Bio-Rad Laboratories, Inc.

as we maintained a tight focus on manufacturing costs, which was partially offset by higher material costs and lower absorption. Amortization related to prior acquisitions recorded in cost of goods sold was approximately $4 million in both periods. SG&A expenses for Q1 2024 were $215 million, or 35.2% of sales, compared to $226 million, or 33%, in Q1 of 2023. The decrease in SG&A spend was driven by the positive impact of our previously discussed cost reduction initiatives, including lower employee-related expenses and discretionary spend, as well as higher restructuring charges in the year-ago period. Total amortization expense related to acquisitions recorded in SG&A for the quarter is approximately $1 million versus approximately $2 million in Q1 of 2023. Research and development expense in the first quarter was $66 million or 10.9% of sales compared to $75 million or 11.1% of sales in Q1 of 2023. Year-over-year decrease was primarily due to decreased employee related expenses and lower restructuring costs. Q1 operating income was $45 million or 7.3% of sales compared to 62 million, or 9.1% of sales in Q1 of 2023, primarily due to lower sales versus the year-ago period, which were partially offset by our expense management initiatives. 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 $422 million of income to the reported results. During the quarter, interest and other income resulted in net other income of $24 million compared to net other income of $40 million last year. The primary driver of the year-over-year change is the lower Sartorius dividend, which declined to $18 million in Q1 of 2024 versus the quarter of 2023. The effective tax rate for the first quarter of 2024 was 21.8% compared to 18.7% 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. First quarter reported net income was $384 million or $13.45 diluted earnings per share compared to net income of $69 million or a diluted earnings per share of $2.32 in Q1 of 2023. This change from last year is largely related to changes in the valuation of our Sartorius holdings. Moving on to the non-GAAP results. Looking at the results on a non-GAAP basis, we have excluded certain atypical and unique items that impacted both the gross and operating margins, as well as other income. These items are detailed in the reconciliation table in the press release. Looking at the non-GAAP results for the first quarter, in cost of goods sold, we have excluded approximately $4 million of amortization of purchased intangibles and approximately $1 million of restructuring expenses. These exclusions moved the non-GAAP gross margin to 54.2% for the first quarter of 2024, which is flat to Q1 of 2023. Non-GAAP SG&A dollar spend was slightly lower on a year-over-year basis, but as a percentage of sales was higher due to lower revenue in Q1 of 2024. Specifically in the first quarter of 2024, SG&A as a percent was 34% versus 31.3% in Q1 of 2023. In SG&A, on a non-GAAP basis, we have excluded the amortization of intangibles of approximately $1 million, approximately $2 million for an in vitro diagnostic registration fee in Europe for previously approved products, and approximately $4 million of restructuring-related expenses. Non-GAAP R&D as a percentage of sales in the first quarter of 2024 was 10.5% versus 10.4% in Q1 of 2023. In R&D, on a non-GAAP basis, we have excluded approximately $2 million of restructuring expenses and a small acquisition expense. The cumulative sum of these non-GAAP adjustments results in moving the quarterly operating margin from 7.3% on a GAAP basis to 9.7% on a non-GAAP basis. This non-GAAP operating margin compares to non-GAAP operating margin of 12.4% in Q1 of 2023. We've also excluded certain items below the operating line, which is primarily related to the increase in value of the Sartorius equity securities and loan receivable holdings of $422 million. The non-GAAP effective tax rate for the first quarter of 2024 was 22.3% compared to 20.9% for the same period in 2023. A higher rate in 2024 was driven by geographical mix of earnings and change in valuation allowance related to our deferred tax assets. Finally, non-GAAP net income for the first quarter of 2024 was $65 million or $2.29 diluted earnings per share compared to $99 million or a diluted earnings per share of $3.34 in Q1 of 2023. Moving on to the balance sheet, total cash and short-term investments at the end of Q1 2024 was $1,651,000,000 compared to $1,613,000,000 at the end of 2023. The change in cash and short-term investments from the fourth quarter of 2023 was primarily due to the change in working capital. Inventory of $783 million was essentially flat compared to $781 million in the prior quarter. For the first quarter of 2024, net cash generated from operating activities was $70 million which compares to 98 million in Q1 of 2023. Net capital expenditures for the first quarter of 2024 were $40 million, and depreciation and amortization was 37 million. Adjusted EBITDA for the first quarter of 2024 was 109 million, or 17.8% of sales, and excluding the Sartorius dividend was 14.8%. The adjusted EBITDA for the first quarter of 2023 was 149 million, or 21.9% of sales, and excluding the Sartorius dividend was 16.8%. During the first quarter, we purchased 14,250 shares of our stock for a total cost of approximately $5 million, or an average purchase price of approximately $330 per share. We continue to be opportunistic with our buyback program and still have approximately $275 million available for share repurchases under the current board authorized program. Moving on to the non-GAAP guidance. As referenced in Andy's commentary, we are seeing some encouraging signs in the life science and markets. However, we remain cautious on the magnitude and timing of the recovery for the life science group, but are still anticipating improvement during the second half of the year. We continue to expect normalized growth for the clinical diagnostics group in 2024. Taken together, we are maintaining our full year outlook with currency neutral revenue growth to be between 1 and 2.5% and non-GAAP operating margin projected to be between 13.5% and 14%. I'll now hand the call back to Norman to make a few concluding remarks.

Thanks, Drew. Just to close it out, I'd like to reiterate that in spite of all that's going on around us, Our strategy and our focus for the future growth of the company is intact. In our clinical diagnostics business, we have these leading market positions globally for our core platforms, and we continue to invest in supporting the growth and building a position in, for example, a new molecular diagnostic segment through the development of PCR1, an acquisition we made some time ago. and leveraging our droplet digital PCR platform into high-value niches. In life science, we continue to maintain a focus on biopharma, especially for digital PCR, our process chromatography products, and new products in development, particularly around cell biology. We do believe the long-term opportunity for sustained growth in this biopharma market segment is solid. And certainly, we also continue to invest to enhance our leadership in digital PCR and other leading platform positions in the academic markets that we serve. Overall, between life science and diagnostics, we do believe we're well positioned to drive long-term growth as we move through this dynamic period.

All right, that concludes our prepared remarks, and we will now open the line to take your questions. Operator?