Ilan.

Ilan Daskal: Great. Thank you, Andy. Now, I would like to review the results of the first quarter. Net sales for the first quarter of 2023 were $676.8 million, which is a 3.3% decline on a reported basis versus $700.1 million in Q1 of 2022. On a currency neutral basis, the year-over-year revenue decline was 0.3%. The first quarter year-over-year revenue decline was mainly the result of significantly lower COVID-related sales of approximately $2.6 million versus $45 million in the first quarter of last year. Core revenue, which excludes COVID-related sales, increased 6.1% year-over-year on a currency neutral basis.

Ilan Daskal: Thank you Andy. Now I would like to review the results of the first quarter.

Ilan Daskal: Net sales for the first quarter of 2023 were $676.8 million, which is a 3.3% decline on a reported basis versus $700.1 million in Q1 of 2022. On a currency neutral basis, the year-over-year revenue decline was 0.3%.

On a currency neutral basis, the year over year revenue decline was 0.3%.

Ilan Daskal: The first quarter of year-over-year revenue decline was mainly the result of significantly lower COVID-19 related sales of approximately $2.6 million versus $45 million in the first quarter of last year. Core revenue, which excludes COVID related sales increased 6.1% year-over-year on a currency neutral basis.

Versus $45 million in the first quarter of last year.

Core revenue, which excludes corporate related sales increased six 1% year over year on a currency neutral basis.

Ilan Daskal: As Andy alluded to earlier, our Q1 results were impacted by increased sanctions in Russia, increased early-stage biotech companies pressures, and continuing certain supply chain challenges, including those associated with our manufacturing lines transfer and ramp-up in Asia. The production transition contributed to a continued elevated order backlog, mainly within the diagnostics group. In addition, we continue to ramp capacity to accommodate the growing demand for the new QX600 ddPCR system. On a geographic basis, we experienced currency neutral year-over-year core revenue growth in the Americas and Europe, while core revenue modestly declined in Asia, primarily due to a tough compare for the process chromatography franchise related to a very large customer order in the year ago period.

Ilan Daskal: As Andy alluded to earlier, our Q1 results were impacted by increased sanctions in Russia, increased early stage biotech companies pressures, and continuing certain supply chain challenges, including those associated with our manufacturing lines transfer and ramp up in Asia.

Ilan Daskal: The production transition contributed to a continued elevated order backlog mainly within the diagnostics group. In addition, we continue to ramp capacity to accommodate the growing demand for the new QX600, DD PCR system.

In addition, we continue to ramp capacity to accommodate the growing demand for the new <unk> 600, DD Pcr system.

Ilan Daskal: On a geographic basis, we experienced currency neutral year over year core revenue growth in the Americas and Europe, while core revenue modestly declined in Asia, primarily due to a tough compare for the process chromatography franchise related to a very large customer order in the year ago period.

Ilan Daskal: Sales of the Life Science Group in Q1 2023 were $323.6 million, compared to $347.2 million in Q1 2022, which is a decrease of 6.8% on a reported basis, and a decline of 3.6% on a currency neutral basis. The underlying life science year-over-year currency neutral core revenue growth was 9.6%, and was primarily driven by our qPCR products, Western blotting, and Droplet Digital PCR. This growth was lower than we projected as a result of increased sanctions, effective sales of certain products to Russia, as well as growing revenue headwind from biopharma companies due to the funding environment for early-stage biotech companies.

Ilan Daskal: Sales of the life science group in the first quarter of 2023 were $323.6 million compared to $347.2 million in Q1 of 2022, which is a decrease of 6.8% on a reported basis, and a decline of 3.6% on a currency neutral basis.

Compared to $347 2 million in Q1 of 2022, which is a decrease of six 8% on a reported basis and a decline of three 6% on a currency neutral basis.

Ilan Daskal: The underlying life science year-over-year currency neutral core revenue growth was 9.6% and was primarily driven by our Q PCR products, western blotting, and droplet digital PCR. This growth was lower than we projected as a result of increased sanctions effective sales of certain products to Russia as well as growing revenue headwind from biopharma companies due to the funding environment for early stage biotech companies.

This growth was lower than we projected as a result of increased sanctions effective sales of certain products to Russia as well as growing revenue headwind from biopharma companies due to the funding environment for early stage biotech companies.

Ilan Daskal: As I mentioned earlier, we continue to ramp capacity to accommodate the growing demand for the new QX600 ddPCR system. Process chromatography revenue, which can fluctuate on a quarterly basis, posted a mid-single digit year-over-year decline due to a tough compare, as well as some softness in the bioprocessing market. With that being said, we will expect, we still expect double-digit growth for 2023, despite a low revenue projection relative to our prior forecast. Excluding process chromatography sales, the underlying life science business declined 3.3% on a currency neutral basis versus Q1 of 2022, and was a result of lower COVID-related sales. The Life Science group revenue, excluding process chromatography and COVID-related sales, grew 13.6% on a currency neutral basis.

Ilan Daskal: As I mentioned earlier, we continue to ramp capacity to accommodate the growing demand for the new QX 600, DD PCR system. Process chromatography revenue, which can fluctuate on a quarterly basis, posted a mid single digit year-over-year decline due to a tough compare as well as some softness in the bio processing market. With that being said, we still expect double digit growth for 2023, despite a lower revenue projection relative to our prior forecast.

Process chromatography revenue, which can fluctuate on a quarterly basis posted a mid single digit year over year decline due to a tough compare as well as some softness in the bio processing market.

With that being said, we will expect we still expect double digit growth for 2023, despite a lower revenue projection relative to our prior forecast.

Ilan Daskal: Excluding process chromatography sales, the underlying life science business declined 3.3% on a currency neutral basis versus Q1 of 2022 and was a result of lower COVID related sales.

<unk> was a result of lower Covid related sales.

Ilan Daskal: The life science group revenue, excluding process chromatography, and COVID related sales grew 13.6% on a currency neutral basis. On a geographic basis, life science experienced currency neutral year-over-year core revenue growth in the Americas and Europe while Q1 core revenue posted a decline in Asia due to the previously mentioned tough compare for process chromatography.

Ilan Daskal: On a geographic basis, Life Science experienced currency neutral year-over-year core revenue growth in the Americas and Europe, while Q1 core revenue posted a decline in Asia due to the previously mentioned tough compare for process chromatography. Sales of the Clinical Diagnostics group in the first quarter were $352.1 million, compared to $351.8 million in Q1 of 2022, or largely flat on a reported basis, and a 2.8% increase on a currency neutral basis. Core clinical diagnostics year-over-year revenue, which excludes COVID-related sales, increased 3.1% on a currency neutral basis. Growth of the Clinical Diagnostics group was primarily driven by a robust demand for diagnostics instruments, primarily within blood typing, and diabetes, which was not entirely fulfilled due to our manufacturing constraints.

On a geographic basis life science experienced currency neutral year over year core revenue growth in the Americas and Europe . Q1 core revenue posted a decline in Asia due to the previously mentioned tough compare for process chromatography.

Q1 core revenue posted a decline in Asia due to the previously mentioned tough compare for process chromatography.

Ilan Daskal: Sales of the clinical diagnostics group in the first quarter were $362.1 million, compared to $361.8 million in Q1 of 2022 were largely flat on a reported basis and a 2.8% increase on a currency neutral basis.

Compared to $361 $8 million in Q1 of 2022 or largely flat on a reported basis and two 8% increase on a currency neutral basis.

Ilan Daskal: Core clinical diagnostics year-over-year revenue, which excludes COVID-19 related sales increased 3.1% on a currency neutral basis. Growth of the clinical diagnostics group was primarily driven by a robust demand for diagnostics instruments, primarily within blood typing and diabetes, which was not entirely fulfilled due to our manufacturing constraints.

Growth of the clinical diagnostics group was primarily driven by robust demand for diagnostics instruments, primarily within blood typing and diabetes, which was not entirely fulfilled due to our manufacturing constraints.

