BIO - Earnings call transcript Q3 2020 | Bio-Rad Laboratories, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2020 Bio-Rad Laboratories Incorporated Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Director for Investor Relations, Kevin Han. And you may begin.

Kevin Han

Thank you. you joining thank and afternoon, all us. for Good third XXXX. we will of the review Today, 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

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

Ilan Daskal

these for all hope joining your you well you Thank and are afternoon. Good times. Kevin. families that during we us, you, Thank challenging healthy and staying and

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

Andrew Last

you, Ilan. Thank

So a minutes state of around review I'd our to like world. to take few current operations the

we continued across appreciate Before and truly to have to beyond during I employees serve customers who begin, and work our would our our work hard globally above like pandemic. to dedication the organization. recognize We the

a of on through as As the areas support this continuing supply manage customers, ongoing sure we our and our X strategies. to core make manufacturing ensure progress period: reminder, we focus we have product continue of of challenging making to safety key our and employees, operations

improve safety. We world practices have the around routine to employees' now established

numbers. to In significant manufacturing, I'm approaches and driven to policies and able facilities, requirements, our from adapted solution a the productivity shift enabled to procedures, local for experience year the continue minimized equivalent test have pleased We our suspected conditions full results over an pandemic. employee. Work operations to deliver required. a fast achieve. using far. we the a broad testing safety meeting flexible where implemented with demand teams to we be for to we can This and our turnaround droplet and to those now very the rapidly digital And in productivity case implement in continue continuing are we continues have us PCR and back been avoid U.S., have so home by to downtime, In cases has summing work

products. our increased scaled back for have PCR high where mainly meet to in We QX, have diagnostics demand needed, well we the for and our which products, flexed

encountered we past disruption supply and meet now are chain issues believe needs. we with initial scale-up to well early of future are We the positioned the majority pandemic in the

strategies, our now operational. continued I'll back initiatives to we labs pass on it core in And all we work to Ilan. and particular, in R&D, where you. have Thank Lastly, now our

Ilan Daskal

Thank you, Andy.

associated results like would third XXXX for increase the sales third is which I $XXX.X On the to QX testing of related across million and We Now of review strong a X XXXX. for regions. with quarter. all sales experienced basis, basis, geographic in $XXX.X a On basis currency-neutral the reported research. were of demand a Net XX.X% a currency-neutral on increased growth XX.X%. products million, saw we quarter COVID-XX versus

the in over sales by have between a which our the COVID-XX-related compared Digital largely reported Digital majority PCR rest the capacity core revenue third to business. saw XX% quarter of now quarterly higher continue continuing diagnostics Droplet we slightly a lower $XX and gradual a year. were quarter situation are Science our Life million XX%, in growth basis, $XXX.X estimate We at product XX.X% Media. a of to and in QX. in driven Sales the capacity most saw increases core Science fluctuate to and on and Media, of improve. broadly double-digit we Diagnostics Group compared and improvement running for our same both PCR of million Process in labs as PCR monitor third QX, the Overall, increase Droplet of were a growth The increase XX% we the a PCR strong and COVID-XX-related. can in Generally, XXXX last our products, Both labs and we which academic quarter and in demand seeing seen Life Process year-over-year that the slowly to currency-neutral million closely. regions running Biopharma However, a the are XX.X% XX% in products $XXX of quarter. on demand about in to rate is year-over-year QX was quarter XXXX, basis were basis. the on

capacity. Life XX% grew XXXX. Science operating Science in the on was business softness the these Life below versus research academic segment around labs a continued the offset by overall sales, currency-neutral in Media QX demand globe as of the basis Process Excluding were Growth

and continued Science in a are monitoring year-over-year lab a utilization situation. On increase expect basis, the regions. currency-neutral all gradual We across sales Life grew geographic carefully

establishing to becoming broadly be our at testing, Research network and used the for Water dozen across the Digital Environmental by including of continue gold is standardized adopted wastewater Protection which Agency, Digital coordinated COVID-XX encouraged which more a now as testing the globally in the is X monitoring being We business, Droplet PCR Foundation Droplet more of PCR labs and standard. the than State is Michigan, systems wastewater state.

