BIO,BIO.B - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q2 2020 Bio-Rad Laboratories, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Kevin Han. Please go ahead, sir.

Kevin Han

operator. you, Thank thank and for us. joining Good you afternoon all second XXXX. Today, we of the review will quarter me the Vice of Wright, with President of Executive Financial And the on Group. Andy the and Officer; our Norman Officer; Group, Annette Ilan Clinical Chief Chief Schwartz, Life Operating Diagnostics Daskal, Tumolo, Executive Science President Executive Last, President Officer; Chief phone and Vice today President are Dara and

COVID-XX making that everyone begin statements steps pandemic. in our would that These subject matters. review, goals, are on we the and in about forward-looking statements is caution pandemic future and risks based assumptions and results the taking plans financial the be regarding are and operations, we on management's Before performance these future like events Bio-Rad will response Bio-Rad's and statements I our are expectations to forward-looking other expectations, uncertainties. Included to statements of of to impact and

may Bio-Rad Bio-Rad's these COVID-XX pandemic materially results will to sustainable Bio-Rad's the We be cannot COVID-XX-related demand Our from unknown. the this to able that of products expectations, that the that certain plans and impact or be pandemic duration is will actual for differ be responses the and successful, meet is and demand.

place The business. update the call SEC we our during discuss where not forward-looking You statements, the review the with factors forward-looking and does undue in any these not reliance on made intend to in should filings I today. encourage statements our you company risk to detail

non-GAAP comparable Officer. to measures share, Daskal, review principles. are our generally our President diluted Vice include not accepted should also references of to contained accounting call now Financial per I'll financial Executive GAAP will reconciliation defined in non-GAAP the which and Ilan turn over are to the non-GAAP results these release. Chief income earnings today the remarks and under net Our measures Investors that income

Ilan Daskal

these of for all with the Head technology markets, sciences a want in investment hope officially afternoon. your Bio-Rad he also, you, analysis well capital management, you experience Bio-Rad. Thank life and are Thank joining believe finance, times. new you families financial to welcome comes as that during in we excellent we us, Good our that Kevin. challenging healthy space. And and Han staying Kevin an and to and Investor Relations. breadth primarily will We Kevin to of addition medical and make

update Last, detailed the like light current of Chief begin in are I quarterly on Bio-Rad's experiencing Andy that ask environment Operating to I before provide the pandemic-related to Now our Andy? would operations an discussion, Officer, globally. we

Andy Last

by Okay. And I'd a Thank to start current you to of operations much, Ilan. review around minutes the taking like our world. very few state

make who to Before extraordinary I'd the our to recognize under like our I begin, current world the employees continue customers around circumstances. efforts serve to

So for commitment and dedication thank company. to you all continued your to of our employees the

appreciated. are efforts Your truly

of faster are product support core starting on to So US. in the and In challenging in place customers; to the since through measures of on see resumed of workplace R&D. of have to to employees; now we for ensure and as the Early employees core our rest all employee progress regions, making And and globally strategies. continue we guard this maintaining manage to well-being operations manufacturing our been we well. resumption areas in policy we than work-from-home production our are safety to continuing have ongoing pandemic, employees. the our safety three focused ongoing this of implemented period: the essential key place back return the Asia, Europe who on, not relatively to the make to sure our and put in have supply we and continue to hard safety, worked On we beginning

in have from distancing, region. contact home for of on depending tracing remote course, We the social working temperature wearing and, masks, requirements of checks, place

served the measures cases All to have we minimize have number of experienced of these throughout Bio-Rad.

