Q4 2023 Bio-Rad Laboratories Inc Earnings Call
Operator: Thank you for watching! Good afternoon, ladies and gentlemen, and welcome to the Bio Rad Fourth Quarter and Full Year 2023 Earnings Results Conference Call. At this time, all lines are in a listen-only mode.
Good afternoon, ladies and gentlemen, and welcome to the bio Rad fourth quarter and full year 2023 earnings results Conference call.
At this time.
Lines are in a listen only mode.
Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. I would now like to turn the conference over to Edward Jones. Please do so.
The presentation, we will conduct a question and answer session. If at any time during this call with Macquarie immediate assistance. Please press star zero for operator.
I'd now like to turn the conference over to Edward Jones. Please go ahead.
Edward Jones: Thanks, Jenny. Good afternoon, everyone. And thank you for joining us. Today, we will review the fourth quarter and full year 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, Andy Last, our Executive Vice President and Chief Operating Officer, and Simon May, President of the Live Science Group. Before we begin our review, 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 uncertainty. Our actual results may differ materially from these plans, goals, and expectations. You should not place undue reliance on these forward-looking statements, and I encourage you to review our filings with the SEC, where we discuss in detail the risk factors in our business. The company does not intend to update any forward-looking statements made during the call today.
Edward Jones: Thanks Jenny.
Edward Jones: Turning to everyone and thank you for joining US today, we will review the fourth quarter and full year 2023 financial results and provide an update on key business trends for bio Rad.
Edward Jones: With me on the call today are Norman Schwartz, our Chief Executive Officer, Andy last Executive Vice President and Chief operating Officer.
Edward Jones: And Simon May President of the life Science group.
Before we begin our review I would like to caution everyone that we will be making forward looking statements about management's goals.
Edward Jones: And expectations, our future financial performance and other matters. These statements are based on assumptions and expectations of future events cetera, subject to risks and uncertainties.
Edward Jones: Actual results may differ materially from these plans goals and expectations.
Edward Jones: 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.
Operator: Finally, our remarks today will include references to non-GAAP financial measures, 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 report. With that, I will now turn over the call to Andy Last, our Executive Vice President and Chief Operating Officer, to provide an update on Bio Rad's global operation. Okay, many thanks, Ed, and good afternoon to everybody. Thank you for joining us. The fourth quarter of 2023 performed largely as expected, reflecting a continuation of the macroeconomic trends started earlier this year in the biotech and biopharma segments. China and geopolitical challenges related to Russia.
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.
Edward Jones: Release with that I will now turn over the call to Andy last <unk>, Our executive Vice President and Chief operating officer to provide an update on bio rads global operations.
Andy: Okay. Many thanks, Ed and good afternoon to everybody. Thank you for joining us.
Andy: For the fourth quarter of 2023 performed largely as expected.
Andy: Reflecting a continuation of the macroeconomic trends started earlier this year in the biotech and Biopharma segments.
Andy: China and geopolitical challenges relating to Russia.
Andrew J. Last: However, revenue picked up nicely compared to Q3 in both Life Science and Diagnostics. However, as expected, we saw little in the way of budget flush in the fourth quarter of this year for the life sciences. During the quarter, we smoothed out the remaining operational challenges associated with our SAP Go Live in Q3 in Asia Pacific, and we are now operating on a single global instance of SAP across all our operators.
Andy: However, our revenue picked up nicely compared to Q3 in both life science and diagnostics.
Although as expected we saw literally in the way of budget flush in the fourth quarter of this year for the life Science business.
Andy: During the quarter, we smoothed out the remaining operational challenges associated with our SAP go live in Q3 in Asia Pacific.
Andy: And we are now operating on a single Global instance of Sapa Cros.
Andy: Across all our operations.
Andrew J. Last: In life science, we experienced a double-digit core business decline compared to Q4 of the previous year, where we had challenging compares due to strong budget flush, backorder burndown, and we benefited from the launch of the QX600 DD-PCR platform. We were pleased with the growth of our clinical diagnostics business in Q4, especially in Asia-Pacific, where we prioritized placements to capture some strong growth trends, particularly in our diabetes testing. We are now past our supply chain challenges and finished the quarter with a more normalized year-end factor.
Andy: In life Science, we experienced a double digit core business decline compared to Q4 prior year, where.
Andy: Where we had challenging comparisons due to strong budget flush backorder burned down.
Andy: We benefited from the launch of the <unk> 600, DD Pcr platform.
Andy: We were pleased with the growth of our clinical diagnostics business in Q4, especially in Asia Pacific, where we prioritize placements to capture some strong growth trends.
Andy: Particularly in our diabetes testing franchise.
Andy: We are now past our supply chain challenges and finished the quarter with a more normalized year end backlog.
Andrew J. Last: Overall, our DD-PCR franchise had a soft 2023, with sales flat when excluding COVID, as compared to the high growth we had previously been experiencing from our focus in biotech and biopharma. However, we remain very positive about maintaining our leading market share in the markets we serve and are looking forward to the impact of the QX continuum launch as we expand our focus on the lower end market later this year. In addition, we continue to prioritize investment in application and assay expansion for the platform overall, with further launches coming during the year. Furthermore, we are excited about the launch of several other new life science products this year, which include our next-generation ChemE.GO western blot platform and single-celled DDC sample preparation.
Andy: Overall, our DD PCR franchise had a soft 2023 with sales flat when excluding COVID-19 as compared to the high growth. We had previously been experiencing from our focus in biotech and Biopharma.
Andy: However, we remain very positive on maintaining our leading market share in the markets we serve.
Andy: And looking forward to the impact of the <unk> continue on launch as we expand our focus on the low end market later this year.
Andy: In addition, we continue to prioritize investment on application and assay expansion for the platform overall with further launches coming during the year.
Andy: Further we are excited about the launch of several other new life science products. This year, which include our new generation next generation <unk> Western blot platform.
Andy: And single cell DDC sample preparation solution.
Andrew J. Last: We were pleased with the Q4 finish for our Clinical Diagnostics business, especially double-digit year-end growth in Asia-Pacific as a function of demand and priority placements, which helped us to deliver mid-single-digit growth overall for the quarter. During 2023, our teams worked hard on reducing our backorders in the clinical business while bringing Singapore to full production for the products transferred from France. We were pleased with the progress we made on our core franchises in quality controls, immunohematology, Diabetes, and Autoimmune, notwithstanding the challenges in Russia and China. In Q4, inventory levels remained high and similar to Q3, continuing to reflect some impacts of our manufacturing transfer of clinical instruments from France to Singapore and also lower demand impacting inventory consumption and lifecycling. We continue to exercise tight cost control in Q4, and this included lower employee-related costs reflecting reduced incentive compensation. Looking toward 2024 for our clinical diagnostics business, we anticipate a more normalized year for customer demand. However, we remain cautious about the pace and dynamics of recovery in our lifetimes.
We were pleased with the Q4 finish for our clinical diagnostics business, especially.
Andy: Especially double digit year end growth in Asia Pacific as a function of demand and priority placements, which helped us to deliver mid single digit growth overall for the quarter.
Andy: During 2023, our teams worked hard on reducing our back of what is in the clinical business.
Andy: While bringing up Singapore to full production for the products transferred from trials.
Andy: We were pleased with the progress we've made on our core franchises and quality controls immuno hematology.
Andy: <unk> net just the challenges in Russia and China.
Andy: In Q4 inventory levels remained high and similar to Q3 continuing to reflect some impacts of our manufacturing transfer of clinical instruments from trials to Singapore, and also lower demand impacting inventory consumption and life Sciences.