and systems: strengthens which Opus and against X Opus XX the launched global XXX, the fight CFX the the PCR CFX we month, last addition, In our response to new pandemic. contribution

to experienced recovery PCR regions and XXXX, to on reported were million introduced a we we across basis. also and is believe reflects decline compared solution With of the the of CFX basis, for the basis currency-neutral and a Droplet offering, data decline of third X.X% analysis in launch and million complete products $XXX.X a our new in PCR These our Clinical a which On management a product systems, sequential performance $XXX.X QX lines, X.X% connectivity, testing all improved instrument trends. Opus on routine this customers. a Diagnostics provides with cloud-based Sales of Digital systems, platform. Bio-Rad quarter access along the a

products diagnostics rest in During was offset strength the our the of across controls by quality third weakness the portfolio. quarter,

year. Although the from labs experiencing pandemic, seen impact end recovery have recovery and negative the clinical a now the we trough of of a by into QX significant are gradual incremental the expect

the cost. $XXX.X cost, service monitoring potential prior compared closely QX lower million related on of XX% the third expenses be GAAP in geographic were across basis SG&A from basis, recent compares sold will somewhat We XX.X% all to XXXX. surgeons. and the cost tempered better or to in XXXX. increased of declines QX was impact a or for and of Amortization XXXX and Group quarter to compared XXXX reported logistics XX.X% regions. margin The Diagnostics QX to mainly utilization benefited then posted QX million manufacturing XXXX. million $XXX.X gross On The higher was sales of million margin gross current in of goods a of by the recorded XX.X% of for product $X.X in of acquisitions $X.X higher mix,

operating or expense versus $X.X or million of or income was QX with sales $XX.X QX million reduce XX.X% Research to SG&A. of continue initiatives recorded or $X.X was our million XXXX. sales compared compared XX.X% in X.X% in QX XXXX. and of cost-saving acquisitions to to in to $XX.X of of XXXX. $XXX.X in sales was amortization sales QX related $XX.X million Total X.X% We in million of of million QX the quarter for expense development SG&A

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

to Moving non-GAAP the on results.

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

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

geographic foreign quarter our in now tax per of and share in of increase $X compared small earnings. rate the or to a also XXXX. third We and Equity XX.X% with of the quarter certain billion share value the operating of rate full non-GAAP mix non-GAAP excluded line, the $XX.X earnings are compared $X.XX million venture and diluted income was have effective below basis XX%. tax of primarily XXXX. taxation in to loss was $X.XXX in year non-GAAP XX.X% a $XX.X finally, be The the per QX was QX a of We lower And the items on this the our The rate quarter of by approximately XXXX change million earnings net estimate associated Sartorius which for Holdings for driven to investments.

the at billion, an to of Total sheet. end increase from XXXX. were of $X.XXX of QX investments on the $XXX and end million Moving of balance QX cash the short-term

$XX third The higher about by increase COVID-XX-related products. inventory for our increased from was the in quarter, the XXXX. million second During of driven expectation of the by QX quarter of of continued XXXX demand inventory

quarters. use We come repay million notes to December. down the cash to hand the of X over X inventory on expect to in senior outstanding to the next $XXX levels plan We

company may market Company us the XXXX of AG under holdings our Investment an as technically which increased, investment In deem addition, Act. the has value in Sartorius

restricted. resources the run to capital adequate to working have We we may resolution, the near we term. effectively be business on are markets in the access feel While our that our

a third share total the had we million We not $XXX purchase potential quarter, did any available for of During shares of buybacks. our stock.

year XX.X% million. XXXX was CapEx XXXX. For XXXX spend the million, capital $XX.X of was of million EBITDA amortization for the compares from XX%. We and quarter third quarter EBITDA quarter Net of quarter depreciation XXXX, be generated adjusted million, was $XX.X was expenditures for third between in the third were that of to $XX the will project $XXX.X full QX activities $XX and $XX million. and for net cash third which likely of million QX adjusted the The operating in The of sales. XXXX

the to on Moving guidance.