pandemic, Our as extremely to up team we to some meet room we experienced we the the manufacturing too. but Early appropriately have demand reagents, a we continue well. meet arise. are mainly ramped demand, position supply should Today, operations PCR need expanding on chain disruptions in production also of the more production responded increased and instruments, to in have our scaled

of we to manage the much have to with global extremely were Lastly, and have believe the and working given well energy impacts that executed the we situation. pandemic, through time initially well new spent the adjusted environments

on more sharing and continue and our work to initiatives strategies details year. later this to core We look forward

you. So overview, Thank with that Ilan. pass to it to back I'd like

Ilan Daskal

Andy. a reported Thank basis, I which second regional the million of to basis decrease results quarter. weakness of XXXX by second for the offset million, Asia like $XXX.X decreased on now sales Net of review regions. $XXX.X you, sales is X.X% versus And basis, the quarter On in would in a a strength in a QX XXXX. other On was X.X%. currency-neutral were

a the the strong portfolio. As mix for associated products and demand resulted product related demand in saw pandemic in significant We COVID-XX with research. Andy change our of alluded, testing across

the that in quarter COVID-XX-related the $XX PCR Science which Droplet Life However, and currency-neutral in about increase the QX Media. we basis. business. reported Sales basis of demand PCR was of $XXX.X increase rest driven and in million a quarter to growth second year-over-year million the second our a Process million on is XXXX, on the a of estimate by XX.X% XX% were sales majority products, saw lower XXXX The Digital the quarter. in an core our compared of in $XXX.X the of Group We were

same Droplet by around by Life quarter, demand PCR growth products strong year. was due as operating capacity. fluctuate the revenue easy were these on softer Media, demand Growth which the quarter COVID-XX-related offset to globe significant overall primarily basis, research last and a in driven below materially saw PCR labs for an were products. core Process academic Science can Digital which increases compare over Our quarterly was the the year-over-year segment in

currency-neutral on in versus sales XXXX. Life Science in a Excluding a Americas sales, while grew flat. grew Asia about year-over-year business of Europe, basis, and basis Process the Media currency-neutral Science geographic the QX XX.X% were Life On

our Digital open be continue The sensitivity the opportunities PCR excited platforms. and to We and new Droplet about continues up unique to specificity applications. of technology

on quarter deployed a decline Clinical reported to During the XXXX, being million the is of current $XXX.X $XXX.X basis the pandemic, Sales compared million decline currency-neutral were and basis. an it of in in wastewater products prevalence on a monitor streams. to second XX.X% Diagnostics in QX is which a SARS-CoV-X XX.X%

experienced the second segment of its regions. On During product all lower Group Clinical declines weakness across reduced across and geographic Diagnostics basis, from the hospital all due lines a posted Diagnostics visits. quarter, noncritical clinic to the demand

benchtop We System, continue GelDoc a execute which the provides quarter a automated Go on solution to compact new the in product our Imaging package. and second in strategy. development We imaging launched

savings from QX The We also prior This margin the relating XX.X% offset launched basis million the impacted about X/HIV XX.X% center to customs quarter in acquisitions amortization that or million for X.X% expenses million charge quarter was QX million Research on in gross QX to of result in hiring over for products XXXX. years. benefited in to spend, gross prior of primarily ongoing which Reduction taken gradually $X.X a expenses, partially $XXX.X the COVID-XX impact our points. duty and million of new a of $X.X shipped in $XX to of and was $X.X using in income utilization, will compared the XXXX. the better an cost million of reported discretionary or XXXX back XX.X% in Supplemental expense year-over-year dollar was The of or now was XXXX the settings. versus SG&A $X XX.X% sales $XX.X sales The expect million X.X% HIV QX well and the XXX savings to Total for disciplined back blood return sales by compared or come mainly million in related X.X% of or initiatives. as of product quarter million the label in lower coming due approved cost of margin expense in $X Amortization compares to as $XX.X and sold current by acquisitions the to and decrease QX $XX $XX.X recorded as million recorded million marketing GAAP in FDA XXXX. mix of XXXX. was was was QX by of Geenius on expenses workplace. of to of travel $X XXXX. goods primarily quarter X SG&A QX basis XXXX. sales margin million of X.X% we of discretionary were related is higher and SG&A basis compared a for we $XXX.X of compared for in gross sales most claim operating QX and to say, second cost plasma to the donation million, development quarters QX expense or