We continued to exercise tight cost control in Q4, and this included lower employee related costs, reflecting reduced incentive compensation accruals.
Andy: Looking towards 2024 for our clinical diagnostics business.
Andy: We anticipate a more normalized year for customer demand.
Andy: However, we remain cautious on the pace of dynamics of recovery in our life Science business.
Andrew J. Last: We expect the first half of the year to be a decline due to ongoing softness in biofarmer and biotech and compared to the prior year, but anticipate improvement in the second half of the year as funding improves along with stabilization in the broader biopharma market. The pace and shape of recovery in China remain uncertain, but China remains a priority market for future growth. Overall, we see 2024 as a recovery transition year with higher levels of uncertainty than usual for our life science business due to the anticipated second half improvements in biotech and biopharma and the bioprocessing de-stocking recovery. On the latter point, we enter 2024 with a softer order book for process chromatography than the last few years. Mostly related to a couple of large customers with at least one of our large customers still working off elevated inventory throughout the year, On a positive note, our process chromatography resins are included in five of the novel therapeutics approved by the FDA during 2023. In addition, we are excited about the go-live of our new Singapore DC toward the last part of the year, which supports ongoing logistics improvements in the Asia-Pacific region and globally for both businesses.
Andy: We expect the first half of the year to be a decline due to ongoing softness in biopharma and biotech and prior year compare.
Andy: But anticipate improvements in the second half of the year its funding improves along with stabilization in the broader biopharma market.
Andy: The pace and shape of recovery in China remains uncertain, but China remains a priority market for future growth for the company.
Andy: Overall, we see 2024 is the recovery transition year with higher levels of uncertainty than usual for our life science business due to the anticipated second half improvements in biotech and Biopharma and the bioprocess and Destocking recovery.
Andy: On the latter point, we entered 2024 with a softer order book for process chromatography in the last few years.
Andy: Mostly related to a couple of large customers with at least one of our large customers still working off elevated inventory throughout the year.
Andy: On a positive note.
Andy: This is chromatography resins are included in five of the novel Therapeutics approved by the FDA during 2023.
Andy: In addition, we are excited about the go live of our new Singapore DC towards the latter part of the year, which supports ongoing logistics improvements in the Asia Pacific region and globally for both businesses.
Andrew J. Last: On the operating cost front, we have continued to make improvements in our cost structure. However, we will see a material step-up in cost in 2024 for employee incentive compensation accruals, which along with annual merit increases, will create a meaningful cost headway. We also expect to see ongoing tightening of sanctions against Russia, making conditions for meeting demand for our clinical business increasingly more challenging.
Andy: On the operating cost front, we have continued to make improvements in our cost structure.
Andy: However, we will see a material step up in cost in 2024 for employee incentive compensation accruals, which along with annual merit increases.
Andy: We'll create a meaningful cost headwinds.
Andy: We also expect to see ongoing tightening of sanctions against Russia, making conditions for meeting demand for our clinical business increasingly more challenging there.
Andrew J. Last: In closing, we continue to drive forward on our strategy with focus on execution on our priority market segments and platforms, investing in process and efficiency gains around our single global SAP instance, and maintaining our investment levels to drive innovation for our core platform. Thank you, and I'll now pass you to Norman to review the financial results. Okay, thank you, Andy.
Andy: In closing we continue to drive forward on our strategy with focus on execution on our priority market segments and platforms.
Andy: Investing in process and efficiency gains around a single Global instance.
Andy: Maintaining our investment levels to drive innovation truck platforms.
Andy: Thank you and I'll now pass you to normal to review the financial results.
Norman D. Schwartz: Thank you Andy.
Norman D. Schwartz: So first, I'd like to review the results of the fourth quarter and the full year. So net sales for the fourth quarter of 2023 were $681.2 million. It's a 6.7% decline on a reported basis versus $730.3 million in Q4 of 2022, and a 7.7% decline on a currency-neutral basis. Similar to the prior quarter, the fourth quarter year-over-year revenue decline was primarily the result of ongoing weaknesses in the biotech and biopharma end markets. Again, primarily impacting sales of our life science segment products. In addition, we continue to experience weak demand for life science products in China.
Norman D. Schwartz: So first I'd like to review the results of the fourth quarter and the full year.
Norman D. Schwartz: So net sales for the fourth quarter of 2023 were 681 2 million.
Norm: That's a six 7% decline on a reported basis versus $730 3 million in Q4 of 2022, and a seven 7% decline on a currency neutral basis.
Norm: Similar to the prior quarter, the fourth quarter year over year revenue decline was primarily the result of ongoing weakness in the biotech and Biopharma end markets.
Norm: Yeah.
Yeah, primarily impacting sales of our life science segment products.
Norm: In addition, we continue to experience weak demand for life science products in China, and I think both as a result of the macro economic environment as well as.
Norman D. Schwartz: I think both as a result of the macroeconomic environment and, to some extent, the local Made in China initiative. COVID-related sales in the prior year were $13.4 million and immaterial in the fourth quarter of 2023. Therefore, core revenue, which excludes COVID-related sales, decreased 6.0% currency neutral. And then, on a geographic basis, currency neutral revenue decreased year over year in the Americas and Europe and was relatively flat in Asia.
Norm: To some extent the local made in China initiatives.
Norm: Covid related sales in the prior year were $13 4 million and immaterial in the fourth quarter of 2023 therefore.
Norm: Core revenue, which excludes COVID-19 related sales decreased 6.0% currency neutral.
Norm: And then on a geographic basis currency neutral revenue decreased year over year in the Americas and Europe.
Norm: And was relatively flat in Asia.
Norman D. Schwartz: The FAO for Life Science Group in the fourth quarter of 2023 was $291.1 million compared to $359.7 million in Q4 of 2022, which is a 19.1% decline on a reported basis and 19.9% on a currency neutral basis. Excluding COVID related sales, the life science year over year currency neutral core revenue experienced a broad based decline of approximately 17%. In addition to the challenging biotech, biopharmaceutical, and markets and soft macroeconomic conditions in China during the quarter, DDPCR and QPCR sales faced difficult comparisons due to the backwater burndown and other factors Andy mentioned in the year-ago period. And when excluding process chromatography sales, the underlying life science business decreased 22.1% on a currency-neutral basis versus Q4 of 2022. And finally, the Life Science Group revenue excluding process chromatography and COVID-related sales decreased 18.7%, currency neutral. On a geographic basis, life science year-over-year core revenue decreased across all three regions.
Norm: The sales of life Science group in the fourth quarter of 2023.
Norm: We're at $291 1 million compared to $359 7 million in Q4 of 2022.
Norm: Which is a 19, 1% decline on a reported basis and 19, 9% on a currency neutral basis.
Norm: Excluding COVID-19 related sales to life science year over year currency neutral core revenue experienced a broad based decline of approximately 17%.
Norm: In addition to the challenging biotech biopharma end markets and soft macroeconomic conditions in China during the quarter DD PCR in Q PCR sales faced difficult compares.
Norm: Due to the backwater burned down and other factors Andy mentioned.
Norm: In the year ago period.
Norm: And when excluding process chromatography sales the underlying life science business decreased 22, 1% on a currency neutral basis.
Versus a.
Norm: The first is Q4 of 2022.
Norm: And finally, the life Science group revenue, excluding process chromatography, and Covid related sales decreased 18, 7% currency neutral.
Norm: On a geographic basis life science year over year core revenue decreased across all three regions.