Ilan Daskal: We continue to see strong rebound in placements of instruments in China, which should contribute to reagent pull-through volumes in the coming quarters. On a geographic basis, currency neutral year-over-year core revenue for the diagnostics group posted a double-digit growth in Asia and were largely flat in the Americas and Europe versus the year ago period. The reported gross margin for the first quarter of 2023 was 53.5% on a GAAP basis, and compares to 57.5% in Q1 of 2022. The year-over-year gross margin decline was mainly due to lower COVID-related sales, unfavorable product mix, and higher cost raw materials. The gross margin this year was further impacted by a higher than anticipated percentage of instrument sales versus reagents, as well as from the lower than forecasted revenue in the Life Science group.

Ilan Daskal: We continue to see strong rebound in placements of instruments in China, which should contribute to reagent pull through volumes in the coming quarters.

Ilan Daskal: On a geographic basis currency neutral year over year core revenue for the diagnostics group posted a double digit growth in Asia and were largely flat in the Americas and Europe versus the year ago period.

Ilan Daskal: The reported gross margin for the first quarter of 2023 was 53.5% on a GAAP basis and compares to 57.5% in Q1 of 2022. The year-over-year gross margin decline was mainly due to lower COVID-19 related sales, unfavorable product mix, and higher cost raw materials. The gross margin this year was further impacted by higher than anticipated percentage of instrument sales versus reagents, as well as from the lower than forecasted revenue in the life science group.

The year over year gross margin decline was mainly due to lower COVID-19 related sales on <unk>.

Favorable product mix and higher cost raw materials.

The gross margin. This year was further impacted by higher than anticipated percentage of instrument sales versus reagents.

As well as from the lower than forecasted revenue in the life Science group.

Ilan Daskal: In addition, we were not able to fully recover the higher inflationary cost this year, as the increases in certain raw materials and elevated logistics costs were not fully recovered in selling prices. Amortization related to prior acquisitions recorded in cost of goods sold was $4.3 million, compared to $4.5 million in Q1 of 2022. SG&A expenses for Q1 of 2023 were $225.6 million or 33.3% of sales, compared to $196.7 million or 28.1% in Q1 of 2022. The increase in SG&A expenses was driven by higher employee-related expenses, a restructuring charge, and higher discretionary spend.

Ilan Daskal: In addition, we were not able to fully recover the higher inflationary costs this year as the increases in certain raw materials and elevated logistics costs were not fully recovered in selling prices.

Ilan Daskal: Amortization related to prior acquisitions recorded in cost of goods sold was $4.3 million compared to $4.5 million in Q1 of 2022.

Ilan Daskal: SG&A expenses for Q1 of 2023 were $225.6 million or 33.3% of sales compared to $196.7 million or 28.1% in Q1 of 2022. The increase in SG&A expenses was driven by higher employee-related expenses, a restructuring charge, and higher discretionary spend.

The increase in SG&A expenses was driven by higher employee related expenses and restructuring charge and higher discretionary spend.

Ilan Daskal: Total amortization expense related to acquisitions recorded in SG&A for the quarter was $1.7 million versus $1.8 million in Q1 of 2022. Research and development expense in the first quarter was $75 million or 11.1% of sales, compared to $59.5 million or 8.5% of sales in Q1 of 2022. The year-over-year increase was due to increased employee-related expenses, following the Curiosity acquisition in the third quarter of 2022, higher project-related spend, and a restructuring cost. Q1 operating income was $61.9 million, or 9.1% of sales, compared to $146.4 million or 20.9% of sales in Q1 of 2022.

Ilan Daskal: Total amortization expense related to acquisitions recorded in SG&A for the quarter was $1.7 million versus $1.8 million in Q1 of 2022.

Ilan Daskal: Research and development expense in the first quarter was $75 million or 11.1% of sales compared to $59.5 million or 8.5% of sales in Q1 of 2022. The year-over-year increase was due to increased employee-related expenses, following the Curiosity acquisition in the third quarter of 2022, higher project related spend, and the restructuring costs.

Or 11, 1% of sales compared to $59 5 million or eight 5% of sales in Q1 of 2022.

The year-over-year increase was due to increased employee-related expenses, following the Curiosity acquisition in the third quarter of 2022, higher project related spend, and the restructuring costs.

Higher project related spend and the restructuring costs.

Ilan Daskal: Q1 operating income was $61.9 million or 9.1% of sales compared to $146.4 million or 20.9% of sales in Q1 of 2022.

Or nine 1% of sales compared to $146 4 million or. Or 29% of sales in Q1 of 2022.

Or 29% of sales in Q1 of 2022.

Ilan Daskal: Looking below the operating line, the change in fair market value of equity securities holdings, which are substantially related to Bio-Rad's ownership of Sartorius AG shares, negatively impacted the reported results by $17.5 million. During the quarter, interest and other income resulted in net other income of $40.4 million, compared to net other income of $30.7 million last year. Q1 2023 included a $34.8 million dividend from Sartorius, versus $31.6 million dividend in Q1 2022. The effective tax rate for Q1 2023 was 18.7%, compared to 22.9% for the same period in 2022. The effective tax rate reported in Q1 2023 was primarily affected by geographical mix of earnings.

Ilan Daskal: Looking below the operating line, the change in fair market value of Equity Securities Holdings, which are substantially related to Bio Rad's ownership of Sartorius AG shares, negatively impacted the reported results by $17.5 million.

Ilan Daskal: During the quarter, interest and other income resulted in net other income of $40.4 million, compared to net other income of $30.7 million last year. Q1 of 2023 included a $34.8 million dividend from Sartorius versus $31.6 million dividend in the first quarter of 2022.

Compared to net other income of $37 million last year.

Q1 of 2023 included a $34 8 million dividend from Sartorius.

This is $31 $6 million dividend in the first quarter of 2022.

Ilan Daskal: The effective tax rate for the first quarter of 2023 was 18.7% compared to 22.9% for the same period in 2022. The effective tax rate reported in Q1 of 2023 was primarily affected by geographical mix of earnings. The effective tax rate reported in Q1 of 2022 was primarily affected by an unrealized loss in equity securities.

The effective tax rate reported in Q1 of 2023 was primarily affected by geographical mix of earnings.

Ilan Daskal: The effective tax rate reported in Q1 of 2022 was primarily affected by an unrealized loss in equity securities. Reported net income for the first quarter was $69 million, or $2.32 diluted earnings per share, compared to a loss of $3.367 billion, or $112.50 diluted loss per share in Q1 of 2022. This change from last year is largely related to changes in the valuation of the Sartorius holdings. Moving on to the Non-GAAP results. Looking at the results on a Non-GAAP basis, we have excluded certain atypical and unique items that impacted both the gross and operating margins, as well as other income. These items are detailed in the reconciliation table in the press release.

The effective tax rate reported in Q1 of 2022 was primarily affected by an unrealized loss in equity securities.

Ilan Daskal: Reported net income for the first quarter was $69 million or $2.32 diluted earnings per share compared to a loss of $3,367,000 million or $112.50 diluted loss per share in Q1 of 2022. This change from last year is largely related to changes in the valuation of the Sartorius holdings.

Compared to a loss of $3 billion and $367 million or $112 50 diluted loss per share in Q1 of 2022. This change from last year is largely related to changes in the valuation of the Sartorius holdings.

This change from last year is largely related to changes in the valuation of the Sartorius holdings.

Ilan Daskal: Moving on to the non-GAAP results. Looking at our results on a non-GAAP basis, we have excluded certain atypical and unique items that impacted both the gross and operating margins as well as other income. These items are detailed in the reconciliation table in the press release.

Looking at our results on a non-GAAP basis, we have excluded certain atypical and unique items that impacted both the gross and operating margins as well as other income.

These items are detailed in the reconciliation table in the press release.

Ilan Daskal: Looking at the non-GAAP results for the first quarter, in cost of goods sold, we have excluded $4.3 million of amortization of purchased intangibles and a small restructuring expense. These exclusions moved the gross margin from 53.5% for the first quarter of 2023, to a non-GAAP gross margin of 54.2% versus 58.2% in Q1 of 2022. Non-GAAP SG&A in the first quarter of 2023 was 31.3% versus 27.2% in Q1 of 2022. In SG&A on a non-GAAP basis, we have excluded amortization of purchased intangibles of $1.7 million, an in vitro diagnostic registration fee in Europe for previously approved products of $1.9 million, acquisition-related cost of $800,000, and $9 million of restructuring related expenses.

