Bio-Rad Laboratories (NYSE:BIO) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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The full earnings call is available at https://events.q4inc.com/attendee/969966609
Summary
Bio-Rad Laboratories reported a 1.1% increase in net sales for Q1 2026, but a 4.2% decrease on a currency-neutral basis, with significant headwinds from geopolitical conflicts in the Middle East impacting revenues.
The company is focusing on accelerating innovation and improving operational efficiencies, with a strategic emphasis on its digital PCR product line which saw a 24% revenue growth in instruments.
Bio-Rad Laboratories adjusted its 2026 guidance to a range of -3% to +0.5% currency-neutral revenue growth, citing challenges from the Middle East conflict and continued issues in the academic funding environment.
Operational highlights include manufacturing select life science instruments in China to meet local demand and reduce tariff exposure, and the successful integration of the QX700 platform in their digital PCR lineup.
Despite current challenges, management remains committed to achieving mid-teens operating margins in the near term, with a focus on disciplined M&A and operational agility to drive long-term growth.
Full Transcript
Regina (Operator)
Ladies and gentlemen, thank you for standing by. My name is Regina and I will be your conference operator today. At this time I would like to welcome everyone to Bio-Rad Laboratories’ first quarter 2026 results, conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. I would now like to turn the conference over to Ruben Argeta, Bio Rad’s Head of Investor Relations. You may begin.
Ruben Argeta
Thank you, Regina. Good afternoon everyone and thank you for joining us. My name is Ruben Argeta, Bio Rad’s new head of Investor Relations. It’s a pleasure to join the team and be with you here today. We will review the financial results for the first quarter ended March 31, 2026 and provide an update on key business trends for Bio-Rad. With me on the call today are Norman Schwartz, our Chief executive officer, John DiVincenzo, president and chief Operating Officer and Roop Lakaraju, Executive Vice President and Chief Financial Officer. Before we begin our review, I would like to remind 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. 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 generally under Generally Accepted Accounting Principles. In addition to excluding certain atypical and non recurring items or non GAAP financial measures, exclude changes in the equity value of our stake in Sartorius AG. In order to provide investors with a better understanding of Bio Rad’s underlying operational performance, investors should review the reconciliation of these non GAAP measures to the comparable GAAP results contained in our earnings release. We have also posted a supplemental earnings presentation in the Investor Relations section of our website for your reference. With that, I will now turn the call over to our Chief operating officer, John DiVincenzo.
John DiVincenzo (President and Chief Operating Officer)
Thanks Ruben and welcome to the team. Good to have you here and good afternoon everyone. Thank you for joining us. In the first quarter, our teams executed within a dynamic operating environment. We reported Q1 results within our revenue guidance as we navigated several external pressures, most notably associated with the ongoing conflict. The Middle east this region has been one of Bio-Rad’s fastest growing markets for several years. We haven’t highlighted this in the past, but in 2025 the region represented over 9% of our diagnostics segment, primarily driven by our blood typing franchise. The conflict substantially reduced our first quarter 2026 revenues and depending upon the timing of resolution, will be a significant headwind for revenue and margin for full year 2026. Despite the macro headwinds, our teams remain focused on executing our strategic initiatives, accelerating innovation and driving further efficiencies across the organization to increase competitiveness. In life science, reported net sales were flat reflecting mix and market conditions. Academic demand remained constrained, particularly in the Americas where our customers budgets have been significantly impacted by changes in funding. While NIH funding increased modestly year over year, our Voice of Customer Pulse surveys indicate that behind the scenes there continues to be considerable disruption and we continue to see a lag between funding approvals and purchasing activity. In biopharma we are seeing early signs of stabilization. Early stage biotech remains cautious, however activity among later stage companies is more robust. We expect gradual improvement through the year. On the commercial side, ensuring we capture our fair share of demand in a constrained market requires our sales organization to work differently. We have sharpened the focus of our commercial teams on segment level prioritization, directing coverage towards customers with active funding, accelerating conversions from our existing installed base and competing aggressively where competitive displacement opportunities exist. Our digital PCR product area continues to be a strategic differentiator in the quarter. DDPCR instrument revenue grew 24% over prior year. This is an encouraging leading indicator since new customers typically drive consumable pull through within six to 12 months of purchase and installation. The new QX700 platform is driving both competitive wins and conversion from QPCR, supported by an extensive assay menu and expanding publication base and ahead of schedule, the team now has enabled over 99% of our digital PCR assays to be available on the new QX700 series which is driving instrument growth. Looking ahead, we continue to expect a measured recovery in life science led by Biopharma. In clinical diagnostics we delivered modest reported growth of just under 2%. As I mentioned earlier, performance in the quarter was impacted by geopolitical disruption in the Middle east which affected both demand