Norman D. Schwartz: Conversely, we saw broad-based growth for the clinical diagnostics group. Fourth quarter sales of the Clinical Diagnostics Group were $389 million, compared to $369.6 million in Q4 of 2022. This represents a growth of 5.3% on a reported basis and 4.2% growth on a currency-neutral basis. Additionally, core clinical diagnostics year-over-year revenue, which excludes COVID-related sales, increased 4.3 percent. The clinical diagnostic group benefited from particular strength in diabetes product sales as well as from the reduction of elevated back orders.
Norm: Conversely, we.
Norm: We saw broad based growth for the clinical diagnostics group.
Norm: Fourth quarter sales of clinical diagnostics group with $389 million compared to $369 6 million in Q4 of 2022.
Norm: This represents a growth of five 3% on a reported basis and four 2% growth on a currency neutral basis.
Norm: And then Corey clinical diagnostics year over year revenue, which excludes COVID-19 related sales increased four 3%.
Norm: Yeah.
Norm: The clinical diagnostics group benefited from particular strength in diabetes product sales as well as from the reduction of elevated back quarters.
Norman D. Schwartz: On a geographic basis, the Diagnostics Group revenue is primarily driven by strong growth in Asia for the company. Q4 reported gross margin was 53.8% on a gap basis and compares to 54.4% in the fourth quarter of 2022. The year-over-year gross margin decline was due to a number of factors, including lower manufacturing volume, the impacts of inflation, and inventory reserves. Amortization related to prior acquisitions required, and cost of goods was $4.5 million as compared to $4.4 million in Q4 of 2022. STNA Expenses for the fourth quarter of 2023 were 207.1 million, or 30.4% of sales, compared to 212.2 million, or 29.1% in Q4 of 2022. The lower SG&A in the quarter was mainly due to lower employee-related expenses, partially offset by a weaker dollar and a facility lease impairment.
Norm: Okay geographic basis, the diagnostics group revenue was primarily driven by strong growth in Asia.
Norm: For the company.
Q4 reported gross margin.
Norm: Was 53, 8% on a GAAP basis and compares to 54, 4% in the fourth quarter of 2022.
Norm: The year over year gross margin decline was due to a number of factors, including lower manufacturing volume the impacts of inflation and inventory reserves.
Norm: Amortization related to prior acquisitions recorded in cost of goods was $4 5 million as compared to $4 4 million in Q4 of 2022.
Norm: SG&A expenses for.
Norm: For the fourth quarter of 2023, or $207 1 billion or 34% of sales compared to $212 2 million or 29, 1% in Q4 of 2022.
Norm: The lower SG&A in the quarter was mainly due to lower employee related expenses, partially offset by a weaker dollar and a facility lease impairment.
Norman D. Schwartz: And total amortization expense related to acquisitions recorded in SG&A for the quarter was $1.2 million versus $1.7 million in Q4 of 22. Research and development expense in the fourth quarter was $63.9 million or 9.4% of sales compared to $66.2 million or 9.1% of sales in Q4 of 2022. The lower expense levels reflect both lower employee-related and project expenses.
Norm: And total amortization expense related to acquisitions recorded in SG&A for the quarter was $1 2 million versus $1 7 million in.
Q4 of 'twenty two.
Norm: Research and development expense in the fourth quarter was $63 9 million or nine 4% of sales compared to $66 2 million or nine 1% of sales in Q4 of 2022.
Norm: The lower expense levels reflect both lower employee related and project expenses.
Norman D. Schwartz: Fourth-quarter operating income was $95.3 million, or 14% of sales, compared to $118.7 million, or 16.2% of sales, in Q4 of 2022. Looking below the operating line, the change in fair market value of equity security holdings, which are substantially related to Bio Rad's ownership of Sartoria's AG shares, added $324.3 million of income to the reported results. During the quarter, interest and other income resulted in net other income of $8.8 million compared to net other expense of $6.1 million last year, primarily driven by increased interest income from investments. The effective tax rate for the fourth quarter of 2023 was 18.4% compared to 24.2% for the same period in 2022.
Norm: Fourth quarter operating income was $95 3 million or 14% of sales compared to $118 7 million or.
Norm: Or 16, 2% of sales in Q4 of 2022.
Looking below the operating line.
Norm: The change in fair market value of equity security holdings, which are substantially related to bio Rad its ownership of Sartorius AG shares.
Norm: And at $324 $3 million of income to the reported results.
Norm: During the quarter interest and other income resulted in net other income of $8 $8 million compared to net other expense of $6 $1 million last year, primarily driven by increased interest income from investments.
Norm: The effective tax rate for the fourth quarter of 2023 was 18, 4% compared to 24, 2% for the same period in 2022.
Norman D. Schwartz: Tax rates for both years were driven by unrealized gains in equity securities, and the lower rate in 2023 was primarily a result of changes in the geographical mix of earnings. Fourth quarter reported net income was $349.7 million, or $12.14 diluted earnings per share, compared to net income of $827.7 million, for a diluted earnings per share of $27.78 in Q4 of 2022. This change from last year is again largely related to changes in the valuation of Sartorius Holding. So, moving on to the non-GAAP results. On a NOMGAP basis, we have excluded certain atypical and unique items that impacted both gross and operating margins, as well as other income.
Norm: Tax rates for both years were driven by unrealized gains in equity securities and a lower rate in 2023 was primarily a result of changes in the geographical mix of earnings.
Norm: Fourth quarter reported net income was $349 7 million or $12.14 diluted earnings per share.
Norm: <unk> to net income of $827 $7 million.
Norm: Or diluted earnings per share of $27.78 in Q4 of 2022.
Norm: This change from last year is largely related to changes in the valuation of Sartorius holdings.
Norm: So moving on to the non-GAAP results.
Norm: On a non-GAAP basis, we have excluded certain atypical and unique items that impacted both gross and operating margins as well as other income.
Norman D. Schwartz: These items are detailed in the reconciliation table in the press release. So, looking at the non-GAAP results for the fourth quarter, we have excluded $4.5 million of amortization of persistent tangibles and a small restructuring benefit.
Norm: These items are detailed in the reconciliation table in the press release.
Norm: So looking at the non-GAAP results for the fourth quarter.
Cost to go goods, we have excluded $4 $5 million of amortization of purchased intangibles and small restructuring benefit. These.
Norman D. Schwartz: These exclusions move the gross margin for the fourth quarter of 2023 to a non-gap gross margin of 54.4% versus 54.9% in Q4 of 2022. Non-Gap SG&A in the fourth quarter of 2023 was 29.8% versus 28.5% in Q4 of 2022. In SG&A, on a non-GAAP basis, we've excluded amortization of purchase intangibles of $1.2 million, and the In Vitro Diagnostics Registration Fee in Europe for previously approved products of 1.8 million, and $851,000 of restructuring-related expenses. Non-GAAP R&D expense in the fourth quarter of 2023 was 9.1%, basically the same as 2022. R&D On a non-GAAP basis, we have excluded $1.3 million in restructuring expenses and $400,000 in acquisition-related costs.
Norm: These exclusions moved the gross margin for the fourth quarter of 2023 to a non-GAAP gross margin of 54, 4% versus 54, 9% in Q4 of 2022.
Norm: non-GAAP SG&A in the fourth quarter of 2023 was 29, 8% versus 28, 5% in Q4 of 2022.
Norm: In SG&A on a non-GAAP basis, we have excluded amortization of purchased intangibles of $1 2 million.
Norm: In in vitro diagnostics registration fee in Europe for previously approved products.
Norm: One 8 million.
Norm: $851000 of restructuring related expenses.