Ilan Daskal: Looking at the non-GAAP results for the first quarter, in cost of goods sold we have excluded $4.3 million of amortization of purchased intangibles and a small restructuring expense. These exclusions moved the gross margin from 53.5% for the first quarter of 2023 to a non-GAAP gross margin of 54.2% versus 58.2% in Q1 of 2022.

These exclusions moved the gross margin from 53, 5% for the first quarter of 2023 to our non-GAAP gross margin of 54, 2% versus 58, 2% in Q1 of 2022.

Ilan Daskal: Non-GAAP SG&A in the first quarter of 2023 was 31.3% versus 27.2% in Q1 of 2022.

Ilan Daskal: In SG&A, on a non-GAAP basis, we have excluded amortization of purchased intangibles of $1.7 million, an in vitro diagnostic registration fee in Europe for previously approved products of $1.9 million, acquisition related cost of $800,000 and $9 million of restructuring related expenses.

an in vitro diagnostic registration fee in Europe for previously approved products of $1.9 million, acquisition related cost of $800,000 and $9 million of restructuring related expenses.

Acquisition related cost of $800000 and $9 million of restructuring related expenses.

Ilan Daskal: Non-GAAP R&D expense in the first quarter of 2023 was 10.4% versus 8.5% in Q1 of 2022. In R&D, on a non-GAAP basis, we have excluded $4.2 million of restructuring expenses. The cumulative sum of these non-GAAP adjustments result in moving the quarterly operating margin from 9.1% on a GAAP basis to 12.4% on a non-GAAP basis. This non-GAAP operating margin compares to a non-GAAP operating margin of 22.4% in Q1 of 2022. We have also excluded certain items below the operating line, which are the decrease in value of the Sartorius equity securities and loan receivable holdings of $17.5 million, and about a $1 million loss associated with venture investments.

Ilan Daskal: Non-GAAP R&D expense in the first quarter of 2023 was 10.4% versus 8.5% in Q1 of 2022.

Ilan Daskal: In R&D, on a non-GAAP basis, we have excluded $4.2 million of restructuring expenses. The cumulative sum of these non-GAAP adjustments result in moving the quarterly operating margin from 9.1% on a GAAP basis to 12.4% on a non-GAAP basis. This non-GAAP operating margin compares to a non-GAAP operating margin of 22.4% in Q1 of 2022.

The cumulative sum of these non-GAAP adjustments result in moving the quarterly operating margin from nine 1% on a GAAP basis to 12, 4% on a non-GAAP basis.

This non-GAAP operating margin compares to a non-GAAP operating margin of 22.4% in Q1 of 2022.

Ilan Daskal: We have also excluded certain items below the operating line, which are the decrease in value of the Sartorius equity securities and loan receivable holdings of $17.5 million and about a $1 million loss associated with venture investments.

And about a $1 million loss associated with venture investments.

Ilan Daskal: The non-GAAP effective tax rate for Q1 2023 was 20.9%, compared to 19.6% for the same period in 2022. The higher rate in 2023 was driven by geographical mix of earnings and lower compensation-related deductions. And finally, non-GAAP net income for Q1 2023 was $99.4 million, or $3.34 diluted earnings per share, compared to $151.5 million, or diluted earnings per share of $5.02 in Q1 2022. Moving on to the balance sheet. Total cash and short-term investments at the end of Q1 was $1.857 billion, compared to $1.796 billion at the end of 2022.

Ilan Daskal: The non-GAAP effective tax rate for the first quarter of 2023 was 29% compared to 19, 6% for the same period in 2022. The higher rate in 2023 was driven by geographical mix of earnings and lower compensation related deductions.

The higher rate in 2023 was driven by geographical mix of earnings and lower compensation related deductions.

And finally non-GAAP net income for the first quarter of 2023 was $99 4 million or $3 and 34 diluted earnings per share compared to $151 5 million or diluted earnings per share of $5. The $5 <unk> in Q1 of 2022.

The $5 <unk> in Q1 of 2022.

Moving onto the balance sheet. Total cash and short term investments at the end of Q1 was $1 billion and $857 million. Compared to $1 billion and $796 million at the end of 2022.

Total cash and short term investments at the end of Q1 was $1 billion and $857 million.

Compared to $1 billion and $796 million at the end of 2022.

Ilan Daskal: The change in cash and short-term investments from Q4 2022 was primarily due to the change in working capital. Inventory at the end of Q1 reached $752.9 million from $719.3 million in the prior quarter. The higher inventory level was driven mainly by rebuilding of finished goods safety stock for certain instruments. In addition, we are rebalancing inventory levels as we complete the transition of some of our manufacturing. We did not purchase any shares of our stock during Q1, but as we have done in recent years, coming out of blackout periods, we will continue to be opportunistic with share buybacks, particularly when we believe there is a significant dislocation in the valuation of our stock.

The change in cash and short term investments from the fourth quarter of 2022 was primarily due to the change in working capital.

Inventory at the end of Q1 reached $752 9 million from $719 3 million in the prior quarter.

The higher inventory level was driven mainly by rebuilding of finished goods safety stock for certain instruments.

In addition, we are rebalancing inventory levels.

We complete the transition of some of our manufacturing.

We did not purchase any shares of our stock during the first quarter, but as we have done in recent years coming out of blackout periods. We will continue to be opportunistic with share buybacks, particularly when we believe the reasons.

Significant dislocation in the valuation of our stock.

Ilan Daskal: To that end, we have over $200 million available to deploy under the current board-authorized program. For the first quarter of 2023, net cash generated from operating activities was $98.1 million, which compares to $50.5 million in Q1 of 2022. This increase mainly reflect changes in working capital. The Adjusted EBITDA for the first quarter of 2023 was $148.5 million, or 21.9% of sales, and excluding the Sartorius dividend, was 16.8%. The Adjusted EBITDA in Q1 of 2022 was $215.4 million, or 30.8% of sales, and excluding the Sartorius dividend, was 26.3%.

To that end, we have over $200 million available to deploy under the current both board authorized program.

For the first quarter of 2023 net cash generated from operating activities was $98 1 million.

Which compares to $55 million in Q1 of 2022.

This increase mainly reflects changes in working capital.

The adjusted EBITDA for the first quarter of 2023 was $148 5 million or.

Or 21, 9% of sales and excluding the sartorius dividend was 16, 8%.

The adjusted EBITDA in Q1 of 2022 was $215 4 million or.

Or 38% of sales and excluding the sartorius dividend was 26, 3%.

Ilan Daskal: Net capital expenditures for Q1 2023 were $35.7 million, and depreciation and amortization for Q1 was $35.6 million. Moving on to the non-GAAP guidance. Taking into account the macroeconomic factors, as well as our continued operational transformation initiatives, we are revising our 2023 financial outlook as follows: We are now guiding currency neutral revenue growth in 2023 to be about 4.5% versus 6% to 7% previously. For the full year, we estimate currency neutral revenue growth, excluding COVID-related sales, to be about 8.5% versus 10% to 11% in our prior guidance.

Net capital expenditures for the first quarter of 2023 were $35 7 million.

And depreciation and amortization for the first quarter was $35 6 million.

Moving on to the non-GAAP guidance.

Taking into account the macroeconomic factors as well as our continued operational transformation initiatives. We are revising our 2023 financial outlook as follows.

We are now guiding currency neutral revenue growth in 2023 to be about four 5% versus 6% to 7% previously.

For the full year, we estimate currency neutral revenue growth, excluding COVID-19 related sales to be about eight 5% versus 10% to 11% in our prior guidance.

Ilan Daskal: We expect the first half of 2023 core growth to be between 6.5% and 7% over the first half of 2022, and about 10% core growth in the second half of the year over the second half of 2022. The Life Science Group year-over-year currency neutral revenue growth is expected to be about 3% versus 8% to 9%, and excluding COVID-related sales, the Life Science Group growth is projected to be about 11% versus 16% to 18% in our prior guidance. For the first half of 2023, we expect for the Life Science Group about 9.5% core growth over the first half of 2022, and about 12.5% core growth for the second half of the year over the second half of 2022.

We expected the first half of 2023 core growth to be between six 5% and 7% over the first half of 2022.

And about 10% core growth in the second half of the year over the second half of 2022.