year-over-year between pandemic, continue return assume and We activity uncertain mix. to in and although of to we We duration and be X% in Diagnostics XXXX. full that we product versus X.X%. at relative do sales a XX% that X%, sales gross the currency-neutral non-GAAP XX.X%. see R&D adjusted smaller impact Group a Life be full estimate about to operating between levels growth between pre-pandemic the QX. benefit quarter With revenue margin XX% XX.X%, currency-neutral Full XX% currency-neutral COVID-XX XX% margin the non-COVID-XX-related and X.X% to to EBITDA COVID-XX-related year believe GAAP about decline of year mind, the be This fourth and product projected for to year business XXXX margin full improvement the assumes will estimate and that and year in gradual to gradual and sales revenue up XX.X% a currently is Science for around be XX%,

operating over mix. product better year was significantly measures discretionary cost profit control Our driven and last by higher

begin a operations to our XXXX. benefits that experienced we to of gradual these normal, reversal in we As return expect back

the questions. we to and to our it Christy? and to business you now nature targets. due plan normalizes. current year growth this we your host Lastly, December, the in that That activity revenue when in will Investor updating of With the Day said, XXXX on not instead line and our with will prepared take open concludes remarks, host look we an margin uncertain pandemic,

Operator

[Operator Instructions].

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

Patrick Donnelly

Ilan, how more to was you're just break much would The maybe Basically, versus for helpful. ddPCR some appreciate Can bit more you related out instrument how sales there the expectations into more? XQ, expecting any probably granularity smaller but you. that one just And the certainly COVID relative going the of a wondering be to benefit, build-outs? trend?

Ilan Daskal

you, Patrick. Thank Sure.

our is all, of sales. very a serology the lower again, were currently about QX of that incremental first was instruments. ddPCR, COVID-XX-related mean, extent, number we split. it that's think And the small the $XX And number. it with core And I be revenue associated number a QX, test. our associated million majority associated vast was believe most with the So will with we and that was PCR when lesser than The

Patrick Donnelly

kind down? just same Or wondering, was step expect $XXX kind going to I in that it million it, of, significant from should guess I we Okay. ballpark, so? is be of call a or the just slightly down

Ilan Daskal

recall, if a the serology the terms split ratios. million QX, In PCR, core you about was and $XX between of it in the similar kind of overall ddPCR with

QX to slightly those tell. And it's the about to now. somewhere so far, it's below maybe be what not numbers. That's a It's going difficult right between in little to think probably two, but lower. bit But we much going less probably be

Patrick Donnelly

side, there. it. And you I to the we there? above to margin helpful of a drop-through related much Are way guys nice well core beat more with obviously as then on out clearly in, that to frame you big revenues was what think on from COVID expansion some well initiatives coming the that obviously, working versus been you've expected how kind the the parse expansion of No, revenue expected, that's saw Okay. able the margin

Ilan Daskal

Yes.

as the as most of is as example. were the contributed well footprint. for COVID-related of COVID-XX-related definitely, utilization well mix the associated freight, main sales components. There utilization, But the some both headwinds and the mix with some part, contribution products the for on as side the the it these manufacturing in was the and So on for

Patrick Donnelly

To the the gotten at Okay. your he's a be side. to on the being given kind different I Sartorius about the are have Obviously, look investment maybe norm, about few it's regulations so might strong more it you side. stake. cash past how mean I of seeing, for And big, some one then you there. are M&A if talked you flow little acquisitive over the know larger guys on landscape? the you quarters, point thinking guys there, bit

monetize If powder. of you wanted dry clearly, lot a to that,

your looks like? flexibility scale, should maybe there? So about your how appetite activity, again, given your on think we larger the And pipeline the what

Norman Schwartz

Yes.

in I that at technology the we've a early larger today several kinds little think it these of say as more we've few things size past that and stage a and you And in. established know, years, appetite over to our looking as plays companies I think fair we're to more these invested of done the are opposed things. is

we in the can of several X land see So pipeline, things or got if again, them. we've X

Patrick Donnelly

Okay. Ilan, be December, targets? know want I to side. are that get just revenue something you one. going you're it press -- to what last I to guess release venue housekeeping mentioned about one quick is we'll right. the X-year just And sure going make thinking in -- on we new I

