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01/10 19:00
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: while there is optimism in product development and partnerships, financial metrics show declining cash flow and net loss. The guidance is cautious, with some positive outlooks, but uncertainties in key markets like China and the Americas persist. The Q&A reveals optimism in certain areas, but management's vague responses on growth and market challenges add uncertainty, balancing positive developments. Overall, the sentiment remains neutral as positive and negative factors offset each other.
Net Sales Net sales for Q3 2025 were approximately $653 million, a 0.5% increase on a reported basis compared to $650 million in Q3 2024. On a currency-neutral basis, this represents a 1.7% year-over-year decrease, driven by both the Life Science and Clinical Diagnostics segments.
Life Science Segment Sales Sales were $262 million in Q3 2025 compared to $261 million in Q3 2024, essentially flat on a reported basis and a 1.5% decrease on a currency-neutral basis. The decline was driven by constrained academic research and biotech funding environments.
Process Chromatography Business Experienced strong double-digit growth year-over-year in Q3 2025 due to the timing of customer orders. However, core Life Science segment revenue decreased 6% year-over-year and 7.8% on a currency-neutral basis, reflecting ongoing softness in academic research and biotech end markets and tough comparisons due to large one-time orders in the prior year.
Clinical Diagnostics Segment Sales Sales were approximately $391 million in Q3 2025 compared to $389 million in Q3 2024, a 0.6% increase on a reported basis and a 1.8% decrease on a currency-neutral basis. The decrease was primarily due to lower reimbursement rates for diabetes testing in China.
Gross Margin Reported GAAP gross margin for Q3 2025 was 52.6%, compared to 54.8% in Q3 2024. Non-GAAP gross margin was 53.5% versus 55.6% in the prior year. The decrease was due to higher material costs and reduced fixed manufacturing absorption.
SG&A Expense SG&A expense for Q3 2025 was $207 million (31.7% of sales) compared to $200 million (30.8% of sales) in Q3 2024. Non-GAAP SG&A spend was $202 million versus $197 million in the prior year. The increase was due to higher employee-related costs.
R&D Expense R&D expense for Q3 2025 was $71 million (10.9% of sales) compared to $91 million (14% of sales) in Q3 2024. Non-GAAP R&D spend was $70 million versus $91 million in the prior year. The decrease was primarily due to higher in-process R&D charges associated with an acquisition in Q3 2024.
Operating Income Operating income for Q3 2025 was approximately $65 million (10% of sales), flat versus Q3 2024 on both a dollar and percentage basis. Non-GAAP operating margin was 11.8% compared to 11.3% in Q3 2024, reflecting proactive cost actions and net reductions in IP R&D expense.
Net Income Reported net loss for Q3 2025 was $342 million or $12.70 per diluted share, primarily due to a $398 million loss from the change in fair market value of equity security holdings. Non-GAAP net income was $61 million or $2.26 per diluted share, compared to $56 million or $2.02 per diluted share in Q3 2024.
Cash Flow Net cash generated from operating activities in Q3 2025 was $121 million compared to $164 million in Q3 2024. Free cash flow for Q3 2025 was $89 million, compared to $123 million in Q3 2024. The decrease was due to lower operating cash flow and higher capital expenditures.
Droplet Digital PCR (ddPCR) strategy: Completed global sales training on new QX platforms; positive customer receptivity, especially in the entry-level segment; sales funnel building despite extended selling cycles.
ddPCR-based diagnostic strategy: Expanded through partnerships with Gencurix and Biodesix. Gencurix partnership makes Bio-Rad the exclusive distributor of Droplex oncology testing kits in Europe. Biodesix partnership expands access to biomarker testing for advanced breast cancer.
Process Chromatography: Strong double-digit growth year-over-year due to timing of customer orders; expected high teens growth for 2025.
Geographic Sales Performance: Currency-neutral sales decreased in the Americas but increased in Asia Pacific and EMEA for Life Science segment. Clinical Diagnostics saw decreased sales in Asia Pacific but increased in the Americas and EMEA.