The life Science group year over year currency neutral revenue growth is expected to be about 3% versus 8% to 9% and excluding COVID-19 related sales. The life Science group growth is projected to be about 11% versus 16% to 18%.

Our prior guidance.

For the first half of 2023, we expect for the life Science group about nine 5% core growth over the first half of 2022 and.

And about 12, 5% core growth for the second half of the year over the second half of 2022.

Ilan Daskal: For the Diagnostics group, we estimate currency neutral revenue growth of about 6% versus 5% previously, as we are seeing improved demand dynamics in 2023. Excluding COVID-related sales, the Diagnostics group growth is projected between 6% and 6.5% versus 5% to 5.5% in our prior guidance. For the first half of 2023, we expect for the Diagnostics group about 4.5% core growth over the first half of 2022, and about 8% core growth for the second half of the year over the second half of 2022. Full year non-GAAP gross margin is now projected to gradually improve throughout 2023 and be between 55% and 55.5% for the full year.

For the diagnostics group, we estimate currency neutral revenue growth of about 6% versus 5% previously.

We are seeing improved demand dynamics in 2023.

Excluding COVID-19 related sales the diagnostics group growth is projected between six and six 5% versus five to five 5% in our prior guidance.

For the first half of 2023, we expect for the diagnostics group about four 5% core growth over the first half of 2022 and about 8% core growth for the second half of the year over the second half of 2022.

Full year non-GAAP gross margin is now projected to gradually improve throughout 2023 and be between 55 and 55, 5% for the full year.

Ilan Daskal: For the first half of the year, we now anticipate gross margin to be between 54.5% and 55%, and for the second half of the year to be between 55.5% and 66%. We now project full year non-GAAP operating margin of approximately 17.5% versus 19.5% in our prior guidance, as we plan to focus on expense management for the remainder of the year. For the first half of the year, we expect operating margin to be about 14% and reaching 21% for the second half of 2023. Full year Adjusted EBITDA margin is expected to be about 23% versus 25% in our prior guidance.

For the first half of the year, we now anticipate gross margin to be between 54, 5% and 55% and for the second half of the year to be between $55 five and 66%.

We now project full year non-GAAP operating margin of approximately 17, 5% versus 19, 5% in our prior guidance as we plan to focus on expense management for the remainder of the year.

For the first half of the year, we expect operating margin to be about 14% and reaching 21% for the second half of 2023.

And full year adjusted EBITDA margin is expected to be about 23% versus 25% in our prior guidance.

Ilan Daskal: For the first half of the year, we expect Adjusted EBITDA margin to be about 21%, and in the second half of the year to be about 25%. We are also revising our targeted 2021 to 2025 currency neutral compounded annual core revenue growth rate to be 8% versus our previous target of 8.9%. For the life science business, we are now targeting about 12.4% between 2021 and 2025 versus our prior expectations of approximately 13.9%. For clinical diagnostics business, we now expect 4.4% versus 4.6% previously. Our gross margin in 2025 is targeted to be about 57% versus our previous target of 59%, and our Adjusted EBITDA for 2025 is targeted to be about 26% versus our previous target of 28%.

For the first half of the year, we expect adjusted EBITDA margin to be about 21% and in the second half of the year to be about 25%.

Okay.

We are also revising our targeted 2021% to 2025 currency neutral compounded annual revenue growth rate to be 8% versus our previous target of eight 9%.

For the life Science business, we are now targeting about 12, 4% between 2021 and 2025 versus our prior expectations of approximately 13, 9%.

For clinical diagnostics business, we now expect four 4% versus four 6% previously.

Our gross margin in 2025 is targeted to be about 57% versus our previous target of 59%.

And our adjusted EBITDA for 2025 is targeted to be about 26% versus our previous target of 28%.

Ilan Daskal: That concludes our prepared remarks, and we will now open the line to take your questions. Operator?

That concludes our prepared remarks, and we will now open the line to take your questions.

Operator.

Operator: Absolutely. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question is from the line of Brandon Couillard with Jefferies. Your line is now open.

Absolutely.

I would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by tier.

Again to ask a question press star one.

As a reminder, if youre using a speakerphone. Please remember to pick up your handset before asking a question, we'll pause briefly as questions you registered.

The first question is from the line of Brian <unk> with Jefferies. Your line is now open.

Brandon Couillard: Hey, good afternoon, fellas. Thanks for taking the questions. Ilan, appreciate all of the detail you just walked through there. Lot to unpack. If I just start with the 23 guidance reset on the top line, can you help us bridge the components and the puts and takes between Russia weakness, early stage biopharma, lower process media demand, and secondarily, what gives you the confidence in terms of the second half acceleration on the top line? Just start there.

Hey, good afternoon.

Thanks for taking the questions.

While I appreciate that all of the detail.

Can you just walk through there to unpack I just start with a 23 guidance. We set on the top line can you help us bridge the components and the puts and takes between Russia weakness early stage Biopharma lower process media demand then secondly.

Secondarily, what gives you the confidence in terms of the second half acceleration.

On the top line should start there.

Andy Last: Hi, Brandon, it's Andy, actually. So maybe, maybe I'll just walk through the answer to that. And you did capture the big levers in-

Andrew Last: Hi, Brandon, it's Andy, actually. So maybe, maybe I'll just walk through the answer to that. And you did capture the big levers in out of Russia, which has had a meaningful impact. Biopharma softness, which did have some impact, particularly in the kind of, let's call it, emerging biopharma companies and the financial access to capital in Q1, which flowed through to broader kind of slowdown in demand for our life science products. The process chromatography story is not so much an emerging biopharma story, as much as, you know, I think we've finally now just seen some of the effect of the overall inventory rebalancing that has been going on in the industry, and we had not been seeing that previously.

Hi, Brian It's Andy actually so maybe I'll just walk through.

Sure the answer to that and you did capture the big leave us in.

Simon May: ... out of Russia, which has had a meaningful impact. Biopharma softness, which did have some impact, particularly in the kind of, let's call it, emerging biopharma companies and the financial access to capital in Q1, which flowed through to broader kind of slowdown in demand for our life science products. The process chromatography story is not so much an emerging biopharma story, as much as, you know, I think we've finally now just seen some of the effect of the overall inventory rebalancing that has been going on in the industry, and we had not been seeing that previously.

Once out of Russia, which has had a meaningful impact biopharma softness switch.

Did have some impact, particularly in the kind of let's call it emerging biopharma companies.

But.

But financial.

Access to capital in Q1, which which flowed through to.

Broad demand broader kind of slowdown in demand for our life science.

Products.

The process CRO story is not so much an emerging biopharma story as much as you know.

I think we're finally now just seeing some of the effect.

Of the overall inventory rebalancing that has been going on in the industry and we have not been seeing that previously.

Simon May: I'd say the last two points to highlight on the revenue bridge would be, you know, a slower pace of backorder reduction, which, you know, and I don't think we're seeing we are able to capture everything that we initially estimated. And related to our gene expression business, just generally a softer demand that is being experienced this year against a very, you know, significant installed base that we had previously put out there over the last two or three years.

I'd say the last two points to two highlights on the revenue bridge would be.

Slower pace of Backorder reduction, which you know and I don't think we're saying we're able to capture everything that we initially estimated.

And related to our gene expression business, just generally softer demand provides us.

Being experienced this year against a very significant installed base that we had previously put out there over the last two or three years.

Brandon Couillard: Okay, maybe in terms of the 25 targets, I mean, just generally, conceptually, why update those now? Especially given what seems to be all the operational challenges you faced in the quarter and macro variables, which you've discussed on the call. Number two, can you share what the applied targets would be in terms of revenue dollars in 2025? And if my math is right, would that suggest kind of 8% organic CAGR the next three years to get there?

Okay.

Maybe.

In terms of the 25 targets I mean, just generally conceptually why update those now, especially given what seems to be all the operational.

The challenges we faced in the quarter and macro variables that you discussed on the call.

Number two.

Can you share that will be applied targets.

With the in terms of revenue dollars and 25 and if my math is right would that suggest kind of 8% organic CAGR. The next.

Three years.

To get there.