Ilan Daskal

Yes.

with we measures. So tuned. release And But stay well. we'll press several follow-up as some financial calls to plan

Operator

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

Brandon Couillard

to touch third maybe and opportunity areas might the helpful. cost right you maybe that XX% the good looking leverage, where see sustainable quarter. And we Should with now any a kind could that some on you're the as in for in if start obviously, chime be you pretty Andy be the of you. business base of specific range? view savings additional would at and priorities under in kind think Ilan, of new this SG&A

Ilan Daskal

definitely of they're will Brandon. back, some enjoy some expenses chime come although lower not level at these did the definitely of start Thank we to in. discretionary and pre-pandemic. continue of expenses, Andy I'll to but you, the start, speaking, Generally

pre-pandemic be from prior higher to we'll back continue to that will level, assuming the get quarter. So SG&A

with also was expenses. And employee-related some of it associated

were you level we below we SG&A. realizing cost-saving pandemic, said, are continue about the we we of With there, think run our very that initiatives that started mid-XXs that So before the believe in that savings there. we successful we with terms of our currently, normalized level and if

in I more some of kind between. So expected

Andrew Last

Yes.

to an we certainly, we think does us Brandon, opportunity rethink I give the -- this way of some operate.

can -- think less experienced think return there like our And we the can a if in been areas we've some as that, sure somewhat seen think we normal, it past. I in surprise SG&A. remote we've wouldn't successful and there's than we've I -- to that is we all travel where to work environment, me working how I'm about that other on continue

Brandon Couillard

All some the right. Annette. a wastewater of other one more love the ddPCR application. application. of are for business. get opportunity, there kind whether around with just really Maybe to I are -- need a dabbled being also a Would that areas for technologies know on there that's few from of color the you Number that of one, out niche multiple

able non-COVID-related ONE. be share of at you're QX as well right for that for be areas the sort And to program color might particularly system of now. any upgrade looking As I'd demand, you if a the interested

Annette Tumolo

Okay. Thanks, Brandon.

as the quite but very positioned an ddPCR environment can a other in you a is and background imagine, this needle And some a we situation COVID. is surveillance looking detect for need, there that the that outbreak to you a inhibitors, work to with we're surveillance of technologies lot So opportunity. But size likely the think can haystack to in serve doing for market community of be products. use, wastewater understand might that well brand-new the longer-term we're market with Yes, us need well. early opportunity for support is really to ddPCR try our the for are and

and is. So far, what really taking uptake we're we're longer-term pleased at harder the taken so a with the opportunity look we've

doing return this revenue not some Like like the people things in diagnostics And Second are sequentially, clinical we're the We're blooding, from seeing question coming products. non-COVID. oh, of that. so there market, experiments, our quite western to -- at But back we see yet. normal. the gradual improvement lab core means

So we're optimistic.

some the labs I come think the algorithm have around safe work think back stay lab in and get and research right the R&D done. teams, world people figuring out like our I own to are

So normal. that as I see part we're to to think the starting return of

Brandon Couillard

accrued think Got last they you. that expect maybe with And receive to of Ilan XXX Andy. you litigation you might then you and Genomics know, cash update that stand owe kind some I don't actually of right one, now you? when that's where or Maybe been

Andrew Last

mean Andy. regard commenting typically with this we're litigation on I So not to the situation XXx. is

report And so when I we continue work that something through disclose. that can to think litigation. we'll obviously of we feel kind And we'll there's

Operator

next Our the of Jack from Research. Nephron line comes from Meehan question

Jack Meehan

going go to fourth probe -- overall And on on bit you the that down provide the capacity color testing stepping you is little up around side? third in assume but can to your Is expectations the wanted from assay quarter. the year-end? COVID more a there the any expect sales I sequentially, you piece do to within

Andrew Last

established chime COVID-related in the on So don't franchise. placements I our the since an mean as back Annette know, certainly But as majority have well of can comments. my diagnostics probably sales you are end of molecular we instrument

are our to are related than capacity building So pull-through. test they sales more

point our So view QX softer QX. there. to We than demand bit is it's a be think overall is on of going

Jack Meehan

And then ahead, -- on Great. oh, Annette. go the

Annette Tumolo

No.

have to somewhat the authorization. diagnostics going FDA market, submitted for but we're test molecular I just to the we was qPCR Sorry, emergency to use a new add an

tuned So for stay that.