Norm: non-GAAP R&D expense in the fourth quarter of 2023 was nine 1% basic.
Norm: Basically the same as 2022.
Norm: You know R&D on a non-GAAP basis, we have excluded $1 $3 million and had restructuring expenses and $400000 in acquisition related costs.
Norm: And the accumulated the accumulative sum of these non-GAAP adjustments result in moving the quarterly operating margin from 14% on a GAAP basis to 15, 5% on a non-GAAP basis.
Norman D. Schwartz: And the cumulative sum of these non-gap adjustments resulted in moving the quarterly operating margin from 14% on a gap basis to 15.5% on a non-gap basis. And this non-GAAP operating margin compares to a non-GAAP operating margin of 17.4 percent in Q4 of 2020. 2022. We've also excluded certain items below the operating line, which are the increase in the value of Sartorius Equity Holdings and a loan receivable of $324.3 million, and a $965,000 loss on venture investment. The non-GAAP effective tax rate for the fourth quarter of 2023 was 22.4% compared to 28.1% for the same period in 2022. The lower tax rate in 2023 was primarily driven by the geographical mix of earnings and a release of reserves related to the resolution of certain tax positions.
Norm: And this non-GAAP operating margin compares to a non-GAAP operating margin of 17, 4% in Q4 of.
Norm: 2022.
Norm: We have also excluded certain items below the operating line, which are the increase in the value of Sartorius equity holdings, and a loan receivable of $324 $3 million.
Norm: And a $965000 loss on venture investments.
Norm: The non-GAAP effective tax rate for the fourth quarter of 2023 was 22, 4% compared to 28, 1% for the same period in 2022.
The lower tax rate in 2023 was primarily driven by the geographical mix of earnings and a release of reserves related related to resolution of certain tax positions.
Norman D. Schwartz: And finally, non-GAAP net income for the fourth quarter of 2023 was $89.3 million, or $3.10 diluted earnings per share, compared to $98.3 million, or $0.5 million, or $3.31 diluted earnings per share in Q4 of 2022. So now, for the full year results. Net sales for the full year of 2023 were $2,671,000,000, which is a 4.7% decline on a reported basis as compared to $2,802,000,000 in 2022. On a currency neutral basis, full year 2023 net sales decreased 4.1%.
Norm: And finally non-GAAP net income for the fourth quarter of 2023 was $89 $3 million or $3.10 diluted earnings per share compared to $98 five.
Norm: $5 million or diluted earnings per share of $3.31 in Q4 of 2022.
Speaker Change: So now for the full year results.
Speaker Change: Net sales for the full year of 2023 were $2 billion $671 million, which is a four 7% decline on a reported basis as compared to.
Speaker Change: 2.2 billion $802 million in 2022.
Speaker Change: On a currency neutral basis full year 2023, net sales decreased four 1%.
Norman D. Schwartz: COVID-related sales for the full year were about $4 million, compared to $109 million in 2023 and 2022, so that core, year over year revenue, which excludes COVID related sales, decreased by 0.4% or effectively flat on a currency-neutral basis. Now, looking at full year sales results by segment. Sales of the Life Science Group for 2023 were $1,178,000,000, a year-over-year decline of 12% on a currency-neutral basis. When excluding COVID-related sales, life science year-over-year currency-neutral core revenue declined 4.9%. The maturity of the year-over-year decline was driven by process chromatography, qPCR products, and Western blots.
Speaker Change: Covid related sales for the full year were about $4 million compared to $109 million in 'twenty two 'twenty three 2022.
Speaker Change: So that core yeah.
Speaker Change: Year over year revenue, which excludes COVID-19 related sales decreased 0.4% or effectively flat on a currency neutral basis.
Speaker Change: Now looking at full year sales results by segment.
Speaker Change: Sales of the life Science group for 2023 or $1.178 billion, a year over year decline of 12% on a currency neutral basis.
Speaker Change: Excluding COVID-19 related sales life science year over year currency neutral core revenue declined four 9%.
Speaker Change: The majority of the year over year decline was driven by process chromatography, Q PCR products and western blot.
Norman D. Schwartz: On a geographic basis, life science, currency-neutral, full-year core revenue, which, as a reminder, excludes COVID sales, declined in Asia and Europe, while the Americas posted modest growth. Sales of clinical diagnostic products for 2023 were $1,489,000,000, which represents a 3.2% growth on a currency-neutral basis. When excluding COVID-related sales, the clinical diagnostics year-over-year currency neutral core revenue growth was 3.4% and was driven by diabetes, quality control, and blood typing products, partially offset by a decline in infectious disease products. On a geographic basis, clinical diagnostics. Currency Neutral Four-Year Core Revenue Growth grew across all three regions.
Speaker Change: Alright geographic basis life science currency neutral full year core revenue.
Speaker Change: Which as a reminder, excludes COVID-19 sales declined in Asia, and Europe, while the Americas posted modest growth.
Speaker Change: Sales of the clinical diagnostic products for 2023 were $1.489 billion, which represents a three 2% growth on a currency neutral basis.
Speaker Change: When excluding COVID-19 related sales the clinical diagnostics year over year currency neutral core revenue growth was three 4% and was driven by a diabetes quality control and blood typing products, partially offset by a decline in infectious disease products.
Speaker Change: On a geographic basis clinical diagnostics currency neutral full year core revenue growth grew across all three regions.
Norman D. Schwartz: Overall, the company's full-year non-GAAP gross margin was 54.2% compared to 56.6% in 2022. The year-over-year margin decline was driven mainly by product mix, lower COVID sales, inventory reserves, and lower fixed cost leverage. Full year non-GAAP SG&A expense was $814.6 million, for 30.5% of sales compared to $805.4 million, or 28.7% of sales in 2022. The higher SG&A was related to SAP implementation in Asia, legal fees, a lease impairment, and higher discretionary spend, partially offset by lower employee-related costs.
Speaker Change: Overall company full year non-GAAP gross margin was 54, 2% compared to 50 656, 6% in 2022.
Speaker Change: The year over year margin decline was driven mainly by product mix lower COVID-19 sales inventory reserves and lower fixed cost leverage.
Speaker Change: Full year, non-GAAP SG&A expense was $814 $6 million.
Speaker Change: Our 35% of sales compared to $805 $4 million or 28, 7% of sales in 2022.
Speaker Change: The higher SG&A was related to our SAP.
Implementation in Asia legal fees at least impairment and higher discretionary spend partially offset by lower employee related costs.
Norman D. Schwartz: Full-year non-GAAP R&D was $254.8 million, or 9.5% of sales versus $256.7 million, or 9.2% of sales in 2022. And full-year non-GAAP operating income was 14.2% compared to 18.7% in 2022, which reflects the effects of revenue decline, shifts in mix, and lower fixed cost absorption. And lastly, the non-GAAP effective tax rate for the full year of 2023 was 22.3 percent, consistent with our guidance range and compared to 22% in 2022.
Speaker Change: Full year, non-GAAP, R&D was $254 $8 million or nine 5% of sales versus $256 $7 million or nine 2% of sales in 2022.
Speaker Change: And full year non-GAAP operating income was 14, 2% compared to 18, 7% in 2022.
Speaker Change: Which.
Speaker Change: It reflects the effects of revenue decline shifts in mix and lower fixed cost absorption and lastly, the non-GAAP effective tax rate for the full year of 2023 with 22, 3% consistent with our guidance range and compares to 22% in <unk>.
Speaker Change: 2022.