Ilan Daskal: Yeah, Brandon, thanks for the question. So, first of all, you know, we are updating the 2025 based on our latest view, and in light of, you know, the changing environment that we are experiencing. Obviously, you know, as Andy mentioned just now, you know, the entire kind of biotechnology sector and the funding, and that was one of, you know, the growth drivers that we called out during the Investor Day, and we see headwind there. You know, the overall inflationary kind of cost that we today believe is here to stay. I mean, I'm not sure that it is transitory, and that was not taken into account, you know, when we presented during the Investor Day.

Yeah, Brandon Thanks for the question so.

First of all you know we are update.

Updating the 2025 based on our latest view and in light of.

The changing environment that we are experiencing.

Obviously as Andy mentioned, just now the entire kind of biotechnology sector on the funding and that was one of the growth drivers that we called out during the Investor day, and we see a headwind there. The overall inflationary kind of cost that we today believe is here too.

They are I mean, I'm not sure that EPS transitory and that was not taken into account.

When we presented during the Investor day.

Ilan Daskal: So we are layering on, you know, what does that mean for the next, you know, two to three years. And, you know, this, we do believe then, you know, it merits, you know, an update to the 2025 target model in order to set the expectation. With that said, you know, it doesn't change our thinking in terms of the overall transformation that we are working on, and everything that we still plan to achieve, and all the kind of new instruments that are in the pipeline and the development. And so that doesn't change our thinking. It's more kind of, I would argue, macro driven, and we have to kind of communicate accordingly. In terms of, you know, the growth, yes, I mean, so it's your math is correct.

So we are layer is layering on.

What does that mean for the next.

Two to three years and we.

We do believe that merits.

An update to the 2025 target model in order to set the expectation with that said.

It doesn't change our thinking in terms of the overall transformation that we are working on and everything that we still plan to achieve and all the kind of new instruments that are in the pipeline and the development.

And so so that doesn't change our thinking it's more kind of I would argue macro driven.

And we have to kind of communicate accordingly.

In terms of the growth.

Yes, I mean.

So your math is correct is about on a core basis, its about 8% and and that's the update if you think about the currency neutral basis.

Ilan Daskal: It's about, you know, on a core basis, it's about 8%, and that's the updated. If you think about the currency-neutral basis, it's $3.4 billion for 2025 on a currency-neutral basis.

It's about 343.

$3 4 billion for 2025 on a currency neutral basis.

Brandon Couillard: Got it. Last one, for Simon, maybe. Your closest competitor in digital PCR, earlier today talked about a market, a CAGR, the next three years in the 30% to 40% range. I just want to see if that's consistent with your view to the, how you would assess the market, and if you view, the opportunity, the growth outlook, any differently for your business. Thanks.

Got it last one for Simon maybe your closest competitor.

Digital PCR earlier, Dave talked about.

Market CAGR.

CAGR next three years in the 30% to 40% range.

See if thats consistent with your view.

How you would assess the market and if you view the.

The opportunity in the growth outlook.

Separately for your business.

Okay.

Simon May: You know, there's definitely emerging competition in digital PCR, without doubt, and we observe that very closely, and we take it very seriously. As we've said before, I think it really is also helping to significantly expand the market opportunity in ddPCR. When we hear the commentary and the disclosures from our competitors, and we kind of overlay that with the growth trajectory that we see in our own business, we think it's pretty consistent overall. We think it's playing out the way that we thought it would. Then when we think about our overall position today, we talked about how the demand for the QX600 platform and customer acceptance is really fantastic. So we're feeling good about that. In the biopharma segment, notwithstanding some of the market softness that we're seeing at the present time, we've got a very strong position there.

This does definitely emerging competition in digital PCR without doubt ons.

We all observe that very closely and we take it very seriously and as we've said before I think it really is also helping to significantly expand.

The market opportunity in <unk>.

We hear the commentary on the disclosures from our competitors and we kind of overlay that with the growth trajectory that we see in our own business. We think it's pretty consistent overall, and we think keeps playing out the way that we thought it would.

And then when we think about our overall position today with thoughts about.

How the demand for the Q 600 platform and customer acceptance is really fantastic.

So we're feeling good about that and in the Biopharma segment.

Notwithstanding some of the market softness that we're seeing at the present time, we've got a very strong position that we think the markets ultimately go.

Simon May: We think the market's ultimately got very long legs, and I think we've got quite a nice moat around that business. We've got a really formidable portfolio of high-performance assays, and we know in this segment that performance really, really matters. Our QX1 platform is really best in class in terms of throughput and automation. Then, as was mentioned earlier, we've already got the QX Continuum platform that's in development, and I can tell you that program's running quite nicely. So when we-

Very long legs, and I think we got quite a nice moats around our business, we called a really formidable portfolio of high performance <unk> and <unk>.

No in this segment that performance really really matters and our <unk> platform.

It is really best in class in terms of throughput and automation.

Automation and then as was mentioned earlier, we've already got the <unk> continuum platform not seen developments in our consulting about programs running quite nicely.

So when we think about the overall dynamics here I don't think anything has fundamentally changed since we discussed this at Investor day.

[Company Representative] (Bio-Rad Laboratories): ... overall dynamics here, I don't think anything has fundamentally changed since we discussed this at Investor Day.

Brandon Couillard: Good. I will have it. Thank you. Thanks.

I will hop back in the queue. Thanks.

Ilan Daskal: Thank you, Brendan.

Thank you Brendan.

Operator: Thank you for your question. The next question is from the line of Patrick Donnelly with Citi. Your line is now open.

Thank you for your question.

The next question is from the line of Patrick Donnelly with Citi. Your line is now open.

Okay.

Patrick Donnelly: Hey, guys. Thanks for taking the questions. Maybe a similar vein question. You know, on the process chromatography side, sounds like you saw a pretty good slowdown in the quarter. Andy, I think you called out timing as an impact, but obviously the guidance is coming down pretty significantly for the year. How much do you think timing versus change in demand, you know, what are you seeing in the market, and what's the ability to execute in the backdrop of, you know, again, if the demand is holding up, is it just an execution issue? Maybe just kind of give us a little more color there.

Hey, guys. Thanks for taking the question.

Maybe a similar question on the process chrome side. It sounds like you saw pretty good slowdown in the quarter.

Andy I think you called out timing has an impact, but obviously the guidance coming down pretty significantly for the year. How much do you think timing versus change in demand. What are you seeing in the market, what's the ability to execute in the backdrop of.

Again, if the demand is holding up is it just a execution issue, maybe just kind of give us a little more color there.

Andy Last: Yeah, I mean, timing is always a challenge for that business, and I'm sure you guys, you know, you know that well. But, and then Q1 in particular was a tough compared to prior year for us. So we-- That really wasn't a great surprise, from that point of view. Looking forward, you know, I think we are, you know, just starting to experience some of the kind of, we're calling it inventory rebalancing and just a more prudent or conservative approach from the end market, as we go forward. And we feel it's prudent to reflect that in the way we're thinking about our guidance this year. Underlying all of that, though, is still extremely, extremely solid and consistent demand for the process chromatography business.

Andrew Last: Yeah, I mean, timing is always a challenge for that business, and I'm sure you guys, you know, you know that well. But, and then Q1 in particular was a tough compared to prior year for us. So we-- That really wasn't a great surprise, from that point of view. Looking forward, you know, I think we are, you know, just starting to experience some of the kind of, we're calling it inventory rebalancing and just a more prudent or conservative approach from the end market, as we go forward. And we feel it's prudent to reflect that in the way we're thinking about our guidance this year. Underlying all of that, though, is still extremely, extremely solid and consistent demand for the process chromatography business.

Yes.

Timing is always a challenge for that business.

And I'm sure you guys, you know that well but.

And then in Q1 in particular is a tough compared to try trying year for us so so.

That really wasn't a great surprise from that point of view.

Looking forward.

I think we are just starting to experience some of the kind of.

And we're calling it.

Inventory rebalancing and just a more prudent or conservative approach from from the end market.

As we as we go forward and we feel it's prudent to reflect that and the way we're thinking about our guidance this year.

Underlying all of that is.

Extremely extremely solid and consistent demand for the process growing business.

Andy Last: The new products we've introduced have been exceedingly well received, and we're starting to see uptake and traction on those. So our go-forward thesis on process chromatography... We're finally seeing some of the effects that I think others had been calling out for a while. We're finally seeing a little bit of that flow through to our business now.

