Roop Lakkaraju
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories
Thank you, Jon. Good afternoon. I'd like to start with a review of the 4th-quarter and full-year 2024 results. Net sales for the 4th-quarter of 2024 were approximately $668 million, which represents a 2% decline on a reported basis versus $681 million in Q4 of 2023. On a currency-neutral basis, this represents a 2.3% year-over-year decrease and was due to lower sales in our Life Science segment. Sales of the Life Science Group in the 4th-quarter of 2024 were $275 million compared to $291 million in Q4 of 2023, which is a decline of 5.5% on a reported basis and approximately 6% on a currency-neutral basis. Neutral sales decreased across all regions. Excluding process chromatography sales, core Life Science Group revenue increased 2.5% year-over-year and 2% on a currency-neutral basis. Core Life Sciences growth was driven by consumables sales that improved low-single digits sequentially and a mid-single digit year-over-year. Sales of the Clinical Diagnostics Group in the 4th-quarter of 2024 were approximately $393 million compared to $389 million in Q4 of 2023, which is an increase of 0.9% on a reported basis and 0.7% on a currency-neutral basis. Growth of diagnostics was primarily driven by increased demand for our quality-control and blood typing products. Offsetting the higher demand, our diabetes portfolio experienced a revenue decline due to the intra-quarter China reimbursement change that reduced sales by an estimated mid-single-digit million or approximately 75 basis-points and affected Q4 gross margin by the same amount. On a geographic basis, currency-neutral sales increased in EMEA and Americas. Q4 reported GAAP gross margin was 51.2% as compared to 53.8% in the 4th-quarter of 2023. The decrease in gross margin was driven by a restructuring expense to further rightsize our footprint and the impact of the reimbursement reduction for diabetes tests in China. As Jon alluded to earlier, we are continuing to proactively manage our cost structure, including the recent implementation of a 5% workforce reduction to further align headcount for our global organization. The impact of these actions is contemplated in our guidance and should yield savings of $50 million to $55 million in 2025 with fully annualized savings of approximately $60 million to $65 million in 2026. SG&A expenses for 4th-quarter of 2024 were approximately $204 million or 30.6% of sales compared to $207 million or 30.4% in Q4 of 2023. Research and development expense in the 4th-quarter was approximately $80 million or 11.9% of sales compared to $64 million or 9.4% of sales in Q4 of 2023. Q4 operating income was approximately $58 million or 8.7% of sales compared to $95 million or 14% of sales in Q4 of 2023. During the quarter, interest and other income resulted in net other income of $9 million, which is unchanged versus the prior year. The change in fair market value of equity security holdings, which are substantially related to the ownership of Sartorius A&G shares, led to a $977 million loss, which resulted in a reported net loss of $716 million or $25.57 diluted loss per share. The effective tax-rate for the 4th-quarter of 2024 was 21.2% compared to 18.4% for the same-period in 2023. The effective tax-rate reported in these periods was primarily affected by the accounting treatment of our equity securities. Moving to the non-GAAP results. Non-GAAP financial measures, which exclude certain atypical and unique items that impact both gross and operating margins and other income are detailed in the reconciliation table in our press release. 4th-quarter non-GAAP gross margin was 53.9% compared to 54.4% in Q4 of 2023. 4th-quarter non-GAAP operating margin was 13.8% compared to 15.5% in 2023. Non-GAAP effective tax-rate for the 4th-quarter of 2024 was 20.9% compared to 22.3% for the same-period in 2023. Finally, non-GAAP net income for the 4th-quarter of 2024 was $81 million or $2.90 diluted earnings per share. And now for the full-year results. Net sales for the full-year of 2024 were $2,567 million, which represent a 3.9% decline on a reported basis versus $2.671 million in 2023. On a currency-neutral basis, this represents a 3.6% decrease and was driven primarily by lower sales in our Life Science segment. Sales of the Life Science Group for 2024 were approximately $1.28 million compared to million in 2023, which is a decline of 12.8% on a reported basis and 12.6% on a currency-neutral basis. Our 10 years of sales decreased across all regions. Sales of the Clinical Diagnostics Group for 2024 were $1,538 million compared to $1,489 million in 2023, which represents a 3.3% increase on a reported basis and 3.7% growth on a currency-neutral basis. Growth of diagnostics was primarily driven by increased demand for our quality-control and blood typing products. On a geographic basis, currency-neutral revenue grew across all three regions. As we had targeted, overall full-year non-GAAP gross margin reached 55% compared to 54.2% in 2023. The year-over-year margin increase was driven mainly by the impact of operational improvements made throughout the year and a favorable product mix. Full-year non-GAAP SG&A expense was $799 million or 31.1% of sales compared to $815 million or 30.5% in 