Bio-Rad Laboratories, Inc.

Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to the BioRad first quarter 2025 earnings results conference call and webcast. All lines having place on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press the star one. I would now like to turn the conference over to Edward Chung, Head of Investor Relations. You may begin.

Thanks, Desiree. Good afternoon, everyone, and thank you for joining us. Today, we will review the first quarter 2025 financial results and provide an update on key business trends for BioRad. With me on the call today are Norman Schwartz, our Chief Executive Officer, John DiVincenzo, President and Chief Operating Officer, and Luke and Rup Lakharaju, Executive Vice President and Chief Financial Officer. Before we begin our review, I would like to remind everyone that we'll 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 of 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'll now turn the call over to our Chief Operating Officer, John DiVincenzo.

Hello, and thank you for joining today's call. Despite a challenging macro environment with academic market headwinds due to government funding and global trade disruptions from tariffs, we delivered solid Q1 results, exceeding consensus for both revenue and operating margins. Our clinical diagnostics business performs slightly better than forecast, while our life science segment experienced softness in academia and biopharma research. Notably, our bioproduction business saw positive momentum, with year-over-year growth returning to our process chromatography business. We continue to prioritize bringing innovative products to our customers. In Q1, we launched several key menu expansions for our core life science portfolio, including a new PCR-based salmonella test for food safety and advancements to our portfolio of DDPCR VeriCheck assays for cell and gene therapy. We are also strategically advancing droplet digital PCR as a valuable tool for oncology diagnosis and management through high-valued assays and key partnerships. Recent compelling clinical trial data published in Clinical Cancer Research utilizing Bio-Rad's DDPCR technology demonstrated a strong correlation between circulating tumor DNA changes and treatment outcomes in lung cancer. This highlights the significant impact of our GDPCR platform on clinical decision-making and patient outcomes. Our team also demonstrated exceptional execution in driving productivity improvements and effective cost management, building on our lean initiatives. We proactively evaluated and are implementing mitigation strategies for tariff impacts in response to escalating geopolitical and trade tensions. In diagnostics, we continue to show solid demand, offsetting reimbursement reductions in China with nearly 3% growth in the rest of the world. And in life science, we navigated academic and biopharma research funding headwinds, particularly in the U.S., while maintaining strong demand for consumables. Process chromatography returned to growth, as I stated, and our DD-PCR portfolio maintained its momentum and strong reagent and consumables growth. Our acquisition of Stila technology remained on track for closing by the end of the third quarter. We are excited about the Stila platform as it expands our offering in the digital PCR segment from gene expression to targeted rare mutation detection. We're planning a webinar following the close of the Stila transaction to outline our strategy in digital PCR with the addition of the Stila and Continuum platforms. During the quarter, I visited several of our global teams across three continents, including nine manufacturing sites, and customer visits for both our life science and clinical diagnostic segments. These visits reinforced my confidence in our team's commitment, strength of our global organization, and fantastic relationships with our customers. Our investments in efficiency and productivity within our manufacturing sites and distribution centers are yielding tangible results. My travels, including a meeting with the leaders of the German Red Cross Blood Donation Service, where we were recently awarded a multi-year contract renewal for our immunohematology platform, a testament to the quality and reliability of our solution. At Bio-Rad, we continue to advance in our ability to develop innovative products, drive operational excellence, and build upon our relationships with customers in over 133 countries, as we are laser-focused on delivering sustainable, profitable growth. We thank you for your ongoing support, and I will now turn the call over to Rup for a review of our financial performance.