Andrew Last: The new products we've introduced have been exceedingly well received, and we're starting to see uptake and traction on those. So our go-forward thesis on process chromatography... We're finally seeing some of the effects that I think others had been calling out for a while. We're finally seeing a little bit of that flow through to our business now.

The new products, we have introduced have been exceedingly well.

<unk> received and we're starting to see uptake in traction on those so.

Our go forward thesis on process.

We're finally seeing.

Some of the effects that I think others have been calling out for a while we're finally seeing a little bit of that.

Flow through to our business now.

Patrick Donnelly: Okay, that's helpful. And Alon, maybe on the, on the margin side, I think you called out some, you know, maybe more, aggressive expense management. You know, as you think about that first half to second half ramp in the margins, can you just talk about what levers you guys are pulling, you know, the visibility into hitting those numbers? Again, a pretty, pretty good step up from the first half to the second.

Okay, that's helpful and along maybe on the on.

On the margin side, I think you've called out some maybe more.

Aggressive expense management.

Yes, as you think about that.

First half second half ramp in the margins can you just talk about what levers you guys are pulling.

The visibility into hitting those numbers, we've got a pretty pretty good step up from first half to the second.

Ilan Daskal: Yeah. Thank you, Patrick. Appreciate the question. So, we have several initiatives that are in flight, and it's part of our kind of plan already. We anticipate that we will be able to realize it in the second half, and it will roll over also into next year. And these are obviously multiple initiatives that we are pretty confident that we will be able to achieve. It's part of the guidance. Obviously, it's baked in. And obviously, you know, the goal there is to mitigate, you know, the softness that we, you know, guided for, on the top line, as well as, you know, some aspect of the gross margin.

Yes. Thank you Patrick I appreciate the question so.

We have several initiatives that are in flight and it's part of our kind of plan already.

We anticipate that we will be able to realize eight in the second half.

And it will roll over also into next year.

And these are obviously multiple initiatives that we.

We are pretty confident that we will be able to achieve its part of the guidance obviously 2018.

And obviously.

The goal there is to mitigate the softness that we are.

Got it for.

The top line as well as some aspect of the of the gross margin.

Ilan Daskal: And I think, you know, that we have a very good plan to achieve it, and it's mainly focused on the second half of this year.

And I think that we have.

Good plan to achieve it and it's mainly focused on the second half of this year.

Patrick Donnelly: Okay. And then maybe on the long-term guide, you know, life science came down, I think, 150 basis points. When you think about that change to the growth build, in terms of the algorithm you guys have, you know, behind the scenes there, what-- I guess, what segments were the biggest step downs? I mean, did digital PCR change at all? Was it process chromatography? If you can just help us think about what softened in that algorithm and, yeah, I think when you guys gave the guide, we didn't get a ton of building blocks. So just trying to figure out what areas, maybe it was all of them, but just, just if you could help us out there, it'd be, it'd be helpful.

Okay.

And then maybe on the long term guide you know life Science came down I think 150 bps. When you think about that change to the gross billed.

The algorithm that you guys have.

Behind the scenes there what I guess what segments were the biggest step downs I mean, the digital PCR change at all with the process Chrome. If you can just help us think about what softened and that algorithm.

When you guys gave a guide and you can get a ton of building blocks. So just trying to figure out.

What areas, maybe it was all of them, but just if you could help us out there it would be helpful.

Andy Last: Yeah, Patrick, let me take a shot at this question. I think what we've determined is that, you know, the biopharma softness is contributing to life science growth at a slower pace, is kind of the simplest way to think about it. And, you know, with the kind of shakeup that's gone on a little bit in the emerging smaller biotech companies, where we've had meaningful business and very strong growth. You know, and just it's that effect flowing through over the next couple of years. And I wouldn't think of it as anything more than that at this point in time.

Andrew Last: Yeah, Patrick, let me take a shot at this question. I think what we've determined is that, you know, the biopharma softness is contributing to life science growth at a slower pace, is kind of the simplest way to think about it. And, you know, with the kind of shakeup that's gone on a little bit in the emerging smaller biotech companies, where we've had meaningful business and very strong growth. You know, and just it's that effect flowing through over the next couple of years. And I wouldn't think of it as anything more than that at this point in time.

Yeah, Patrick Let me, let me take a shot at this question I think what we've what we've determined is.

Is that.

The Biopharma softness is contributing to life science growth at a slower pace as kind of the simplest way to think about it and and you know with the with the kind of shakeout, that's gone on a little bit in the emerging smaller biotech companies, where we've had meaningful business.

Very strong growth.

And just if that effect flowing through over the next couple of years.

And I wouldn't think of it as anything more than that at this point in time.

Andy Last: You know, just to reiterate that the fundamental pillars in the life science business on process chromatography and Droplet Digital PCR and then related products are very solid. So we're, you know, I think prudently putting forward that we see it, you know, as a slower growth as a result.

Andrew Last: You know, just to reiterate that the fundamental pillars in the life science business on process chromatography and Droplet Digital PCR and then related products are very solid. So we're, you know, I think prudently putting forward that we see it, you know, as a slower growth as a result.

Just to reiterate that the fundamental pillars in.

And the life science business.

Process chromatography, and droplet digital PCR and then related products.

Very solid so.

So where where I think prudently.

Putting forward that we see.

Slower growth as a result, I think as well, Russia wasn't part of the initial calculus and now it is it's not a massive implants.

[Company Representative] (Bio-Rad Laboratories): I think as well, Russia wasn't part of the initial calculus, and now it is.

Simon May: I think as well, Russia wasn't part of the initial calculus, and now it is.

Andy Last: Yes.

Andrew Last: Yes.

[Company Representative] (Bio-Rad Laboratories): It's not a massive impact, but it does make a dent, and that flows through to the projection as well.

Simon May: It's not a massive impact, but it does make a dent, and that flows through to the projection as well.

Thank you, Dan and that flows through to the projection as well.

Patrick Donnelly: Understood. Thank you, guys.

Understood. Thank you guys.

Ilan Daskal: Thank you, Patrick.

Thank you Patrick.

Operator: ... Thank you for your question. The next question is from the line of Dan Leonard with Credit Suisse. Your line is now open.

Operator: Thank you for your question. The next question is from the line of Dan Leonard with Credit Suisse. Your line is now open.

Thank you for your question.

The next question is from the line of Dan Leonard with Credit Suisse. Your line is now open.

Dan Leonard: Thank you. I think Brandon asked this question, but I'm not sure I caught the answer. Does the revised guidance still assumes a meaningful sales acceleration in 2H? The Q4 comp is tough. Macro is not getting better. So what are you looking at to support that second half ramp?

Thank you I think Brendan asked this question, but I'm not sure I caught the answer.

Is it revised guidance still assumes a meaningful sales acceleration into H.

Fourth quarter comp is tough macro is not getting better. So what are you looking at to support that second half ramp.

Ilan Daskal: You want to start?

Okay.

Andy Last: Yeah, so we do see, you know, a slightly lower growth projection from the life science business, which I think we just reflected in the commentary, which is, you know, some partially offset by an improved performance in the clinical business in the second half. We're seeing, you know, actually fairly robust demand for our clinical systems that we expect to continue. So you've got a little bit of a mix shift playing out there in, on, across the two business groups, which will further help support the second half performance. Has a small mix impact on margin, which we're also reflecting because of the differential between the two business groups.

Andrew Last: Yeah, so we do see, you know, a slightly lower growth projection from the life science business, which I think we just reflected in the commentary, which is, you know, some partially offset by an improved performance in the clinical business in the second half. We're seeing, you know, actually fairly robust demand for our clinical systems that we expect to continue. So you've got a little bit of a mix shift playing out there in, on, across the two business groups, which will further help support the second half performance. Has a small mix impact on margin, which we're also reflecting because of the differential between the two business groups.

Yes.

So we do see a slightly lower growth projections from from the life Science business, which I think we just reflected in the commentary.

Is.

Partially offset by an improved performance in the clinical business in the second half.

We're seeing actually fairly robust demand for our clinical systems.

That we expect to continue its obviously, you've got a little bit of a mix shift playing out there.