Norman D. Schwartz: So moving on to the balance sheet, total cash and short-term investments at the end of 2023 was $1,613,000,000 compared to $1,796,000,000 at the end of 2022 and $1,765,000,000 at the end of the third quarter of 2023. The change in cash and short-term investments from the third quarter of 2023 was primarily due to share repurchases, working capital, and the timing of tax payment Yesterday.
Speaker Change: So moving on to the balance sheet.
Speaker Change: Total cash and short term investments at the end of 2023 with $1.613 billion compared to $1 billion $796 million at the end of 2022 and $1 billion $765 million at the end of the third.
Speaker Change: Quarter of 2023.
Speaker Change: The change in cash and short term investments from the third quarter of 2023 was primarily due to share repurchases.
Speaker Change: Working capital and the timing of tax payments.
Speaker Change: Yesterday.
Norman D. Schwartz: Just to mention, we concluded a new $200 million credit agreement maturing now in February of 2029, which provides additional liquidity and enhances Bio Rad's financial flexibility. And this new credit line replaces a prior $200 million facility that was maturing in April of this year. Inventory at the end of Q4 increased slightly to $780.5 million from $775.8 million in the prior quarter and was primarily due to a higher level of finished goods.
Speaker Change: Just to mention we concluded a new $200 million credit agreement maturing and now in February of 2029.
Speaker Change: Flexibility in this new credit line replaces a prior $200 million facility that was maturing in April of this year.
Speaker Change: Inventory at the end of Q4 increased slightly to $780 5 million from 775 8 million.
Speaker Change: In the prior quarter and was primarily due to a higher level of finished goods.
Norman D. Schwartz: As we move on from the supply chain challenges of the past two years, we continue to anticipate inventory decreasing to more normal levels over the next six to eight quarters. For the fourth quarter of 2023, net cash generated from operating activities was $81 million, which compares to $79.7 million in Q4 of 2022. This increase mainly reflects changes in working capital offset by the timing of tax payments.
Speaker Change: If we move on from the supply chain challenges of the past two years, we continue to anticipate inventory decreasing to more normal levels over the next six to eight quarters.
Speaker Change: For the fourth quarter of 2023 net cash generated from operating activities was $81 million, which compares to $79 7 million in Q4 of 2022.
Speaker Change: This increase mainly reflects changes in working capital offset by the timing of tax payments.
Norman D. Schwartz: For the full year of 2023, net cash generated from operations was $374.9 million versus $194.4 million in 2022. This increase mainly reflects changes in working capital. During the fourth quarter, we purchased 659,000 shares of our stock for a total cost of $200 million, or an average purchase price of approximately $303 per share, as we continue to be optimistic with our buyback program. It is useful to note that we still have nearly $280 million available for share repurchases under the current board-authorized program. And further, just a little further.
Speaker Change: For the full year of 2023 net cash generated from operations was $374 9 million versus $194 4 million in 2022.
Speaker Change: This increase mainly reflects changes in working capital.
Speaker Change: During the fourth quarter, we purchased 659000 shares of our stock for a total cost of $200 million or an average purchase price of approximately $303 per share as we continue to be opportunistic with our buyback program.
Speaker Change: Probably useful to note, we still have nearly $280 million available for share repurchases under the current board authorized program.
Speaker Change: Yeah.
Speaker Change: And further just yet.
Norman D. Schwartz: Just so you understand, full year share buybacks totaled 1,268,000 shares for approximately $429 million. Again, that's for the year. As a comparison, we purchased about 479,000 shares of our stock for $216 million in 2022. I just need you to dock for the fourth quarter of 2023 with 136.8 million, or 20.1% of sales, and adjusted EBITDA in the fourth quarter of 2022 was 21.4%. Full year adjusted EBITDA, including the Sartorius dividend, was $535.9 million, or about 20.1%, compared to 23.8% in 2022. Net capital expenditures for the fourth quarter of 2023 were $42.1 million, and full year CapEx spend was $156.5 million. And finally, depreciation and amortization for the fourth quarter was $37.2 million, and $145.9 million for the full year.
Speaker Change: Just so you understand full year share buybacks totaled a $1 million.
Speaker Change: 268000 shares.
Speaker Change: For approximately $429 million again, that's for the year as a comparison, we purchased about 479000 shares of our stock for $216 million in 2022.
Speaker Change: Adjusted EBITDA for the fourth quarter of 2023 was $136 8 million or 21% of sales and adjusted EBITDA in the fourth quarter of 2022 was 21, 4%.
Speaker Change: Full year, adjusted EBITDA, including the sectorial dividend was $535 $9 million or about 21%.
Speaker Change: Compared to 23, 8% in 2022.
Speaker Change: Net capital expenditures for the fourth quarter 2023 were $42 $1 million in full year Capex spend was $156.5 million.
Speaker Change: And finally, depreciation and amortization for the fourth quarter was.
Speaker Change: $37 $2 million and $145 9 billion for the full year.
Norman D. Schwartz: Moving on to the non-GAP guidance for 2024. As Andy alluded to earlier, you know, we do see 2024 as a recovery transition year with higher levels of uncertainty than usual for our life science business and a Study Growth Outlook for Diagnostics. Given the operating expense headwinds and muted revenue growth, I think it's fair to say that margin expansion will be difficult this year. Keep in mind that employee-related expenses impacting our P&L represent somewhere between a 250 to 300 basis point headwind that we need to overcome in 2024. And we have continuing geopolitical issues, especially as it relates to China and Russia.
Speaker Change: So moving on to the non-GAAP guidance for 2024.
Speaker Change: So as Andy alluded to earlier, we do see 'twenty 'twenty four is recovery transition year with higher levels of uncertainty than usual for our life science business.
Speaker Change: And a steady growth outlook for diagnostics.
Speaker Change: Given the operating expense headwinds and muted revenue growth.
Speaker Change: I think it's fair to say that margin expansion it will be difficult this year.
Speaker Change: Keep in mind that employee related expenses impacting our P&L represent somewhere between a 250 to 300 basis point headwind that we need to overcome in 2024.
Speaker Change: And we have continuing geopolitical issues, especially as it relates to China and Russia.
Norman D. Schwartz: However, as we remain focused on improving our cost structure, we are well positioned for operating margin leverage and as revenue growth returns. Again, I think, you know, 2024 is certainly very different from a normal year. This year, revenue is expected to be a bit more back-end loaded than usual, based on the anticipated recovery in biotech and biopharma. Consequently, we do expect soft growth and operating margins in the first half of the year, particularly in the first quarter, with improvements in the second half kind of in line with the market recovery and revenue normalization. So with all that as a kind of a preamble.
Speaker Change: However, we remain.
Speaker Change: As we remain focused on improving our cost structure, we are well positioned for operating margin leverage it and and as revenue growth returns.
Speaker Change: Again, I think you know 'twenty 'twenty four is is.
Certainly very different to a normal year.
Speaker Change: This year revenue is expected to be a bit more backend loaded than usual based on the anticipated recovery in biotech and Biopharma. Consequently, we do expect soft gross margin gross and operating margins in the first half of the year, particularly in the first quarter we.
Speaker Change: Improvements in the second half kind of in line with the market recovery and and a revenue normalization.
Speaker Change: So with all that as a kind of a preamble here's how we see the year rolling out.
Norman D. Schwartz: Here's how we see the year rolling out. We're guiding currency-neutral revenue growth in 2024 to be between one and two and a half percent overall. For the Life Science Group, year-over-year currency-neutral revenue growth is expected to be between zero and two percent. And for the Diagnostics Group, we estimate currency-neutral revenue growth to be between two and a half and three percent. With the backdrop of working through elevated backwaters in the last year, we realized a little over 1% price improvement at the corporate level, which was below inflationary trends at our overall cost.