Thank you, John, and good afternoon. I'd like to start with a review of the first quarter 2025 results. Overall, we executed well during the quarter, which allowed us to deliver revenue and operating profit and margin ahead of consensus estimates for Q1. Net sales for the first quarter of 2025 were approximately 585 million, which represents a 4.2% decline on a reported basis versus 611 million in Q1 of 2024. On a currency neutral basis, this represents a 1.5% year-over-year decrease and was primarily driven by lower sales in our life science group. Sales of life science group in the first quarter of 2025 were $229 million compared to $242 million in Q1 of 2024, which is a decline of 5.4% on a reported basis and 3.5% on a currency neutral basis, primarily reflecting ongoing softness in the biotech and academic research market, particularly in the Americas. currency neutral sales decreased in the Americas, and Asia Pacific partially offset by increased sales in EMEA. Our process chromatography business experienced mid-teens growth on a year-over-year basis. The strength in Q1 was due to the timing of customers' orders, and we continue to expect high single-digit growth for this area in 2025. Excluding process chromatography sales, core life science group revenue decreased 7.5% year-over-year and 5.5% on a currency neutral basis due to the softness across the markets for instrument demand. Sales of the clinical diagnostics group in the first quarter of 2025 were approximately $357 million compared to $369 million in Q1 of 2024, which is a decrease of 3.2% on a reported basis and effectively flat on a currency neutral basis. Increased demand for our quality control products was offset by the expected lower diabetes testing revenue, and we currently do not expect further reimbursement changes in China this year. On a geographic basis, currency neutral sales decreased in Asia Pacific, partially offset by increased sales in EMEA and the Americas. Q1 reported GAAP gross margin was 52.3% as compared to 53.4% in the first quarter of 2024. The decrease in gross margin was primarily driven by restructuring expenses related to the workforce reduction announced during the first quarter of 2025. SG&A expense for the first quarter of 2025 was $209 million, or 35.7% of sales compared to $215 million, or 35.2% in Q1 of 2024. The decrease in SG&A expense was primarily due to lower discretionary spending and employee-related costs partially offset by restructuring costs. Research and development expense in the first quarter was $74 million or 12.6% of sales compared to $66 million or 10.9% of sales in Q1 of 2024. The higher year-over-year R&D was primarily due to restructuring costs, partially offset by lower employee-related expenses. Q1 operating income was approximately $24 million or 4% of sales compared to $45 million or 7.3% of sales in Q1 of 24. Lower operating income is driven by higher restructuring costs, partially upset by the revenue mix, continued proactive expense management initiatives. During the quarter, interest and other income resulted in net other income of 28 million compared to net other income of 24 million last year. The change in fair market value of equity security holdings, primarily related to the ownership of Sartorius AG shares, contributed to our reported net income of $64 million, or $2.29 per diluted share. The effective tax rate for the first quarter of 2025 was 23.3% compared to 21.8% for the same period in 2024. The higher rate in 2025 was driven by our geographical mix of earnings. 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. First quarter non-GAAP gross margin was 53.8% in line with consensus, but lower than Q1 2024's results of 54.2%. First quarter non-GAAP operating margin was 10.8% compared to 9.7% in Q1 of 2024. The non-GAAP effective tax rate for the first quarter of 2024 was 20.6% compared to 22.4% for the same period in 2024. The lower rate in 2025 was driven by our geographical mix of earnings. Finally, non-GAAP net income for the first quarter of 2025 was $71 million or $2.54 diluted earnings per share. Moving on to the balance sheet, total cash and short-term investments at the end of Q1 were $1,660,000,000 compared to $1,665,000,000 at the end of Q4 2024. Inventory at the end of Q1 was $790,000,000 up from $760,000,000 in the prior quarter. For the first quarter of 2025, net cash generated from operating activities was $130,000,000 compared to $70,000,000 for Q1 of 2024. Net capital expenditures for the first quarter of 2025 were $34 million, and depreciation amortization for the first quarter was $38 million. Regarding free cash flow for the first quarter of 2025, we were pleased with a generation of $96 million, which compares to $30 million in Q1 of 2024. We continue to target full-year free cash flow of approximately $310 to $330 million for 2025. During the first quarter, purchased 399,295 shares of our stock for a total cost of $101 million or an average purchase price