Bio-Rad Laboratories, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Bio-Rad Fourth Quarter and Full Year 2023 Earnings Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. I would now like to turn the conference over to Edward Chung. Please go ahead.

Thanks, Jenny. Good afternoon, everyone, and thank you for joining us. Today, we will review the fourth quarter and full year 2023 financial results and provide an update on key business trends for Bio-Rad. With me on the call today are Norman Schwartz, our Chief Executive Officer, Andy Last, Executive Vice President and Chief Operating Officer, and Simon May, President of the Life Science Group. Before we begin our review, I would like to caution everyone that we will be making forward-looking statements about management's goals, plans and expectations, our future financial performance, and other matters. These statements are based on assumptions and expectations of future events that are subject to risks and uncertainties. Our actual results may differ materially from these plans, goals, and expectations. You should not place undue reliance on these forward-looking statements, and I encourage you to review our filings with the SEC where we discuss in detail the risk factors in our business. The company does not intend to update any forward-looking statements made during the call today. Finally, our remarks today will include references to non-GAAP financials, including net income and diluted earnings per share, which are financial measures that are not defined under generally accepted accounting principles. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in our earnings release. With that, I will now turn over the call to Andy Last, our Executive Vice President and Chief Operating Officer, to provide an update on Bio-Rad's global operations.

Okay, many thanks, Ed, and good afternoon to everybody. Thank you for joining us. The fourth quarter of 2023 performed largely as expected. reflecting a continuation of the macroeconomic trends started earlier this year in the biotech and biopharma segments, China, and geopolitical challenges related to Russia. However, revenue picked up nicely compared to Q3 in both life science and diagnostics, although as expected, we saw little in the way of budget flush in the fourth quarter of this year for the life science business. During the quarter, we smoothed out the remaining operational challenges associated with our SAP Go Live in Q3 in Asia Pacific. And we are now operating on a single global instance of SAP across all our operations. In life science, we experienced a double-digit core business decline compared to Q4 prior year, where we had challenging compares due to strong budget flush, backorder burn down, and we benefited from the launch of the QX600 DD-PCR platform. We were pleased with the growth of our clinical diagnostics business in Q4, especially in Asia Pacific where we prioritized placements to capture some strong growth trends, particularly in our diabetes testing franchise. We are now past our supply chain challenges and finished the quarter with a more normalized year-end backlog. Overall, our DD-PCR franchise had a soft 2023 with sales flat when excluding COVID as compared to the high growth we had previously been experiencing from our focus in biotech and biopharma. However, we remain very positive on maintaining our leading market share in the markets we serve and are looking forward to the impact of the QX Continuum launch as we expand our focus on the lower end market later this year. In addition, we continue to prioritize investment on application and assay expansion for the platform overall, with further launches coming during the year. Further, we're excited about the launch of several other new life science products this year, which include our next-generation ChemidocGo Western Block Platform and single-cell DDC sample preparation solutions. We were pleased with the Q4 finish for our clinical diagnostics business, especially double-digit year-end growth in Asia Pacific as a function of demand and priority placements, which helped us to deliver mid-single-digit growth overall for the quarter. During 2023, our teams worked hard on reducing our back orders in the clinical business, while bringing up Singapore to full production for the products transferred from France. We were pleased with the progress we made on our core franchises in quality controls, immunohematology, diabetes and autoimmune, net of the challenges in Russia and China. In Q4, inventory levels remained high and similar to Q3, continuing to reflect some impacts of our manufacturing transfer of clinical instruments from France to Singapore, and also lower demand impacting inventory consumption and life sciences. We continue to exercise tight cost control in Q4, and this included lower employee-related costs reflecting reduced incentive compensation accruals. Looking toward 2024 for our clinical diagnostics business, we anticipate a more normalized year for customer demand. We remain cautious on the pace and dynamics of recovery in our life science business. We expect the first half of the year to be a decline due to ongoing softness in biopharma and biotech and prior year compares. But anticipate improvement in the second half of the year as funding improves along with stabilization in the broader biopharma market. The pace and shape of recovery in China remains uncertain. but China remains a priority market for future growth for the company. Overall, we see 2024 as a recovery transition year with higher levels of uncertainty than usual for our life science business due to the anticipated second half improvements in biotech and biopharma and the bioprocessing destocking recovery. On the latter point, we entered 2024 with a softer order book for process chromatography than the last few years, mostly related to a couple of large customers, with at least one of our large customers still working off elevated inventory throughout the year. On a positive note, our process chromatography resins are included in five of the novel therapeutics approved by the FDA during 2023. In addition, we are excited about the go-live of our new Singapore DC toward the last part of the year, which supports ongoing logistics improvements in the Asia-Pacific region and globally for both businesses. On the operating costs front, we have continued to make improvements in our cost structure. However, we will see a material step up in cost in 2024, for employee incentive compensation accruals, which, along with annual merit increases, will create a meaningful cost headwind. We also expect to see ongoing tightening of sanctions against Russia, making conditions for meeting demand for our clinical business increasingly more challenging there. In closing, we continue to drive forward on our strategy with focus on execution on our priority market segments and platforms. investing in process and efficiency gains around our single global SAP instance, and maintaining our investment levels to drive innovation for our core platforms. Thank you, and I'll now pass you to Norman to review the financial results.