to tax was the $X.X in XX.X% line, was the year. the declared Sartorius income and the $XX.XX. dividend in to of was includes substantially AG. fair shares income paid market other in Holdings. reported an year diluted to effective of were The of during in QX the and increase quarter million the Sartorius is compared operating March rate compared and in XXXX. net million In in of holdings, last securities the $X.X XX.X% results is equity of net the Reported in valuation related added and resulted to billion change was other paid below related was million per expense Looking is last to April. for Also from of income value substantially earnings $XX.X the from XXXX million quarter, for Sartorius, $X.XXX $XXX.X of holdings changes dividend June and in quarter and XXXX, an This declared which income interest share second July. was QX of of the

looking excluded a that operating the These are press the gross impacted at the to items in and items basis, release. certain both and have atypical other non-GAAP in as results the on income. on well margins unique reconciliation non-GAAP Moving as table results, the we detailed

R&D The XX.X% Non-GAAP $X.X quarter benefit. versus the excluded in million. of of legal-related quarter SG&A, second sum purchased a margin basis, XX.X% moved restructuring XXXX. a in excluded non-GAAP These the about second XXXX million of X.X% expense the and for in non-GAAP versus non-GAAP acquisition-related in we and XX.X% of $X.X of $X non-GAAP QX operating amortization costs Non-GAAP XXXX QX result a to we in have QX operating in negligible purchased SG&A intangibles moving of margin the $X.X quarterly XXXX. XX.X% and In on of This second the versus In the expenses gross these operating non-GAAP restructuring million, basis, a amortization benefit. QX have of of XXXX. margin on was of a restructuring non-GAAP exclusions XX.X%. excluded on million for of of $XXX,XXX was X.X% gross to from XXXX intangibles in basis. a compares XXXX the sold, non-GAAP the quarter, and basis adjustments at margin X.X% GAAP XX.X% non-GAAP of second cost cumulative of we of quarter results Looking on margin have to of R&D, in goods

of XX.X% of part the and and small tax foreign to business certain driven million the sale our compared compared taxation per the net geographic earnings the XXXX. $X.XX for million in to line, of rate value an finally, of million earnings. share billion, The quarter the the in of the on excluded a XXXX. operations XX.X% non-GAAP with rate $XX.X change other in segment. effective in per $X.XXX operating The in mix have was of was earnings decrease $X.X non-GAAP of venture noncore And that associated items holdings was XXXX QX or investments share We a which income below Sartorius by for million gain our a equity are loss of increase and $XX.X of our $XX.X was QX quarter second diluted of $X.XX

end of Moving sheet, the of from QX XXXX. the $X.XXX the which was on of were and at to total balance cash end roughly QX billion, investments short-term unchanged

of by our our in QX our supply inventory about by safety increase XXXX QX the during stock $XX XXXX, and we additional of level that from disruption year. components to earlier that resulting part of late decision from in the of the XXXX normalizing levels. The the second of inventory quarter, saw driven of given secure we was the cyber-attack QX million During increased experienced chain the

next reduce quarters. the expect inventory We to over three levels

our purchase our total any did now potential a and second Board program, quarter, July, increase our $XXX have share for stock. to In we available authorizing we $XXX the million buyback share refreshed buybacks. shares of our million During not a of capacity

$XX.X the and second of in second activities dividend quarter XXXX, capital of the cash EBITDA and XXXX second expenditures million, excluding XX%. and XX.X% for was Net was million. were XXXX of mainly compares in the the This and QX of XX.X%. in change $XX.X million, quarter XXXX capital was adjusted XXXX. was quarter for dividend, for QX sales, tails. was EBITDA million of quarter For Sartorius $XX.X the the of the The which second amortization Sartorius from of the operating to net $XXX timing working The reduction adjusted generated reflects depreciation

guidance, to QX the about X%. may the the a our With test. up benefit we sales currently COVID-XX-related to smaller be that uncertain to be said, relative of we June versus duration flat modest product the sales on quarter year-over-year and of pandemic. the see third from from assumes benefit believe that the continue COVID-XX gradual impact that Moving currency-neutral a levels, and improvement serology This will third quarter

continue We workplace the various indicators and as to well demand as assess protocols. supply return to

experience. believe the our that the transitory, line that Operator? now That to but the half to be to recovery remarks, take recovery continue we the it COVID-XX currently, We gradual concludes would impact and predict of might will and expect of the difficult questions. we your prepared will year, is rate open we second in

Operator

first the Our Instructions] [Operator line Wells Leonard question of comes from from Dan Fargo.