Across the three business groups.

Which will further help support the second half performance.

It has a small mix impact on margin.

We're also reflecting because of the differential between the two business groups, Yeah, and then I will add to that also that from there obviously it flows throughout the P&L. The gross margin, we expect it to improve.

Ilan Daskal: Yeah, and then I will add to that also that from there, obviously, it flows throughout the PNL. You know, the gross margin, you know, we expect it to improve as the year progresses. As well as, you know, we have a list of initiatives that are in flight and some are scheduled to start that will benefit the second half.

As the year progresses.

As well as.

A list of initiatives.

Our in flight in Sumpter scheduled.

To start that.

Will benefit the second half.

Andy Last: We've got one final factor, which-

Andrew Last: We've got one final factor, which-

One final factor rich.

Ilan Daskal: Yes

Andy Last: ... which is the burn down of backlog in the second half, you know. And so we have much better line of sight to the phasing of that in the second half, and that will also contribute to the second half growth. And QX600 on the life science side is it's a very robust pipeline.

Andrew Last: which is the burn down of backlog in the second half, you know. And so we have much better line of sight to the phasing of that in the second half, and that will also contribute to the second half growth. And QX600 on the life science side is it's a very robust pipeline.

Sure.

The.

<unk> backlog in the second half an hour and so.

We have much better line of sight to that.

<unk> of that in the second half and that will also contribute to.

To the second half growth.

And <unk> 600 on the life science side.

It's a very robust pipeline, yes, so on the Q 600, yes, exactly handy I mean.

Ilan Daskal: Yeah. So on the QX600, yeah, exactly, Andy. I mean, it's about the manufacturing kind of volume that we plan to have a much higher volume in the second half than in the first half. And that's obviously a nice contribution, not only about the top line, but it's about the average, you know, margin it flows through.

It's about the manufacturing kind of volume that we plan to have a much higher volume in the second half than in the first half and that's obviously a nice contribution not only about the top line, but it's above average.

Marginal flow through.

Dan Leonard: Okay. And then my follow-up question, Andy: you commented on softer demand for gene expression against a significant installed base. Why isn't that a multi-year problem?

Okay.

And then my follow up question, Andy you commented on softer demand for gene expression again significant installed base.

Why isn't that a multiyear problem.

Andy Last: Well, I think, I think as we move forward, it is an element. I think it's a good, a good point you're making, Dan. It's an element that is factored into the life science forward-looking view on the 2025 trajectory, right? And, you know, it is a factor that is hard to really quantify in the market after you've placed all these instruments over the last 2, 2-plus years, 3 years. So it's a good call out, and it's a fair point, but it is considered in our 2025 re-guides for life science.

Andrew Last: Well, I think, I think as we move forward, it is an element. I think it's a good, a good point you're making, Dan. It's an element that is factored into the life science forward-looking view on the 2025 trajectory, right? And, you know, it is a factor that is hard to really quantify in the market after you've placed all these instruments over the last 2, 2-plus years, 3 years. So it's a good call out, and it's a fair point, but it is considered in our 2025 re-guides for life science.

Well I think I think as we move forward. It is an element I think it's a good a good point, you're making there and its an element that is factored into the life science.

Forward looking view.

On the 25 trajectory right.

It is it is a fact, so that it's hard to really quantify in the market. After you placed all these instruments over the last two plus years three years.

So it's a good call out and it's a fair point, but it is it is considered.

25, <unk> guys for life Science.

Dan Leonard: Okay. Thank you.

Okay. Thank you.

Ilan Daskal: Thank you, Dan.

Thank you Dan.

Operator: Thank you for your question. The next question is from the line of Jack Meehan with Nephron Research. Your line is now open.

Thank you for your question.

The next question is from the line of Jack Meehan with Nephron already.

Research Your line is now open.

Jack Meehan: Thank you. Good afternoon. First question is on the Russian sanctions. Can you just quantify for us the impact that's now embedded in your forecast, and when did it start? And when... I just guess, when will it annualize?

Thank you good afternoon.

First question is on the Russian sanctions can you just quantify for us the impact that's now embedded in your forecast then when does it start.

I guess, one more annualize.

Ilan Daskal: Yeah, thank you, Jack. I appreciate the question. You know, historically, we called out that Russia was between, you know, 1% and 2% of revenue on an annual basis. Obviously, the sanctions kept accumulating, and when we started the year, we still had, you know, a nice, you know, pipeline. I would say that about 1/3 of our projection, more than 1/3 of the projection for this year, you know, was impacted by incremental sanctions that we had to revise it this quarter. These are not, you know, the prior sanctions. These are incremental sanctions that prevents us from, you know, shipping more than 1/3 of our projected or prior projection for this year.

Yes.

Thank you Jeff I appreciate the question.

Historically, we called out that Russia.

It was between one and 2% of revenue on an annual basis, obviously, the sanctions kept accumulating and when we started the year, we still have a nice pipeline.

<unk>.

I would say that about a third of our projection more than a third of the projection for this year.

Was impacted by incremental sanctions that.

We had to revise eight this quarter these are not.

Prior to sanction these are incremental sanctions that prevent us from.

Shipping.

More than a third of our projected oil prior projection for this year.

Jack Meehan: Mm-hmm. Got it. And then in the diagnostics business, so it sounded like regionally you did well in Asia. Was just curious if you could comment on what you're seeing here in the US and in Europe. I think I heard largely flat. You know, we've been hearing about better volumes from a lot of the services providers. So just, just how is that playing through in your US and Europe business?

Mhm.

Jack Meehan: Got it. And then in the diagnostics business, so it sounded like regionally you did well in Asia. Was just curious if you could comment on what you're seeing here in the US and in Europe. I think I heard largely flat. You know, we've been hearing about better volumes from a lot of the services providers. So just, just how is that playing through in your US and Europe business?

Got it and then in the diagnostics business. So it sounded like regionally you did well in Asia.

I was just curious if you could comment on what Youre seeing here in the U S and in Europe .

I think I heard largely flat we've been hearing about better volumes from a lot of the services providers.

<unk>.

Just how is that playing through in your U S and Europe business.

Ilan Daskal: Yeah. I, I believe we have Dara. She dialed in remotely. So Dara, I'm not sure. Were you able to hear the question?

Yes, I believe we have Dara <unk> dialed in remotely. So there are not sure where you're able to hear the question.

Dara Grantham Wright: Yeah. Thank you. Thanks for the question. This is Dara Wright. Can you hear me okay?

Dara Wright: Yeah. Thank you. Thanks for the question. This is Dara Wright. Can you hear me okay?

Yeah. Thank you. Thank you. Thanks for the question Dara airline can you hear me Okay. Yes.

Ilan Daskal: Yeah, thank you.

Yes. Thank you.

Dara Grantham Wright: Great. So demand is strong in all regions. You know, elevated a bit in Asia Pacific, you know, as a consequence of China opening, you know, back up with sort of the COVID restrictions lifted in Q1. The actual sales were sort of biased towards Asia Pacific in Q1, so the revenue was biased there. But demand and backlog is similarly sort of higher than historically in EMEA and Americas. So as we burn down that backlog, you know, placing instruments globally, which increases our install base.

Dara Wright: Great. So demand is strong in all regions. You know, elevated a bit in Asia Pacific, you know, as a consequence of China opening, you know, back up with sort of the COVID restrictions lifted in Q1. The actual sales were sort of biased towards Asia Pacific in Q1, so the revenue was biased there. But demand and backlog is similarly sort of higher than historically in EMEA and Americas. So as we burn down that backlog, you know, placing instruments globally, which increases our install base.

Great.

So demand is strong in all regions.

Elevated.

Asia Pacific.

Consequently, China opening back up.

With the Covid restrictions lifted in Q1.

The actual sales, where we're sort of bias towards Asia Pacific in Q1, so the revenue with with bias, there, but that demand and backlog.

Similarly.

Higher than then.

The historically.

In America.

Well as we as we burn down that backlog you know.

Are you, saying that placing instruments globally.

Increase in our installed base.