2023. The decrease in dollars of SG&A expense was primarily due to a reduction in discretionary spending and lower employee-related costs. Full-year non-GAAP R&D was $282 million or 11% of sales versus $255 million or 9.5% in 2023. The increase in non-GAAP R&D was primarily due to a onetime acquired in-process research and development expense of $30 million related to the Sabre Bio acquisition. Full-year non-GAAP operating margin was 12.9% compared to 14.2% in 2023, which reflects the effects of revenue decline and the aforementioned in-process R&D expense, offset by favorable product mix and the impact of operational improvements. Lastly, the non-GAAP effective tax-rate for the full-year of 2024 was 23.6%. Moving to the balance sheet, total cash and short-term investments at the end of Q4 2024 were $1.665 million compared to $1,628 million at the end of Q3 2024. Inventory at the end of Q4 was $760 million, down from $804 million in the prior quarter as we continue to make progress on reducing inventory. For the 4th-quarter of 2024, net cash generated from operating activities was approximately $124 million compared to $81 million for Q4 of 2023. For the full-year of 2024, net cash generated from operations improved to $455 million versus $375 million in 2023 and was driven by the focused efforts in improving working capital efficiency. Net capital expenditures for the 4th-quarter of 2024 were approximately $43 million and full-year net capital expenditures were $166 million. Depreciation and amortization for the 4th-quarter was $39 million and $152 million for the full-year. The 4th-quarter of 2024 free-cash flow was approximately $81 million, which compares to $39 million in Q4 of '23. For the full-year of '24, free-cash flow was approximately $290 million, which compares to $218 million for the full-year 2023. Full-year 2024 buybacks totaled 691,000 shares for approximately $202 million. And over the past years, we've deployed over $630 million for share repurchases. Considering the current dynamic environment, we expect to do further share repurchases and have approximately $577 million available for buybacks under the current Board authorized program. Moving on to the non-GAAP guidance for 2025. We're guiding a currency-neutral revenue growth for the full-year to be between 1.5% and 3.5%, which excludes any revenue from acquisitions. On an as-reported basis, Q1 is expected to be approximately 5.7% to 7% lower on a year-over-year basis and then sequentially improving each quarter. The Life Science Group year-over-year currency-neutral revenue growth is expected to be between 1.5% and 3.5% with our Process Chromatography business poised to increase high-single-digits. Note that this outlook contemplates a soft dynamic, but soft academic environment, but does not consider last week's proposed NIH indirect spending actions. Overall, NIH funding is not a significant component of our total sales. Specifically, we estimate that the US academic and government segment represents approximately a high single-digit percent of revenue. A subset of our US academic and government segment is federally funded research, including the NIH. We estimate our total federally funded research exposure as approximately 4% of our revenue. For the Diagnostics Group, we estimate currency-neutral revenue growth to be between 2% and 3%. As a reminder, our growth outlook for clinical diagnostics includes approximately 100 basis-point impact in 2025 due to the partner's exit from the donor screening business and approximately a 60 basis impact from the reimbursement reduction for diabetes testing in China. Full-year non-GAAP gross margin is projected to be between 55% and 55.5% and includes the approximately 60 basis-point incremental gross margin headwind related to the reimbursement reduction for our diabetes business. On a quarterly basis, we expect Q1's gross margin to be like Q4 2024. Subsequent to-Q1, we expect steady sequential improvement because of the continued productivity and efficiency benefit from our operational initiatives and improved sales volume. We look to target exiting the year in the high 55% gross margin range. Full-year non-GAAP operating margin is projected to be between 13% and 13.5%. This includes the 60 basis-point effect from the reimbursement change as mentioned earlier, as well as the headwinds from the strengthening of the US dollar, representing approximately $70 million or 250 basis-point headwind through 2025 revenue. Revenue and an approximate 40 basis-point drag on operating margin. In addition, we are making nice progress with Sabre Bio, which we purchased last summer and plan to achieve a key development milestone in 2025. The result is a potential $10 million R&D expense or a 40 basis-point impact, which would impact both GAAP and non-GAAP results and has been considered in our guidance range. We estimate the non-GAAP full-year tax-rate to be approximately 23%. Capex is projected to be approximately $160 million to $180 million as we continue to invest in our infrastructure to support our multiyear transformation. We anticipate full-year cash -- free-cash flow of approximately $310 million to $330 million for 2025 as compared to $290 million for 2024. With that, I'll now turn the call over to Norman for his remarks.