Your line is now open.

Dan Leonard

you. Thank

there perhaps the And demand of don't versus in on that. XXX for million quarter. to you and COVID directly involved How curious So out testing? be any qPCR one has consumables? the think efforts have your do more be much so on there, Bio-Rad surge must XX So was question in a I yet tests thoughts that but equipment-related

Andy Last

hi, Dan, here. Okay. this Andy is

is of we'd what instrument. the say think the there I majority were sales

course, Of was your core too. PCR embedded Digital of to do our on repeat PCR first there, just answer reagents, have too, Could sales, question. the some the Droplet we That business the second and part? you part

Dan Leonard

Yeah.

I plans and directly your own I to or involved part was, in noticed be you to don't have have you second the The testing do effort? develop if you any uncertain aspirations have otherwise. more one test, I'm mean qPCR

Andy Last

Yes.

pass So the I'll on we've approved. got a to to ddPCR question EUA that was Annette the And question. allow Annette qPCR – I'll answer

Annette Tumolo

are would I said, Okay. it kit to it. putting as consumables reagents dramatic We our Thanks, a that's Droplet could choose out we always that us. quite put a something have test Digital see do. in mean, but test increase first, may, along to that out we instruments, evaluating for we with a qPCR COVID and sense Yeah, did for and PCR always plastic whether in make and our Andy. Andy we large demand chose footprint go

Dan Leonard

And expectations what in QX? the demand question, over-indexed your on Sciences, follow-up the variable an like seems that's outlook. and there academic, into you. pace you. seems market of government it my Life thank important and are It in Okay, QX Thank you're

Ilan Daskal

Andy, do take to that? you want

Andy Last

can I that. Sure. take

a sudden any go in be through So go picking as opening we're we same up gradual a gradual through And thinking increase We the We're QX. half see fair. not QX. expect QX, changes to continue as to to pace, expecting the bit. in opening we we second a through in saw

Dan Leonard

the color. for Thanks

Ilan Daskal

you, Dan. Thank

Operator

you. Thank

line of next Donnelly Our from the question Citi. Patrick from comes

open. now is line Your

Patrick Donnelly

the of that was here? had with you to one mix, about talked margins, particularly we and you smaller it faced? talk in for just related you then Great, forward? benefit encouraging environment headwind very forward, strength, there. a that Can kind was expectations onetime see How on of the versus much the the going this through have little the thanks. to maybe particularly going maybe some much some expansion of the Ilan, how And initiatives guys you you for as guys as internal go time the COVID

Ilan Daskal

Yeah. Thank appreciate you, Patrick. question. the I

due yes, So quarter, we better margin a better the gross to had, obviously, mix. this

this as be second of some I about inventory QX but we'll that to have kind started big full half also overall the mix we that the little there. it have depends gross will out the benefit impact on recovery utilization post think kind the a when well XXXX. the on effect of on we'll and margin As on there buildup a I second Generally of a quarter. the built in up full plan have half, year It inventory that the some lower gross the mix think year, from don't gradual And that assuming We half. second in speaking, balancing continued going since the will take experience the bit into the margin. a benefit

Patrick Donnelly

Did pulled well? of back take well through you a kind pretty Okay. And Can maybe could That's be through I've seen the as of improvement Clinical things talk there? some went what come COVID And see side. great quarter-to-date just much we also, progressed little we've have trends see things you've say bit. or pause you elective as through in then on talk and of if seen a stuff heard It'd reuptick Diagnostics just you this little the June you just through then on a quarter? How the the bit back has that July, as we did as then side. helpful. progressed