Speaker Change: We are guiding a currency neutral revenue growth in 2024 to be between one.
Speaker Change: One and 2.5% overall, the life Science group year over year currency neutral revenue growth is expected to be between zero and 2% and for the diagnostics group, we estimate currency neutral revenue growth to be between two and a half and 3%.
Speaker Change: <unk>.
Speaker Change: With a backdrop of working to elevated back orders in the last year, we realized a little over 1% from price improvement at the corporate level.
Speaker Change: Which was below inflationary trends to our overall cost.
Norman D. Schwartz: We are targeting to achieve a similar level of price realization this year, mainly through the life science group. We'd also like to call out the sale of a non-core contract manufacturing business in December that was part of a prior acquisition. This business is reported under other operations, and it contributed revenue of $3 to $4 million annually but had really an immaterial impact on our overall financial results. Foot-ear non-gap gross margin is projected to be between 54 and 54.5 percent with study improvement anticipated throughout the year. Gross margin for the first half of the year is expected to be below the full year range, with the second half anticipated gross margin recovery driven by improved sales volume. Full year non-GAAP operating margin is projected to be between 13.5 and 14 percent.
Speaker Change: We are targeting to achieve a similar level of price realization this year.
Speaker Change: Mainly through the life Science group.
Speaker Change: We'd also like to call out the sale of a non core contract manufacturing business in December that was part of a prior acquisition. This business. It is.
Speaker Change: Reported under other operations contributed revenue of $3 million to $4 million annually, but had really a material an immaterial impact on our overall financial results.
Speaker Change: Full year non-GAAP gross margin is protected to be projected to be between 54, and 54, 5% with steady improvement anticipated throughout the year.
Speaker Change: Gross margin for the first half of the year is expected to be below the full year range with the second half anticipated gross margin recovery driven by improved sales volume.
Speaker Change: Full year non-GAAP operating margin is projected to be between $13 five and 14%.
Norman D. Schwartz: We estimate the non-GAAP full-year tax rate to be between 22 and 23 percent, and CapEx is projected to be approximately $160 to $180 million as we continue to invest in our infrastructure to support our multi-year growth strategy. And finally, full year, non-GAAP, EBITDA excluding, the Sartorius dividend is expected to be between 18.5% and 19%.
Speaker Change: We estimate the non-GAAP full year tax rate to be between 22, and 23% and Capex is projected to be approximately $160 million to $180 million as we continue to invest in our infrastructure to support our multi year growth strategy.
Speaker Change: And finally full year non-GAAP EBITDA excluding.
Speaker Change: The sartorius dividend is expected to be between 18, and a half and 19% and when we include the recently announced reduced sartorius dividend. The adjusted EBITDA is expected to be between 19% and 19, 5%.
Norman D. Schwartz: And when we include the recently announced reduced Sartorius dividend, the adjusted EBITDA is expected to be between 19% and 19.5%. So in concluding today's prepared remarks, just a few comments on Bio Rad's ongoing corporate transformation and key accomplishments, maybe a little bit as a baseline for 2024. I would say, in spite of all the macro variables, you know, we feel we have a good, realistic outlook for 2024. You know, we're clear of the pandemic. We've resolved our supply chain constraints. We successfully transitioned key diagnostics platforms to our Singapore manufacturing facility. We completed our global SAP implementation.
Speaker Change: So in concluding today's prepared remarks.
Speaker Change: Just a few comments about on pirate's ongoing corporate transformation.
Speaker Change: And key accomplishments it maybe a little bit as a baseline for 2020 for I would say in spite of all the macro variables. We feel we have a good realistic outlook for 2024.
Speaker Change: We are clear of the pandemic, we've resolved our supply chain constraints, we successfully transitioned key diagnostics platforms to our Singapore manufacturing facility, we completed our global SAP implementation and I think most important we continue to make progress on our journey of transformation.
Norman D. Schwartz: And, I think most importantly, we continue to make progress on our journey of transformation. In addition, as Andy mentioned, we have a number of exciting products in our pipeline to help us drive 2024 as we look forward to our life science markets recovering later in the year. Certainly, looking back over the last four years, I think it's important to note that our underlying business has grown at a currency-neutral compound rate of 4.6%, including, I might mention, life science, which has grown at over 8%. Overall, I think we feel good that we're making solid progress, and I do think we have a lot to look forward to. That concludes our prepared remarks, and we will now open the line to take your questions, Operator. Yes, thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on your touchtone phone.
Speaker Change: In addition, as Andy mentioned, we have a number of exciting products in our pipeline pipeline to help us drive 'twenty 'twenty four as we look forward to our life science markets recovering later in the year.
Speaker Change: Certainly looking back over the last four years I think it's important to note that our underlying business has grown.
Speaker Change: At a currency neutral compound rate of four 6%.
Speaker Change: Including I might mentioned life science, which has grown at over 8% overall I think we feel good that we're making solid progress and I I do think we have a lot to look forward to.
Speaker Change: Yeah.
Speaker Change: That concludes our prepared remarks, and we will now open the lines to take your questions operator.
Speaker Change: Yeah.
Speaker Change: Yes. Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one you touched on Pony.
Operator: You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the. If you are using a speakerphone, please flip the handset before pressing any key.
Speaker Change: We'll hear with telecom technology, and Youll request questions will be taken in the order received should you wish to cancel your request. Please press the star followed later too.
Speaker Change: Using a speaker please lift the handset before pressing any case once again that is star one should you wish to ask a question.
Patrick Donnelly: Once again, that is star number one should you wish to ask a question. Your first question is from Patrick Donnelly from Citi. Please ask your question. Great, thanks for taking the questions, guys. Norman, I guess this will be for you on the margins. Just in terms of the ramp throughout the year, can you just talk about the moving pieces? It sounds like, you know, the incentive comp is obviously going to hit pretty hard here in the first half. Or is it a bit of a Singapore ramp picking up steam in the second half? Is it volume leverage or something else?
Speaker Change: Your first question is from Patrick Donnelly from Citi. Please ask your question.
Patrick Donnelly: Great. Thanks for taking the questions guys.
Patrick Donnelly: Norman I guess this would be for you on the margins.
Patrick Donnelly: Just in terms of the ramp throughout the year can you just talk about the moving pieces it sounds like.
Speaker Change: The incentive comp is obviously got hit pretty hard here in the first half.
Norman D. Schwartz: Is it a bit of a Singapore ramp picking up steam in the second half is it volume leverage maybe just talk about the cadence and the ramp of that margin story throughout the year here and just kind of how we should think about the base.
Norman D. Schwartz: Maybe just talk about the cadence and the ramp and that margin story throughout the year here and just kind of how we should think about the base. Yeah, I think it really has the most to do with the sales volume. You know, we get a lot of leverage from sales, and I think we should see the margins ramp with sales. Okay, understood. And then just on the CFO search, maybe can you provide an update of where we stand, you know, timing when that could happen? I've got a few questions, so just a little bit of an update there would be helpful.
Speaker Change: Yeah, I think it's I think it really has has a it has the most to do with the with the sales volumes.
Speaker Change: You know, we get a lot of leverage from a from the sales and and and I think we should see that the margins ramp with sales.
Speaker Change: Okay understood.
Speaker Change: And then just on the CFO search.
Speaker Change: Maybe can you provide an update of where we stand timing when that could happen.
Speaker Change: <unk> got a few questions on I'm, just a little bit of an update there would be helpful.