Jack Meehan

a of to to could need you you it actually in Or Would something able market? test that? roll to EUA is the be an advance -- launch out

Ilan Daskal

to building system and components, liberty LDT obviously why are choose own to and insulin We that's at their create full buying labs then our need their assay. EUA full together. the if that, put own They're through many do

Jack Meehan

all at any catch investment there Got look businesses, to quarter third from up potential then second it. was the in the you in And it quarter? across possible both if quantify is as

Ilan Daskal

been nothing that's that question. is pocket to a we have would that to material a it's results. evident been that not evidenced there, good the but QX may to there Yes. not say nothing we us. whilst -- say QX, It's catch-up That's and of It's here

Jack Meehan

of control area on know then you as called side, an diagnostics. in I quality kind And out strength it. that of the Got

could was anything you helped from out a So think COVID I if menu was there testing have that stood wondering that? perspective? Do

Ilan Daskal

I routine on business, component. that, quality testing COVID-related our control don't controls small really to response, initial and only I which a start broad-based no, very -- I'll my to add is think across are

of indicative routine more in us the improvement to testing across sequential it's So board.

Jack Meehan

it. new if any can going And is, Got of last in one, products I in for progress Celsee with the is And how there? time squeeze since acquisition? line updates it terms

Ilan Daskal

pass we'll one to think this I Annette.

Annette Tumolo

Sure.

So it's certainly early days with the traction technology, but the we in are seeing market. some

investing are for series We the kits progressing next-generation well. and platform, developing cell is also application-based market. work in single a new quite We're of a the

supporting So with the Arbor. we're on going R&D very in like said, excited Ann investments. that's I And significant about that

Operator

next comes line Fargo. question from Dan of Our from Leonard the Wells

Dan Leonard

How wants for time contemplating equipment focus spending pandemic? much is to testing that of to better on it, and question leverage are first take about how post for of PCR thinking molecular a my So larger much how in installed whoever you you? your base

Ilan Daskal

a thinking we've about amount we've FDA got and we yes, Certainly, on of That's term obvious the And for it's time opportunity said, are EUA Annette question. Yes. as an we shorter an term. But longer now interesting could what that, us. spent fair more an about in do. the thinking

Dan Leonard

mind a memory. XX risks you're that It in old but we happening have renewed frame And could the to then as have wave be that's years' seems in France, just Okay. over-indexed trying like shutdowns. to my a France. that stuck of potential just I

trying kind exposure to me a you renewed where you mark from frame So you closures greatest of market see of to are wave do how and can your that?

Ilan Daskal

an geography I see going very we're think And the or closely fact exposed. of thing where -- more to aware that, watching it's away. area don't this So less any that's particular global. that one we're quite pretty I again, that's that isn't

Andrew Last

of -- May is that? need kind we an dimension I the extra think resurgence keep our though. add so that obviously, extremely something eye on to to closely, I

backdrop. COVID many with how as I think also now we're to have experiencing the people work that learned

impact. first of think but the to so unlike And the be go year, to likely not more we surge it's it's without going certainly moderated,

And that's might this gauge it's so there resurgence harder how much current on. to impact from be much going

Dan Leonard

Okay. of Ilan. question you for be mentioned technicality Ilan, And my would implications that? final What maybe investment classified company. an might get that then as the Bio-Rad some

Ilan Daskal

operations. Thank you, I think mean, the are our impact And obviously, on in resolution. don't the basically, a Yes. Danny. It's currently has near question. great working it we we any on term,

thinking So that's our right now.

Operator

at time. no more questions are this There

Ilan Daskal

All right.

Okay. Thank forward today, with everyone, the in for you, Thank joining to us quarter. look and next you we you. connecting

Operator

Ladies call. and this now and you this concludes may conference gentlemen, time. Thank you at disconnect for today's participating,

Bio-Rad Laboratories (BIO) 30 Oct 202020 Q3 Earnings call transcript