Ilan Daskal

do Dara, that question? to want take you

Dara Wright

selective by to testing not start did back and procedures and being you some really historical experience June muted averages. modest still said, recovery to as in We Sure. exactly, routine

in but an did see So improvement we we're June. watchful waiting, in

Patrick Donnelly

a sudden the bit the a getting front quite And the there perhaps are the in the of before technology now, side a getting in on demand one, Great customers strengthening bit? a have base a meaning is to maybe and COVID, of COVID guys maybe last there? of out accessing you whereas of franchise, the a where a all this other upticked you on weren't side, technology more ddPCR just broad is sense, installed level that given acceleration has you stronger

Ilan Daskal

to Yeah, I'll address that Annette. question

Annette Tumolo

Sure.

for that what's to quite I emerged growth I is disease. yes, the and this is, time, that's general technology good can long see – in platform it with answer to likely the been has your a think this how continue happening. we not We've question quite virology, And think focused in it. on particular. what area had infectious We be useful experiencing in

public So kind of they already we've And highly precise. reused, very sensitive it's and certainly, pathogens. used I have monitor monitoring for been there. think lasting using wastewater wastewater agencies environmental platform swimming present the in monitoring, for for a being It's safety, for governmental by because areas. we'll effect that's being They're

So in saying, I think to people getting monitor for for be – we there, seeing SARS. those we're gee, looking reasons monitoring an uptick now maybe are should

we're think I going area kind some of as well. lasting customers that to So in get

Patrick Donnelly

Very you. helpful, thank

Ilan Daskal

you, Thank Patrick.

Operator

Our [Operator of question Thank Meehan Instructions] comes Research. next you. from from Nephron the line Jack

Your line now is open.

Jack Meehan

that Sciences quarter. on I whatever afternoon. granularity good little serology Life bit benefit hoping you versus in COVID of with in was the the side? on million a the seen just How $XX diagnostics from have benefit was might much Thanks, more

Andy Last

very Science the side was launched quarter, the Andy. PCR is Digital late our modest it serology from PCR very This the through modest. contribution. Yeah. so majority Contribution Jack. Life a of and We was product came in Hi, The and business.

Jack Meehan

And going manufacturing contribution. know that it the for the guidance you down case footprint would the I the constrained I were quarter in why I needs step And guess, guess be But third calls in where to summer? your into a be is Okay. the if quarter. second capacity sequentially

Andy Last

wish do question? to you answer Annette, that

Annette Tumolo

Sure. I can take that.

into the this demand, quarter, consumables several demand beginning quarter experienced, spent and meet the as our So and lines. first at others, across of pandemic, the second end to reagent did the we real platform, our scaling our our manufacturer plastics upswing in months many we of in a and

have to meet watch for constraints now place good out scale to. a meet to as in we're our and to We other through year, as the moving further think do quarter life third companies have if position we've a demand do chain end supply – we science But I the the into and to good gotten demand. into well. ourselves of I think

Jack Meehan

look right, I is biochromatography at math Life of but and for I Life into we I'm there, if the I'm it the you Process know then business, something the half about products talk over don't my back Can Science a the was tailwind concentrated going if COVID and the expectations go, XX%. you additional within results, and it the Science just do trying down to segment? some like if Got getting Media while well had the tailwind recovery core the

Andy Last

Yes.

the at think line over question, think – reports being down I Life business feel We don't the see the when we our down high-teens look kind XX%. reported in percentage. Science is our with we of in other of of that QX I kind majority for core

Ilan Daskal

think about goes obviously, part a more we the Jack, the also half, and and throughout gradual guidance And thinking the for quarter our of portfolio. is third of recovery, mix normalized that continued a about second to kind back the way it,

Andy Last

were the we netted given it we felt out, didn't where conditions comfortable I with I quite as market we nothing – new. Yeah. think so