Norman D. Schwartz: Yeah, we're really making good progress. And candidly, we're hoping to have a new CFO on board by the next earnings call. Okay, all right, so the next few months. And then maybe one last one just in terms of the outlook for China, you know, just how you guys are thinking about that region, both in life science and diagnostics. I know it's two, maybe two good, two different stories there.
Speaker Change: Yeah, we're really making good progress.
Speaker Change: And.
Speaker Change: Candidly, we're hoping to have a new CFO on board by the next earnings call.
Speaker Change: Okay, Alright next few months.
Speaker Change: And then maybe one last one just in terms of.
Speaker Change: The outlook on on China, just how you guys are thinking about.
Speaker Change: That region, both in the life science and diagnostics.
Speaker Change: Two maybe two two different stories there.
Norman D. Schwartz: So yeah, just kind of let us know what you're seeing there currently in each segment and the expectations for 24 would be helpful. Yeah, yeah, I'd say, you know, near term, it's, it seems to be a kind of a tough market. You know, not many signs of immediate recovery.
Speaker Change: So yeah, just just kind of let us know what you're seeing there currently in each segment and the expectations for 'twenty four it would be helpful.
Speaker Change: Yeah, Yeah, I think you know near term you know, it's a it seems to be a kind of a tough market.
Speaker Change: Yeah.
Speaker Change: Not many signs of immediate recovery.
Norman D. Schwartz: And a little bit of uncertainty, I think, as to when we will see that. I think that, you know, the good old days of double-digit growth in China are gone. I don't see that in the foreseeable future. You know, for a life science business... You know, I think we've seen the combined impact of, you know, the combined impact of, you know, the in China for China, anti-corruption and, and, and, in general, a kind of tough funding environment affecting business.
Speaker Change: And get a little bit of uncertainty I think this to win when we will see that.
Speaker Change: Think that you know the good old days of double digit growth in China our.
Speaker Change: Our I don't see that in the foreseeable future.
Speaker Change: You know for our life science business.
Speaker Change: You know I think we've seen the.
Speaker Change: The impact of of a combined impact of you know that.
Speaker Change: Yeah.
Speaker Change: In China for China, anti corruption, and and and in general a kind of a tough funding environment affecting the business.
Norman D. Schwartz: For diagnostics, I think we're continuing to see steady growth, but we do also continue to kind of carefully monitor the situation with these value-based pricing tenders, wondering if that may spread to some of our platforms or some of our more specialty products from the kind of higher volume products that have seen that in the short term. Thank you, guys. Thank you. Your next question is from... Jack Meehan from Leffron Research. Please ask a question. Thank you. Good afternoon,
Speaker Change: For diagnostics I think they were continuing to see steady growth.
Speaker Change: But we do continue to also continue to carefully monitor the situation with these these value based pricing tenders are.
Speaker Change: Wondering if that may spread to some of our our platforms or some of our more specialty products from the from.
Speaker Change: From the higher volume products that are that have seen that in the short term.
Speaker Change: Understood. Thank you guys.
Thank you. Your next question is from.
Jack Meehan from Nephron research. Please ask your question.
Jack Meehan: Thank you good afternoon.
Jack Meehan: First question I wanted to ask about the life sciences business. Can you talk about, you know, so in the script you talked about how the PCR and DD-PCR businesses kind of saw some backlog burn down. Could you talk about, like, how long you expect this to persist in 2024 and when you expect that might start to turn the corner? Yeah, this is Simon.
Jack Meehan: First question I wanted to ask about the life Sciences business can you talk about in the script you talked about how the PCR and DD PCR businesses kind of saw some backlog burn down could you talk about like how long you expect this to persist in 2024 and win.
Jack Meehan: That might start to turn the corner.
Jack Meehan: Yes.
Jack Meehan: Yeah. This is Simon I think would really largely through the baht log burned down compares as we head into 'twenty four I think the short answer is the slight is pretty clean now we've obviously got a partnership with the macro conditions in parts of the business.
Simon May: I think we're really largely through the backlog burndown compares as we head into 24. I think the short answer is that the slate's pretty clean. We've obviously got a bunch of other macro conditions impacting the business, as we referred to in the script and the H1 versus H2 contrast, but as we're sitting here today, we don't see backlog burn down as an issue. The call out, sorry just to add on Simon, the call out was against the 22 Q4 compares where life science and from back to back, Got it, OK, and then was curious how process Chrome I know you talked about starting the year with a lower backlog there, but were there some larger than expected shipments in the quarter? It's Simon again.
Jack Meehan: We referred to in the script.
Jack Meehan: H one.
Jack Meehan: As I used to contrast, but as we're sitting here today, we don't see bought locked down as an issue going forward.
Speaker Change: That's a cool out sorry, just to add on some of the call out was against the 22 Q4 compares with life Science had a meaningful contribution from bye bye for now.
Speaker Change: Got it okay.
Speaker Change: And then I was curious how process chrome played out in the quarter versus your expectations. I know you talked about starting the year with lower backlog there were there some larger than expected shipments in the quarter.
Speaker Change: Simon again, I think at a macro level, we saw the conditions that we've been talking about all year with Destocking continue to persist and again.
Simon May: I think at a macro level, we saw the conditions that we've been talking about all year with de-stocking continue to persist, and again, as I think Andy called out in the script, as we enter Q1, our order book remains softer than we've seen it in previous years. I guess the follow-on question there is about whether we are seeing any green shoots, and there's certainly a lot of tentatively encouraging data starting to emerge as we look at our customer base. I think we're seeing that a number of our customers we're really anticipating are going to be through the de-stocking impacts in 2024, and we'll see something like a return to normality, but at the same time, we've got some larger customers who all the indications are they're not going to be through it, and so I think that's going to net out to be tentatively that we'll see some recovery in Right, OK. And then the last one.
Speaker Change: Thank Andy called out in the script, but as we enter Q1, our order book remains softer than we've seen in previous years I guess the follow on question there Isabelle always seeing any green shoots so there's certainly a lot of sense it simply being.
Speaker Change: Encouraging data starting so we moved just when you look at our customer base.
Speaker Change: We're seeing a number of our customers, we're really anticipating a going to be through the destocking impact seen in 2024, and we will see something like a return to normality, but at the same time, we go some logic customers, who all the indications are theyre not.
Speaker Change: And so I think that's gonna nets out to be tentatively we will see some recovery in the second half.
Speaker Change: Still a fair amount of uncertainty around it.
Speaker Change: Great Okay.
Speaker Change: And then last one.
Simon May: Just was curious for any color on kind of below the line items within the guide for this year. Just anything you would call out there. I think Sartorius announced their dividend for the year. Any color on that would be helpful. Yeah, they did, they did cut the dividend. We break that into our guidance. And it's understandable given that, given the kind of cash constraints that they have.
Speaker Change: Just was curious for any color on kind of below the line items within the guide for this year.
Just anything you would call out there I think sertorius announced their dividend for the year just.
Speaker Change: Any color on that would be helpful.
Speaker Change: Yeah. They are they did they did cut the dividend, we baked that into our guidance.
Speaker Change:
Speaker Change: And it's it's it's understandable given.
Speaker Change: Given the kind.
Speaker Change: It kind of cash constraints that they have.
Norman D. Schwartz: Mm-hmm. Okay, thank you. Thank you. Your next question is from Dan Leonard from UBS. Please ask your question.
Speaker Change: Mhm.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Thank you. Your next question is from Jon <unk> from UBS. Please ask your question.
Dan Leonard: Thank you very much. I had another question about the phasing for 2024. You mentioned that the year will be more back-end loaded. Could you elaborate on that? How much more back-end loaded than typical? Yeah, it's a really good question.