Jack Meehan: ... Great. Then one final one for Norman. You know, we're in this, you know, macro environment, which is evolving a little bit. You know, your business is, you know, should be, I think, more defensive when it's all said and done. Just was curious, how kind of the evolving landscape might change your philosophy, if at all, when it comes to M&A and, you know, what you're seeing in the funnel? Thank you.

Jack Meehan: Great. Then one final one for Norman. You know, we're in this, you know, macro environment, which is evolving a little bit. You know, your business is, you know, should be, I think, more defensive when it's all said and done. Just was curious, how kind of the evolving landscape might change your philosophy, if at all, when it comes to M&A and, you know, what you're seeing in the funnel? Thank you.

Great.

And one final one for Norman.

We're in this.

Macro environment, which is evolving a little bit your business. It should be I think more defensive when it's all said and done just was curious.

How kind of the evolving landscape might change your philosophy, if at all when it comes to M&A and.

What youre seeing in the tunnel. Thank you.

Norman Schwartz: Yeah, so the funnel remains about the same. You know, obviously, when you think about kind of valuations coming in, it's a little stickier on the way down. So that's a dynamic that I think we're aware of. But again, you know, we've got a couple of things in the hopper and we continue to see it as a viable option for cash deployment as we go forward to add to the business.

Yes, so the funnel remains about the same.

Sure.

Obviously when when.

When you think about kind of valuations coming in it.

It's a little stickier on the way down.

So so that's that's a dynamic that.

That I think we're aware of.

<unk>.

But again, we've got a couple of things in the Hopper.

And we continue to see it as a.

Yes.

A viable option for for cash deployment.

As we go forward to add to the business.

Operator: Thank you for your question. The next question is a follow-up from Brandon Couillard. Your line is now open.

Thank you for your question.

The next question is a follow up from Brian <unk>. Your line is now open.

Brandon Couillard: Hey, thanks. Just to put pushback on your answer to Patrick's question, I think, I mean, the biopharma exposure, which you have is only 15%. You're talking about a sliver of that overall market. First of all, I wanna make sure I understand that right, and then, what's embedded in your outlook for that earlier stage, you know, biotech customer base? Could you quantify it in terms of sizing, but also kind of what you're expecting in terms of growth from that market?

Okay. Thanks.

Just to push back on your answer to Patrick's question I think.

The biopharma.

Exposure that you have only 15% youre talking about.

Sliver of that overall market first of all I'll make sure I understand that right and then whats embedded in your outlook for that earlier stage.

Biotech customer base could you quantify it.

Sizing, but also kind of what youre expecting in terms of growth from that market.

Andy Last: Yeah. Brandon, I mean, I don't think we've quantified or segmented how, you know, our sales within the biopharma segment overall. You know, we've done particularly well in emerging biotech, especially because of cell and gene therapy-based therapeutic development there in those companies. But the, you know... And that's, so that's more of a broader life science product impact. The, the process chromatography is obviously for the much more, you know, mid- and large-sized biopharma companies. And, you know, and there, I think we're just, you know, we're just literally subject to the macros that have been going on across the industry, which we had not seen before. And have, you know, started to show up a bit for us this year.

Andrew Last: Yeah. Brandon, I mean, I don't think we've quantified or segmented how, you know, our sales within the biopharma segment overall. You know, we've done particularly well in emerging biotech, especially because of cell and gene therapy-based therapeutic development there in those companies. But the, you know... And that's, so that's more of a broader life science product impact. The, the process chromatography is obviously for the much more, you know, mid- and large-sized biopharma companies. And, you know, and there, I think we're just, you know, we're just literally subject to the macros that have been going on across the industry, which we had not seen before. And have, you know, started to show up a bit for us this year. So we've moderated our growth expectations this year, although they're still, you know, good, healthy, double-digit growth for the bioprocessing side of the business.

Yes.

Brendan.

Can we quantify the effect on our segmented.

Our sales within the Biopharma segment overall.

We have done, particularly well in emerging biotech, especially because of cell and gene therapy.

<unk>.

Pudic development, there and fitness companies.

But.

So that's more of a broader life science.

Product impact the.

The process Chrome is obviously for the much more in a minute.

Mid and large sized biopharma companies.

And.

There I think we're just we're just literally subject to to the macros that have been going on across the industry, which we had not seen before.

It started to show up a bit for us this year. So we've moderated our growth expectations. This year, although that's still.

Andy Last: So we've moderated our growth expectations this year, although they're still, you know, good, healthy, double-digit growth for the bioprocessing side of the business.

Good healthy double digit growth for the bio processing side of the business.

[Company Representative] (Bio-Rad Laboratories): I'll just maybe add that about 1/3 of our life science revenue is contributed from biopharma, but we're pretty overweight in these smaller and emerging biotech companies. Whether you're talking about process chromatography, and we've talked about this previously, how our resins really play in these emerging biologic therapeutics. And also in our life science portfolio, generally, we see that halo effect in the emerging biotechs, more so than big pharma, which tend to be locked up in really large contracts.

Simon May: I'll just maybe add that about 1/3 of our life science revenue is contributed from biopharma, but we're pretty overweight in these smaller and emerging biotech companies. Whether you're talking about process chromatography, and we've talked about this previously, how our resins really play in these emerging biologic therapeutics. And also in our life science portfolio, generally, we see that halo effect in the emerging biotechs, more so than big pharma, which tend to be locked up in really large contracts.

I'll, just maybe add that about a third of our life science revenue is contributed from Biopharma with pretty overweight in the small and emerging biotech companies, whether you're talking about process chromatography and we've talked about this previously how are resonating so really play into Asia.

Merging biologics therapeutics and also in our life science portfolio generally.

You see that Halo effects.

Emerging <unk> more so than big pharma, which tends to be locked in.

Large contracts.

Brandon Couillard: Okay. Last one for Ilan. Just to make sure, the definitions we understand correctly. Your 25% EBITDA margin target, that includes the Sartorius dividend. Just want to make sure. And how much is that dividend contemplated? Is it the $34 million this year, or the one from the size of the dividend from last year at the Analyst Day, which is much different? Thanks.

Okay.

Last one for Alon that just to make sure.

The definitions we understand correctly your 25 EBITDA margin target that includes the sartorius dividend just want to make sure.

And how much.

Executives and contemplate <unk>.

$34 million this year or.

One.

Size of the dividend last year at the analyst day, which is much different.

Jack Meehan: Yeah. So, you know, we try to compare it kind of apples to apples. And, you know, back in the Investor Day, we said that it included about $19 million of dividend. And that's what we assumed now to be consistent.

Ilan Daskal: Yeah. So, you know, we try to compare it kind of apples to apples. And, you know, back in the Investor Day, we said that it included about $19 million of dividend. And that's what we assumed now to be consistent.

Yes, so we try to compare is kind of apples to apples.

And back in the Investor Day, we said that it included about $19 million of dividend.

And in that.

And that's what we assume now to be consistent.

Brandon Couillard: Got it. Thank you.

Got it thank you.

Jack Meehan: Sure. Thank you, Brandon.

Ilan Daskal: Sure. Thank you, Brandon.

Thank you Brendan Thank you for your question.

Operator: Thank you for your question. There are no additional questions waiting at this time, so I'll pass the conference back to the management team for any closing remarks.

There are no additional questions waiting at this time, so I'll pass the conference back to the management team for any closing remarks.

Norman Schwartz: Thank you for joining today's call. We will be at the RBC Capital Markets Global Healthcare Conference in New York later this month, and also in New York, the Jefferies Healthcare Conference in June. As always, we appreciate your interest, and we look forward to connecting soon. Thanks.

Edward Chung: Thank you for joining today's call. We will be at the RBC Capital Markets Global Healthcare Conference in New York later this month, and also in New York, the Jefferies Healthcare Conference in June. As always, we appreciate your interest, and we look forward to connecting soon. Thanks.

Thank you for joining today's call we will be at the RBC capital markets Global Healthcare Conference in New York later this month.

And also in New York, The Jefferies Healthcare conference in June .

As always we appreciate your interest and we look forward to connecting soon.

Thanks.

Operator: That concludes the conference call. Thank you for your participation. You may now disconnect your lines. You may now disconnect your lines.

That concludes the conference call. Thank you for your participation you may now disconnect your lines.

Now disconnect your lines.

Q12023 Bio-Rad Laboratories Inc Earnings Call

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