Annette Tumolo

with in line Quite think. market I right. the That's dynamics,

Jack Meehan

last squeeze if final gone years, in the it billion views to about your nature the and $X pursuing build around larger around that you one – looking to at $X Does just billion capital the and curious all now. on it's if closing M&A? Got in the just potentially or X.X of way it strategic pandemic you I allocation, the think change from look over one. thoughts almost I was stake, can Sartorius

Norman Schwartz

So Hence, It's good their market us. investment – been do a obviously, pretty continued in to cap. very has well. obviously, for increase it's Sartorius the

Ilan Daskal

it's a Jack, in year. in would I similar of allocation. have the been add discussing I strategy we also, the Yeah. past terms overall mean, that capital

continue more be tuck-in as need as that available. interest you And well entertaining the higher smaller I the the the pursue which to appetite strategy wait – transaction. which by again for a we to of mean, with much with continued a that's will those acquisitions, plan. be larger authorized become Board to And will share to complimented buyback, obviously opportunistic. We now for increase those have

Jack Meehan

all. you thank Great,

Ilan Daskal

you, Thank Jack.

Operator

you. Thank

the question Couillard comes Brandon of from next Jefferies. from line Our

line Your is open. now

Brandon Couillard

Thanks. Start with Ilan maybe.

look sequentially you with COVID the the quarter? expect And then much specifically tailwinds? spend capture amount in third OpEx back a leverage if year, the the the back as around As the less half in at at significant of the any down quarter, quarter, you the you G&A than of to comes of as of year? share half second half line, the of the third into or you parameters second can in the step us in very model that far look Is it over half how

Ilan Daskal

Yeah. Thank you, Brandon.

up. I a tell We think that is think to to the premature happening your bit first is on months it's based assess last how shape can QX every going lot you, question, I weeks. to little several few a

similar back most manage have at with operating and know potentially cetera. obviously, you we year. about the travel, I few spend that et this don't said, quarters. less seasonality a kind the I to will With take we be some will tell revisit that, the do do of we how it I discretionary So can expenses, and specifically to mean, how this come will that that Thinking going general every point, year quarter experience are the we savings of expenses, that so

categorize if of is with to it, So this specifically discretionary, I still of it have associated quarter. kind most

a as side, was also continue R&D to is associated with the Some have not higher. slightly basis investment. long-term see our intention our can expenses. it R&D any actually, reduce of our to reduce it we you initiatives on on invest do And to operating We dollar

Brandon Couillard

upgrades proceeding. launch I are Maybe eight Anything there you Annette, ONE the platform, with share placements of new can specifically now, get are months an launch legacy the customers percent which of us ddPCR, or let's how from on feel one on into fastest, the QX what or system? that adopting guess, you six for is update

Annette Tumolo

fortunately, of extent biopharma like we where this to and some QX well. in many we therapy gene I the large introduction cell Well, markets. application, their that has customers the the Sure. to segment who was looking and the some proceeding customers We ONE And maybe the product that in customers QC to those QX for adding And QX convert the we're quite with ONE, gee, adopted But primary focused parts we and our product see see ONEs. progress manufacturing QXXXX a it's towards, repertoire. I'll of have made. those pleased and

Brandon Couillard

back Just a quick the question, didn't want to customs sure Ilan, make non-GAAP out that just million charge? include just did that $X of confirm, the still the gross you to margins, I non-GAAP adjustments.

Ilan Daskal

basis it's I does. it And about Yeah, correct. points. did not take That's out. it XXX

Brandon Couillard

Okay.

that. have better, So would excluding been margins XXX

thank good, you. Very Okay.

Ilan Daskal

you. Thank

Operator

further this remarks. like to the back no Thank you. call I'm to Ilan Daskal over turn time, closing I questions. showing At would for

Ilan Daskal

Thank the forward everyone, connecting and to we look today near Thank you, you, for joining call future. in operator. our you with

Operator

this for call. Ladies and today's Thank concludes gentlemen, you participating. conference

now disconnect. You may

Bio-Rad Laboratories (BIO) 2 Aug 202020 Q2 Earnings call transcript