of approximately $253 per share. In April, we purchased an additional 422,648 shares of our stock for a total cost of $99 million or an average purchase price of approximately $234 per share. We will continue to be opportunistic with our buyback program and still have $377 million available per share repurchases under the current board authorized program. Moving on to the non-GAAP guidance for 2025, we are updating our 2025 full-year guide to reflect the Q1 results, the evolving state of the academic and biotech research funding, and the impact of recent changes in the macroeconomy, including tariffs. We recognize that the recent macro changes are causing uncertainty and remain fluid. However, in the interest of full transparency, we're providing our best estimates of the impact of the known changes as of today. Overall, we now expect total currency neutral revenue to be in the range of approximately a 1% decline to 1.5% growth or approximately 225 basis points lower than our previous guide. I'll start with the effect of the softer academic research funding as a result of the changes in U.S. policy. We now expect these life science purchases to be more muted in 2025, in particular demand for instruments, as customers evaluate the impact of potential changes to government funding. We are also seeing reduced demand from biotech customers, particularly among small and mid-sized development stage companies that have become more conservative with equipment spending due to the increased volatility in the capital markets. As such, we now expect our life science business to be in the range of flat to down 3% for the full year versus a growth of approximately 1.5% to 3.5% previously. Next, we are de-risking our diagnostics growth outlook by approximately 100 basis points to reflect a softer macroeconomic environment, particularly in China, and now anticipate full year growth of approximately 0.5% to 2.5%. The net effect of the market softness in our business group is approximately 100 basis point headwind to operating margin. Finally, the impact of tariffs. Our updated guidance considers tariffs that are in effect globally as of today and assumes no change in the current US policy. The net impact of the tariffs is 130 basis point headwind to operating margin, primarily due to US manufactured products that are imported into China. Included in this updated view are actions we are taking to partially mitigate the effects of the tariffs, such as surcharges, prepositioning inventory in certain countries, further regionalizing supply chains, and identifying additional in-region manufacturing opportunities. Factoring in the above, the updated full-year non-GAAP gross margin is projected to be between 53 and 54.5%. Note that we were able to offset the impact from market softness through our actions and the difference relative to our prior full-year gross margin outlook of 55 to 55.5% is entirely due to the impact of tariffs. Full-year non-GAAP operating margin is projected to be between 10 and 12%. Included in this range are the above considerations that I just spoke of. Additionally, we continue to be on track to achieve a key development milestone in Q3 2025 related to Saber Bio, which as discussed previously, would result in a one-time in-process R&D charge of $10 million. As a result of the recent weakening U.S. dollar, we expect less of a headwind to our revenue and operating income than our prior guidance. We now expect approximately a 100 basis point headwind to 2025 revenue and approximate 20 basis point impact on operating margin versus the prior 40 basis point effect. We estimate the non-GAAP full-year tax rate to be approximately 22% versus 23% previously due to the change in the equity value of Sertorius Investment. With our updated outlook for 2025, we recognize that there are many moving pieces and the situation is evolving rapidly. There's a wide range of scenarios that could ultimately play out. That said, we're trying to be prudent and transparent in providing the key headwinds that we are currently seeing in the marketplace. Where possible, we are focused on mitigating the impacts from proposed tariffs and global trade disruptions to deliver results for shareholders. As you've seen in the past year, management's approach to guidance is to be realistic in setting expectations. While we are adjusting our 2025 outlook, this does not shift our focus from the significant opportunities we see in enhancing business performance. Driving consistent top line growth remains central to our strategy, and a key enabler of substantial margin expansion. We are confident that our ability to improve operational efficiency and strategically optimize our footprint will allow us to capture hundreds of basis points of margin expansion over the coming years. We're eager to share more about this opportunity and other critical aspects of our business at our investor day this fall. I'll now turn the call over to Norman for his remarks.