and logistics. While this creates near term challenges, we expect eventual market normalization once the conflict is resolved. Outside of this region, the segment performed as planned, in particular demand for our quality systems and immunohematology franchises shows signs of strength from a margin standpoint. Diagnostics was adversely affected by a disproportionate share of supply chain cost pressures. In light of these continuing supply chain challenges, we understand the need to rationalize manufacturing capacity and network. We are also addressing these challenges through focused actions in procurement and manufacturing. Turning to our operational priorities, we are executing against a clear agenda focused on improving agility, resiliency and efficiency across the company. In our effort to become more agile, we are increasing flexibility in our manufacturing footprint. During the quarter we began manufacture of select life science instruments in China for China, improving responsiveness to local market demand and allowing us to compete in tenders while minimizing tariff exposure. This initiative is indicative of how we are using efficient capital deployment to build operational capabilities for long term business continuity. In R and D, we have re engineered our innovation engine to deliver improved return on investment. Following our portfolio prioritization decisions, we are concentrating investment in areas with the strongest commercial potential. As I mentioned earlier, one example of this prioritization is the fact that 99% of our digital assays are now supported on the new QX700 platform, again ahead of plan. As we prioritize our projects, our focus areas are expanding into high growth clinical applications, leveraging our ddPCR technology, advancing our digital PCR portfolio including our next gen system and oncology assays, and embedding AI capabilities to accelerate development and enhance platform performance. While it is early, this focus allows us to deliver more consistent, higher quality growth over time. So in closing we are executing with discipline in a challenging environment. We are making progress on the operational actions within our control, improving supply chain capability, strengthening execution and focusing investment where it matters most. We remain confident that these actions will translate into improved financial performance over time and with that I’ll turn the call over to Roop.
Roop Lakaraju (Executive Vice President and Chief Financial Officer)
Thank you John and good afternoon. I’d like to start with a review of the first quarter 2026 results. Net sales for the first quarter of 2026 were approximately 592 million, which represents a 1.1% increase on a reported basis versus 585 million in Q1 of 2025 on a currency neutral basis. This represents a 4.2% year over year decrease and was driven by lower sales in both life science and clinical diagnostics segments. Sales of the life science segment in the first quarter of 2026 were 229 million, essentially flat compared to Q1 of 2025 on a reported basis and a 4.3% decrease on currency neutral basis, primarily driven by ongoing challenges in the academic research market, particularly in the Americas. Currency neutral sales decreased in the Americas and EMEA partially offset by increased sales in Asia Pacific. Our DDPCR portfolio was essentially flat in Q1 due to softer biopharma consumables as customers shift their R and D priorities despite the instrument growth. The year over year instrument growth that John noted we believe is a strong indicator of our market share gains especially considering the current market conditions. Finally, the STILA acquisition is on track to be accretive by mid year. More importantly, the QX700 is contributing to both revenue growth and margin expansion. Life Science X Process chromatography revenue increased 1% year over year and decreased 3.1% on a currency neutral basis. Consumables revenue in academic and biopharma research was down 3.9% reflecting the challenging academic research funding environment. Our process chromatography business as expected experienced a year over year currency neutral decline of 13%. Sales of the Clinical Diagnostic segment in the first quarter of 2026 were approximately 364 million compared to 357 million in Q1 of 2025, an increase of 1.9% on a reported basis and a decrease of 4.1% on a currency neutral basis primarily driven by revenue declines from our EMEA region as a result of the regional conflicts in the Middle East. The regional conflict affected demand and execution of logistics for our diagnostics products resulting in an $11 million impact to the business in the quarter as a result of the ongoing challenges within the Middle east. This will have a continued effect on our business for the remainder of 2026. Consolidated gross margin was 52.3% for both the first quarter of 2026 and 2025 on a non GAAP basis. First quarter gross margin was 53.1% versus 53.8% in the year ago period. The lower Q1 gross margin was due to several factors including unfavorable manufacturing absorption as a result of the decreased Middle east revenue which contributed to margin pressure by 40 basis points. Higher instruments versus consumables mix which adversely affected margin by 30 basis points, higher freight fuel surcharges by 20 basis points and FX by 20 basis points. SG&A expense for the first quarter of 2026 was 212 million or 35.9% of sales compared to 209 million or 35.7% in Q1 of 2025. First quarter non GAAP SGA spend was 211 million versus 192 million in the year ago period increase in SGA expense was primarily due to foreign exchange impact resulting from a weaker US dollar on our international cost base partially offset by lower restructuring costs. Research and development expense in the first quarter of 2026 was 63 million or 10.6% of sales compared to 74 million or 12.6% of sales in Q1 of 2025. First quarter Non GAAP R&D spend was 65 million versus 60 million in the year ago period. Q1 operating income was approximately 34 million compared to …
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