Cost Management: Disciplined cost management and tight control of discretionary spending led to margin outperformance.
Lean Initiatives: Operational teams advanced lean initiatives and maintained cost discipline.
Share Buyback Program: Purchased 212,578 shares for $53 million in Q3 2025; year-to-date buybacks total $296 million with $285 million remaining for future buybacks.
Guidance for 2025: Maintained full-year outlook with flat to 1% currency-neutral revenue growth; gross margin expected at 53.5%-54.5% and operating margin at 12%-13%.
Reimbursement rate headwind in China: Lower reimbursement rates for diabetes testing in China have negatively impacted sales in the Clinical Diagnostics segment. This challenge is expected to annualize in the fourth quarter, but the soft macro environment in China could continue to dampen demand for clinical diagnostics products.
Softness in academic research and biotech funding: Ongoing uncertainty and cautious budgeting among research customers have led to weak instrument demand and softness in consumables. This has negatively impacted the Life Science segment, with constrained academic research and biotech funding environments being key contributors.
Process chromatography revenue volatility: While process chromatography experienced strong growth in Q3, revenue is expected to decline sequentially and year-over-year in Q4 due to the timing of customer orders. This volatility poses a challenge to consistent revenue generation.
Higher material costs and reduced fixed manufacturing absorption: These factors have contributed to a decrease in gross margins, impacting overall profitability.
Extended selling cycles for new products: The broader funding climate has led to extended selling cycles for new systems, such as the QX platforms in the Droplet Digital PCR strategy, potentially delaying revenue realization.
Soft macro environment in China: Beyond reimbursement challenges, the overall soft macroeconomic conditions in China could further dampen demand for products in the Clinical Diagnostics segment.
Uncertainty surrounding NIH budget and U.S. government shutdown: Research customers remain cautious with spending due to uncertainties surrounding the final NIH budget and the potential U.S. government shutdown, which could delay recovery in the academic segment.
Life Science Segment Revenue: Modest revenue improvement anticipated in the fourth quarter of 2025. No expected budget flush as research customers remain cautious due to uncertainties surrounding the final NIH budget and U.S. government shutdown. Recovery for the academic segment is expected to take time, with a cautious outlook heading into 2026. Gradual improvement anticipated with biotech customers.
Diagnostics Segment Revenue: Expected to return to growth in the fourth quarter of 2025 as the China reimbursement headwind annualizes and revenue from the quality controls portfolio is realized. No additional reimbursement challenges in China are anticipated for 2026, but a soft macro environment in the region could dampen demand for clinical Diagnostics products.
Process Chromatography Business: Fourth quarter revenue expected to be lower sequentially and year-over-year due to timing of customer orders. Full year 2025 growth outlook revised to high teens from prior low double-digit growth outlook.
Margins: Slight step-up in fourth quarter gross margin anticipated, driven by revenue mix. Sequential improvement in operating margins expected by at least 80 basis points in Q4 2025. Full year 2025 non-GAAP gross margin outlook remains at 53.5% to 54.5%, and operating margin outlook remains at 12% to 13%.
Free Cash Flow: Full year 2025 free cash flow expected to be approximately $310 million to $330 million.
Share Buyback Program: During the third quarter, we purchased 212,578 shares of our stock for a total cost of $53 million or an average purchase price of approximately $249 per share. Year-to-date, we have retired 1.2 million shares through our buyback program, at a total cost of approximately $296 million. We will continue to be opportunistic with share repurchases and still have approximately $285 million available for additional buybacks under the current Board authorized program.
The earnings call presents a mixed picture: while there is optimism in product development and partnerships, financial metrics show declining cash flow and net loss. The guidance is cautious, with some positive outlooks, but uncertainties in key markets like China and the Americas persist. The Q&A reveals optimism in certain areas, but management's vague responses on growth and market challenges add uncertainty, balancing positive developments. Overall, the sentiment remains neutral as positive and negative factors offset each other.
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