Okay, so I think as Rup has alluded to, you know, we continue to operate in what I think of as in a very dynamic environment. And I would say that in all my years in this business, I've never experienced such a prolonged period of macroeconomic headwinds and their impact on the growth of our business, I would say, especially for life science. However, We are still in the golden age biology and I continue to see a long runway ahead for life science research and for diagnostics, the two principal markets that we serve. We remain committed to our customers, the attractive markets that we serve, and certainly the contributions we can make, which position Bio-Rad for consistent, profitable growth. Second, I would say that with our strong balance sheet, we have tremendous optionality. We continue to invest in our business and remain active in evaluating inorganic opportunities, opportunities that potentially offer values to customers immediately. With the increased volatility in the equity market in the past few months, we are seeing more opportunities as valuations for assets have moderated relative to where they have been in recent years. And finally, I guess I would note that BioRed has been resilient and has persevered through many cycles in our 70 plus year history. To the credit and determination of BioRed employees around the world, we continue to advance our corporate transformation And I believe we'll come through this dynamic period even stronger than before. So, Ed, that's all I have. Turn it back to you.

That concludes our prepared remarks, and now we'll open the line to take your questions. Operator?

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. And our first question comes from the line of Patrick Donnelly with CD Group. Your line is open.

Hey, guys. Thank you for taking the questions. Ruth, probably one for you to start, not surprisingly, on tariffs. It sounds like you guys are layering in some impact into the guide. Can you just talk about maybe the gross impact, what mitigation efforts you guys are doing? It sounds like potential surcharges. I'm sure some acceleration on the cost side. And what's the ability to contain this impact into 2025? Will some of it linger? Maybe just walk us through what you're seeing, what the mitigation efforts are, and how to think about this.

Yeah, of course. Thanks, Patrick, for the question. Not surprising also in terms of leading up with tariffs, right? So there are a number of different factors. Let's step back, first of all, maybe just to understand where the tariff impacts are coming from. I think there's a few different aspects. One is, you know, our global footprint is a positive for us. However, we don't have China manufacturing footprint today. So that's one consideration here. Where the tariffs are most significantly impacting us is obviously U.S. products being shipped into China, but also Europe products that are being shipped into the U.S., and so we're very mindful of that. And then there's, of course, supplier considerations. As we think about these different tariff pieces, we are taking actions in terms of potential surcharges, as I've mentioned in my prepared remarks. But we also have been seeking to pre-position inventory, and that's been another aspect of it. The other pieces of this are longer term, right, in terms of looking at in-region manufacturing opportunities, but also then how do we drive further supply chain vitality in region as well in support of the manufacturing. And so all of the, but those, those last two that I just mentioned are longer term in nature. and especially for our diagnostics part of the business, which, as you think about the regulatory considerations, it's a multiyear journey. And so, as we think about the gross margin and operating margin effect here, the gross margin, as I mentioned, movement from the original guide is effectively all tariff-related. We were able to mitigate the operational softness we're seeing or, I'm sorry, market softness we're seeing. And so when you think about that, it's how can we look at within 2025 any further actions we can take and we'll seek to limit it to 2025. However, I think it's still a fluid environment and so it's hard to say what 26 might hold at this point in time.

Okay, that's helpful. And then just the academic side, you know, obviously that's worsened here over the past, you know, past couple months. What have you guys seen as we work our way through March and April? Obviously, the NIH proposal came out with that 40% cut. What's the expectation now for academic? And again, maybe just the cadence of what you saw as we worked our way through the quarter and into April on that segment would be helpful.

Yeah, maybe I could start and then have Norman and John jump in as well. You know, I think what we saw, and there's been some recent articles just on, you know, level of funding decrease that's occurred. There was something that came out more recently in the last day or 2 talked about a 28% reduction in overall funding. I think through the 1st quarter, we were able to hold and especially because the consumables. Uh, we're, we're maintained to be fairly strong. It really is the instruments where we saw the softness more so. But it worsened as we have gone through Q1. And as we think about where we are in Q2 and moving forward, I think the continued lack of clarity on what is the funding level, where's the thresholds going to be maintained, what level of funding is going to be provided, that's creating some additional Challenges for people from an activity standpoint, we're still seeing consumables activity or activity and especially on the consumer side. It's the instrument side that continues to be challenging. I think for us at this point in time.

Okay, and maybe last so.

Yeah, go ahead.

Our next question comes from the line of Dan Leonard with UBS. Your line is open.

Thank you. Maybe just to riff off that last question there, how wide is the gap at this point in growth between consumables and equipment?

I would say it's been a bit of a deterioration. If I just look at it sequentially in terms of the instrument sales on a sequential basis, Dan, it's probably down about 10% further decline. Consumables actually held up fairly well from a sequential standpoint in Q1 versus Q4, maybe just a tad down, but still very strong overall. Hopefully that gives you the answer or perspective you're seeking.

That's helpful. And then as a follow-up, I could use a little bit more help understanding exactly the tariff exposure. So a couple of specific questions. What proportion of your revenue in China is sourced from the US? What percentage of your revenue in the US is sourced from the US and thus insulated from Europe or China tariffs? And what assumption are you making regarding who eats the tariff? How much are you offsetting with a surcharge versus absorbing the tariffs on your P and L. Yeah.

