Norman Schwartz
Chairman of the Board, President and Chief Executive Officer at Bio-Rad Laboratories
Okay. Thank you, Andy. 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. I think both as a result of the macroeconomic environment, as well as to some extent, the local made-in-China initiatives.
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.
The sales of the Life Science Group in the fourth quarter of 2023 were $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, biopharma end markets and soft macroeconomic conditions in China during the quarter, ddPCR and qPCR sales faced difficult compares due to the backorder burn down 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. 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. And then core Clinical Diagnostics year-over-year revenue, which excludes COVID-related sales increased 4.3%.
The Clinical Diagnostic Group benefited from particular strength in diabetes product sales, as well as from the reduction of elevated backorders. 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 GAAP 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 recorded in cost of goods was $4.5 million, as compared to $4.4 million in Q4 of 2022. SG&A 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. 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 2022.
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. 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.
And 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 Sartorius 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.
Effective tax rate for the fourth quarter of 2023 was 18.4%, compared to 24.2% for the same period in 2022. 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 or 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 holdings.
So moving on to the non-GAAP results. 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. These items are detailed in the reconciliation table in the press release. So looking at the non-GAAP results for the fourth quarter, in cost of goods, we have excluded $4.5 million of amortization of purchased intangibles and a small restructuring benefit. These exclusions move 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.
Non-GAAP 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 have excluded amortization of purchased intangibles of $1.2 million and in vitro diagnostics registration fee in Europe for previously proved products of 8 -- 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. In R&D on a non-GAAP basis, we have excluded $1.3 million in the restructuring expenses and $400,000 in acquisition-related costs. And the cumulated -- in the cumulative 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. And this non-GAAP operating margin compares to a non-GAAP operating margin of 17.4% in Q4 of 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 investments. 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 resolution of certain tax positions.
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 $98.5 million or diluted earnings per share of $3.31 in Q4 of 2022. So now, for the full year results.
Net sales for the full year of 2023 were $2,671 million, which is a 4.7% decline on a reported basis, as compared to $2,802 million in 2022. On a currency-neutral basis, full year of 2023, net sales decreased 4.1%. COVID-related sales for the full year were about $4 million, compared to $109 million in 2023 -- 2022. So that core year-over-year revenue, which excludes COVID-related sales, decreased 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 million, 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 majority of the year-over-year decline was driven by process chromatography, qPCR products and Western blot. 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 the Clinical Diagnostic products for 2023 were $1,489 million, 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 full year core revenue growth grew across all three regions.
Overall, company 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 or 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.
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%, consistent with our guidance range and compared to 22% in 2022.
So moving on to the balance sheet. Total cash and short-term investments at the end of 2023 was $1,613 million, compared to $1,796 million at the end of 2022 and $1,765 million 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 payments.
Yesterday, just to mention, we concluded a new $200 million credit agreement maturing in -- 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. 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. 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. Probably useful to note, we still have nearly $280 million available for share repurchases under the current board-authorized program. And further, 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.
Adjusted EBITDA for the fourth quarter of 2023 was $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.
So, moving on to the non-GAAP guidance for 2024. So, as Andy alluded to earlier, we do see 2024 as a recovery transition year, so with higher levels of uncertainty than usual for our Life Science business and a steady 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 basis point 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. However, we remain -- we -- as we remain focused on improving our cost structure, we're well-positioned for operating margin leverage and as revenue growth returns.
Again, I think, 2024 is certainly very different to 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 gross margin -- gross 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, here's how we see the year rolling out. We're guiding a currency-neutral revenue growth in 2024 to be between 1% and 2.5% overall. The Life Science Group, year-over-year of currency-neutral revenue growth is expected to be between 0% and 2%. And for the Diagnostics Group, we estimate currency-neutral revenue growth to be between 2.5% and 3%.
With the backdrop of working through elevated backorders in the last year, we realized a little over 1% from price improvement at the corporate level, which was below inflationary trends to our overall cost. 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, contributed revenue of $3 million to $4 million annually, but had really a material -- an immaterial impact on our overall financial results.
Full year non-GAAP gross margin is projected to be between 54% and 54.5%, with steady 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%. 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.
And finally, full year non-GAAP EBITDA excluding the Sartorius dividend is expected to be between 18.5% and 19%. 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 about 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, we feel we have a good realistic outlook for 2024. 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. And I think most important, 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.