Jon: Thank you very much.
Jon: I had another question about phasing for 2024, you mentioned that the year will be more back end loaded could you elaborate on that how much more backend loaded than typical.
Jon: Yeah, I'd say, it's a really good question.
Norman D. Schwartz: You know, normally it's something like, you know, kind of more like 49-51 when we think of a normal year, and I think we're going to see a much wider spread than that. I think it's anybody's guess exactly what it's going to be, but I think we'll see kind of a bigger delta between the first half and the second half. Much wider than the two-point spread, typically.
Jon: Normally it's it's something like a.
Jon: You know kind of more like 49 51, so when we think of a normal year and I think we're going to see a much Uh huh.
Jon: Wider spread than that.
Jon: For 2024, I think it's anybody's guess exactly what it's going to be but.
Jon: But I think we'll see a kind of a bigger delta between the first half in the second half.
Jon: Much wider than the two point spread typically.
Norman D. Schwartz: Yes, Yes. I think it's more closer to a four or five-point spread between the first and second half there.
Yes, I think more closer towards four five points spread.
Jon: Between the first and second half then.
Jon: Yeah.
Norman D. Schwartz: Appreciate that. And can you share what your growth assumptions are for process chromatography and droplet digital PCR and comment on whether a couple of these new product launches you talked about, the continuum and the DDC, whether they'll be launched in time to contribute to the year? Yes, Simon, again, I think for process chromatography, as I mentioned previously, we've got these competing forces of accounts that are destocked and accounts that are still destocking, and I think the net of that is going to be negative because the accounts that are destocking are our larger accounts. I think there's still some ongoing uncertainty around that, as we keep saying, but the best read of the tea leaves that we've got right now is as
Speaker Change: I appreciate that.
Speaker Change: And can you share what are your growth assumptions for process chromatography.
Speaker Change: With digital PCR and comment on whether a couple of these new product launches you talked about the continuum and the D. D C.
Speaker Change: Whether there'll be launched in time to contribute to the year.
Speaker Change: Yes, Simon again, I think the process chromatography as I mentioned previously we've got these competing forces of accounts started stopped in accounts that are still destocking.
Speaker Change: The nuts that is.
Speaker Change: It's going to be negative because of the accounts that all destocking all our larger accounts.
Speaker Change: I think there's still some ongoing uncertainty around but as we keep saying the best rated the leaves that we've got right now.
Simon May: For digital PCR, we had a challenging Q4 for reasons that have been mentioned, and that in the end made it a challenging year as well. As we look to 2024, I think we're certainly seeing nice growth potential in digital PCR. Again, that's predicated to some degree on the recovery of the biopharmaceutical markets, where we've been hit. We've got a very strong existing position there, and we also have some good new product launches coming out. So the way I think about it, it's the biopharmaceutical market recovery and it's new product introductions. They're both when, not if, events.
Speaker Change: As mentioned for <unk>.
Speaker Change: Digital Pcr.
Speaker Change: Challenging Q4 for reasons not to be mentioned in that India has made it a challenging year as well as we look to 'twenty 'twenty four I think we're certainly seeing nice growth potential and digital PCR again, that's predicated to some degree on recovery of the Biopharma markets, where we've been here.
Speaker Change: We've got a very strong existing positions.
Speaker Change: And also we've got some good new product launches coming out so the way I think about it its bio pharma market recovery on its new products introductions that both when not if events I'm. So for the full year I think we're looking at growth in digital Pcr.
Simon May: And so for the full year, I think we're looking at growth in digital... That's helpful. Thank you. Thank you. Your next question is from Honor McNamara from RBC Capital Markets. Please ask your question. Hey guys, thanks for taking the questions. Just on DDPCR, can you talk about the growth in the quarter or the negative growth on equipment versus consumables? Obviously, you had a tough comp on equipment placements last year, but was there any consumable growth, and how should we think about the kind of the... The consumable is a percentage of total DDEPCR from here, and where does it go? Yeah, I think the short answer there is, again, primarily driven by biopharma headwinds. We saw challenges in both instruments and consumables, I'd say, with approximately equal weighting.
Speaker Change: That's helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: Your next question is from.
Speaker Change: Mcnamara from RBC capital markets. Please ask your question.
Mcnamara: Hey, guys. Thanks for taking the questions just on DD PCR can you talk about the growth in the quarter or negative growth on equipment versus consumables. Obviously, you had a tough comp on equipment placements last year, but is there is there was there any consumable growth and how should we think about kind of the.
Mcnamara: The consumable as a percentage of total DD PCR from here and where does that go.
Speaker Change: Yes, I think the show understood. There is again, primarily driven by Biopharma headwinds, we saw challenges in both instruments and consumables I'd say with approximately equal weighting I think we've got a healthy mix now overall.
Simon May: I think we've got a healthy mix now overall in terms of consumables and instruments, and again, as the markets recover, we think we're going to be the beneficiaries of that. Okay, great. And then on, you know, on capital deployment, obviously, you've still got some room for buybacks. But is buybacks still the priority? Or is there, you know, anything on M&A that you've seen opportunities open up? Or should we just think primarily about buybacks for 2024? Yeah, we certainly, as we mentioned, we've got several hundred million dollars authorized by the board, and we'll continue to be optimistic about share repurchases. But, you know, we still have a focus to kind of continue to look for good complementary business opportunities, tuck-ins, things that are complementary to the business. There's probably no change in our thinking around acquisitions, so it's kind of a two-pronged approach. Could be buybacks, or could be some tuck-in acquisitions.
Speaker Change: Consumables and instruments and again as the markets recover we think we're going to be the beneficiaries of that.
Speaker Change: Okay, Great and then on.
Speaker Change: On capital deployment, obviously, you've still got.
Speaker Change: Some room on buybacks as buybacks.
Speaker Change: Buyback still the priority or is or is there anything on M&A that you've seen.
Speaker Change: Opportunities open up or should we just think primarily about.
Speaker Change: Buybacks for 2024.
Speaker Change: Yeah, we certainly.
Speaker Change: As we mentioned we've got still several hundred million dollars authorized by the board and.
Speaker Change: And we will continue to be optimistic optimistic with share repurchases, but but are you know we still have a focus to kind of continue to look for kind of good a complementary business opportunities to tuck ins.
Speaker Change: Things that are complementary to the business.
Speaker Change:
Speaker Change: Probably no change in thinking around acquisitions. So it's a it's kind of a two pronged approach could be buybacks could be could be some tuck in acquisitions.
Norman D. Schwartz: All right, thanks for that, guys. Thank you. There are no further questions at this time. I will now hand the call back to Edward Chong for the closing remarks. Thank you for joining today's call. We will be at the City Unplugged Life Science Access Day in New York at the end of February and hope to see some of you there.
Speaker Change: Alright, thanks for that guys a combination of both.
Thank you.
Speaker Change: There are no further questions at this time I will now hand, the call back to Edward Chang credit closing remarks.
Edward Chang: Thank you for joining today's call we will be at the Citi Unplug Life Science access day in New York at the end of February and hope to see some of you there.
Edward Jones: As always, we appreciate your interest, and we look forward to connecting soon. Bye-bye. Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining me. You may now disconnect. Thank you. Thank you.
Edward Chang: As always we appreciate your interest and we look forward to connecting soon bye bye.
Edward Chang: Yeah.
Speaker Change: Thank you ladies and gentlemen, the conference has now ended thank you all for joining you may all disconnect.
Speaker Change: Yeah.