So, so, um, again, we don't have any China manufacturing, right? So that that's first and foremost to understand. So you can imagine that, um, the, the, the revenue that's, uh, going into China is either coming from the U S or Singapore predominantly, or there's a bit in Europe as well. And the biggest piece of the tariff impact is those pieces obviously coming from the U.S. into China, and especially on the diagnostic side of the house. And so that's where we're seeing the largest impact of the tariffs overall in terms of what we've articulated.

And then your assumption on you absorb that tariff on your P&L?

Yeah, I mean, I think it's something we're evaluating. Obviously, we talked about surcharges that we're putting in place, and we're working through that and have deployed that already. But as we think about how things are evolving, I think we're also mindful of how the situation is evolving on a geographic basis, right, especially China with the U.S. specifically.

Okay.

Thank you. We've prepared to put in some price adjustments and surcharges nearly effective immediately of course on the diagnostic side we have longer-term contracts which do have some ability to adjust but not exactly the same as on life sciences so the team is kind of just preparing how could we compensate for the tariffs if we absorb it absorb it otherwise buying that additional charges to customers okay

Thank you. So just one more thing to keep in mind that it's, you know, the tariff surcharges are not a free ride. You know, many of these customers have limited budgets. So to the extent you have a tariff surcharge, you might reduce the amount of purchases that are made.

Yeah, I was wondering that as well, Norman. Thank you.

Next question comes from the line of Brandon Killard with Wells Fargo. Your line is open.

Hey, thanks. I want to follow up on that line of questioning. So as it relates to products you're shipping to China, some of your peers have assumed that, you know, that revenue just goes away. It's not feasible for customers to buy the product. So have you assumed demand destruction and are the surcharges in terms of like top line embedded in the guidance as of right now?

Yeah, so two pieces there, Brandon. In terms of the latter, the surcharges are embedded or consideration of the surcharges are embedded within the guide. In terms of the former, we are looking at it from a, so we're not looking at, we're trying, we are looking at it from the standpoint of preserving customer continuity and market share. And therefore, we are, seeing it as strategic in terms of if we, considering the tariff situation, how fluid it is, where surcharges ought to be applied and how we ought to do that.

But again, as I think Rup alluded to earlier, I mean, products going into China actually come from not just the Americas, but from Europe and from Asia, specifically Singapore. So we've got a reasonable amount of mitigation of China tariffs for those products.

Okay. In terms of the guide, I mean, Based on where you came in in the first quarter, it still seems to imply a big second half round, especially when you're looking at it on a two-year stacked comp basis. So can you just help us understand, like, to what degree do you think you de-risked the top line outlook enough for the back half?

Boy, I mean, that is the question, isn't it, Brandon? I mean, we've tried to take a conservative view. of the demand profile and how we see that softness. The ramp from Q1 to Q2, and Q2, Q3 are relatively flat. There's a little bit of an uptick. It's Q4, but we've also, and there's some specific nuances to, let's say, QSD, or is it part of its seasonality, part of its some quality systems revenue that we see uptick. Process Chrome continues relatively consistent through the year. So, we've tried to de-risk it in terms of these moving pieces. I think we've, as we've tried to be over the course of last year or so, be reasonable in terms of our point of view while really taking a prudent approach on what we're seeing in the marketplace.

And what we have done is we've worked, obviously, very closely with the commercial teams here, looking at number of proposals, win rate, sales cycle, and then the run rate business. Run rate business has continued to be as modeled. The run rate, as you can imagine, on the instrument side of things, the sales cycle is a little longer, although we maintain our win rate, which is a positive. So we believe that things will settle down here in the coming months, if not a couple of quarters, and the team is pretty optimistic on the current forecast achievability.

Yeah. Okay, last one. Norman, you mentioned the balance sheet optionality and availability of assets and valuations, which is helpful. Update us on your priority or your preference for capital allocation right now. You're buying back a lot of stock, which is great. I mean, would you consider a larger deal perhaps right now that's maybe north of a billion dollars, or are you primarily still focused on bolt-ons? Just what are your preferences?

Yeah, yeah. I think, you know, especially given some of the what I think of as attractive inorganic opportunities that are bubbling up, I think there is a real appetite for doing something meaningful. You know, obviously the right deal is important for us, You know, especially those larger things that provide scale. We can leverage our kind of global commercial operations. Yeah, lots of things we could do there. But I think we are focused a little bit on larger things. And yeah, we've got plenty of capacity and, you know, on our balance sheet.

and could you know certainly do something in the in the b range thank you thanks brandon our next question comes from the line of taiko peterson with jeffries your line is open this is not on for taiko maybe just to start out on a biopharma group i think you talked about kind of softer trends on smaller and mid-size obviously Process Chrome up mid-teens and 1Q is good to see, I guess. On Process Chrome, you know, is there any kind of initial early-year stocking? You know, you have easy comps there. Why wouldn't that trend kind of continue relative to the high single-digit guide? And then in terms of consumables versus instruments within biopharma and maybe more specifically droplet digital PCR, has your outlook changed at all for the year in terms of consumables and instruments within that end market? Thanks.

Yeah, thanks, Matt. Glad to have you on. So in terms of bioprocessing to start with, you know, Process Chrome was a positive for us. It was nice to see. To your question of why shouldn't that continue, it really is. And we didn't pull anything forward, but customer demand drove it such that they wanted some uptake earlier in Q1 than what they would have otherwise wanted a little later for their own from their own manufacturing production standpoint. We still see it as a high single-digit growth for the year. And really, just as we've expected, the destocking has continued to decrease, and it's normalizing as we would expect. So nothing unusual there, and it's very much a positive there for us. In terms of your question on consumables and instrumentation, the real softness is really around instrumentation, and that's the biggest challenge for us. Consumables has held fairly nicely, even considering kind of the macro around academia, NIH, et cetera. And so we're happy to see that. But where the softness, we pulled it back. It's specifically related to academia and biotech, if you will, and the instrumentation side of that.

Okay, thanks. And then just wanted to clarify, I think you had baked in prior $15 million for the year on the reimbursement dynamics in China. I guess just to clarify, did those kind of play out as expected in one queue in any way? You can kind of quantify what the reimbursement headwind was to your China business here in the first quarter?

Yeah, I think you said it well. It played out just as we expected, nothing different. Uh, nothing incremental, uh, and just in terms of that number that you quoted just now, the 15Million dollars, you just think of that as, you know, uh, 1 quarter value of that. It's kind of played out effectively.

Okay, thanks. Maybe just 1 more understand. You still haven't closed the still a deal. Um, remains on track for for their quarter, but just any kind of. Color update in terms of conversations you've had with with customers, you know, now that it's been some. some time you, since you've announced it, um, give a strategy update here in a few months, but just any feedback or color from, from, uh, your customers, since you've kind of announced the deal, um, maybe, you know, excitement levels around that any more color to add around the still acquisition. Thank you.

Yeah, I think, um, first of all, within our teams, you know, I mentioned that I kind of, uh, Travel the globe, uh, during the quarter and, um, each of our teams are very excited about the platform and what we can do with our content on that platform. even into the food applied application. So we remain very excited about it. You know, we haven't been jumping the gun and engaging customers necessarily on certain things, but where it has come kind of across in certain areas, there's very positive feedback. I mean, I was very surprised that the brand awareness that's out there on the platform in various geographies around the globe. We're bullish. We still have a little ways to go here before we close the deal and can really kind of engage with customers. But overall, there's a lot of excitement. And I think that the exciting thing is the ease of use and the workflow of that platform is very, very exciting to the marketplace.

Great. Thank you.

Thanks, Beth.

Next question comes from the line of Connor McNamara with RBC Capital Markets. Your line is open.

Hey, guys. Thanks for taking the questions. Just first on the life science business, can you talk about the dynamics there first on the pull forward on Process Chrome? Was any of that ahead of Terrace or what can you comment on the strength of that and kind of the cadence of that through the year? Maybe we'll start there.

Yeah, so, Connor, I want to clarify, it wasn't necessarily a pull forward by us. It's something that was customer demand driven, right, in terms of it. And we don't think it was tariff relief. And it wasn't tariff relief. So it wasn't a prepositioning of that revenue ahead of tariffs or anything like that.

OK, thanks for that.

And then the team has basically confirmed their full year forecast as we submitted. And that's pretty solid. It's a very solid forecast.

Okay, perfect. And then if my math is right, it looks like you're taking about $40 million out of the life science guide, which I think you've said that the federally funded academic and government sales is 4% of your sales. So is that $40 million all coming out of that? And kind of are you making the assumption that'll be down 40% year over year? Or is there anything else baked into the life science cut?

Yeah, I mean, it really is. So you're right, the federally funded slash NIH, as you said, it's, you know, as we said before, 4%. Remember, academia broadly is a larger percentage of our overall revenue, somewhere in that, let's call it 20-ish percent. So that's the other piece of that that comes into play, right, overall. And the other piece is, as a function of that, geographically, China continuing to be soft.

uh from a macro and and just you know situation standpoint you know the first quarter as you've probably seen uh connor there was a four five six week period of time there in february in the march where there were almost no grants approved or renewed um so it was pretty dramatic back there we won't see that probably until a number of quarters from now um and it may be a little more dramatic in the first quarter than we're going to see the rest of the year but there's certainly softness and concern by our customers

Yeah, I mean, hopefully that will, as we go through the year, that will moderate that, that cautiousness will moderate. You know, we still haven't seen Congress weigh in on the NIH going forward. So we'll have to see how that goes.

Got it. Okay. Thanks for that. And this last one for me. You said you risked your clinical, diagnostics growth by 100 basis points. Is that just conservatism on weaker demand ahead of, you know, because of what's going on in the macro environment? Or is there anything that you saw within the quarter, you know, exiting the quarter that would imply that that 100 basis points cut is what you're actually seeing? It just sounded like you're just taking a conservative tone on that. If you could give more color, I'd appreciate it.

Well, I mean, again, let's keep in mind, right, I think it's the macro from a DX standpoint on activity levels is one aspect of it. China is another aspect of it. And China may be the more significant aspect of it, right? And so those are the pieces. And just, you know, knock on wood, we haven't seen any further reimbursement rate changes or anything like that. VVP hasn't been anything to note for us. And so it really is just the macro dynamics and softness.

And our last question comes from the line of Jack Meehan with Nefron Research. Your line is open.

Thank you. Good afternoon, everyone. Good afternoon. I wanted to start, just follow up on the tariff assumptions here. This 130 BIPOP margin impact, so it's about $30 million to EBIT. First, I just want to confirm, is this a three-quarter impact you're assuming for the reciprocal tariffs? And are you assuming any revenue impact, or is it really just like the increased cost on exports for those products?

Yeah. So it really depends on which tariffs are in play. So it's respective to the tariffs in play. Obviously, there are certain tariffs that have paused right now. Some are in effect already. So that's what's contemplated in terms of that guide. What we also determined is the surcharges as a net effect of that within that overall guide.

Okay. And then... You mentioned within the diagnostics business, a few times you've mentioned part of it is related to the China region. Can you just talk about how China diagnostics did overall for BioRad in the first quarter? And do you think the increased tariff rates, is that what you're referring to in terms of the macro or is it something broader there?

So a good portion of our diagnostic business in China is actually the quality systems, which we're trying to understand clearly whether that's going to be excluded from tariffs or not. So it looks like that's good news for us. I don't know if you have the exact numbers, but don't think.

Yeah, I mean, if you think about China overall for us, Jack, it wasn't. it was you know kind of mid single digits to let's call it mid to high single digits kind of effect a negative effect from from what we had expected in china and overall i would say it got tougher as we went through the quarter and i think that's the other aspect to keep in mind got it okay and then just the last one about the free cash flow update was a bright spot kind of maintaining that forecast despite

you know, the lower op margin. Can you just talk about, like, some of the levers you're pulling? Is it working capital? Just what else you're looking at to deliver on free cash flow?

Yeah, it really is the working capital. I mean, we continue to focus on inventory and inventory management. Obviously, with the forecast changes, we're running that through the system, looking at what else we can do in region in terms of the timing of those The other aspect is looking at supplier management as well as our DSO in terms of opportunities for improvement there. So we have specific initiatives on all of those fronts wherein it gives us confidence to still stand behind the free cash flow range that we provided.

Okay. Thank you, Rup.

That concludes the question and answer session. I would like to turn the call back over to Edward Shong for closing remarks.

Thank you for joining today's call. We'll be participating at the RBC Global Healthcare Conference in New York later this month, and we'll also be back out in New York in early June for the Jefferies Global Healthcare Conference. As always, we appreciate your interest, and we look forward to connecting soon. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you all for joining and you may now disconnect.