Hi, everyone. This is Rachel Vatnsdal from the Life Science Tools and Diagnostics team with JPMorgan. Today, I have Norman Schwartz from the Bio-Rad team. This session will be 40 minutes. We'll start off with the standard 20 minutes of management's presentation, followed by 20 minutes of Q&A. If you're listening to this via the webcast, feel free to submit a question online through the portal. Otherwise, if you're in-person, raise your hand, and we have mic runners throughout the room that can get you a microphone. Norman, thank you. Okay, great. Thank you. Okay. Thank you all for joining us here today. It does feel great to be back here in person after several years in three dimensions. Since it has been a few years, I thought I'd take kind of the first part of this to refresh everybody on Bio-Rad and what we've accomplished over the last few years, and then show you a little bit about what we're focused on for the next few years. Of course, we'll be making forward-looking statements, refer to other financial measures not defined under GAAP. As you know, these carry with them inherent risks. For those of you who are new to Bio-Rad, you know, we do have a rich history and a strong culture, but I think more important, we're very well-positioned for the future. We're building on a strong foundation. We have 70 years of continuous progress and, you know, we're today approaching the $3 billion sales milestone. We do continue our reputation as an innovator, investing around 9% of every sales dollar in new products and technology. Finally, we are vertically integrated with competencies from, you know, from product development all the way through to marketing, manufacturing, sales and distribution. Today, we serve two important markets: life science research and clinical diagnostics. Each of these are large, robust markets with ample opportunities for growth. We see ourselves as global leaders in each of these two markets. I think one of the hallmarks of our success over the years is really this idea of staying close to our customers, understanding their needs. I think our direct sales model is really an important contributor in this regard. Today, we serve more than 150,000 customers, with no customer accounting for more than 2% of sales. Pretty diverse. These customers span several sub-segments. Life science research, biopharma, hospitals, clinical labs, transfusion labs, all the way to some applied markets. When we look at our worldwide presence, I think geographically, we're pretty diverse. More than 50% of our sales outside of the Americas. You know, if we look at this long term, we see this geographic mix being evolving into thirds. I think the nature of our customers, our direct sales model, our products all combine to give us a very recurring revenue model with about 70% of our sales recurring in one form or another. Between the two core segments, life science and diagnostics, you know, we have a broad diversified product base, more than 8,000 products, across a variety of technologies. We've built and sustained a strong presence in a number of markets on which we continue to build. Today, if we think about it, you know, we think about 80% of our sales are derived from products in which we have a leading market position. As I mentioned, we operate in these two distinct segments. The first being life science. Here, we serve a mix of academic and biopharmaceutical, and a little bit of applied markets, with a broad array of products for basically for biological research. These customers span the globe. As you can see, healthy balance across the three geographies around the world, and still we see outsized opportunity in Asia. In terms of the products, it's important to understand that this is a mix of instruments and reagents. It's a strong emphasis on content development to increase the percentage of recurring business here. The diversity across products, markets, geographies does provide for some real stability and resilience, as we focus on some key opportunities. Here are the few areas of the portfolio that excite us and that we see as key to growth over the next several years. Top of this list on the left is Droplet Digital PCR, where we are today aggressively extending our portfolio to make ddPCR more accessible to a broader range of customers and applications. Second is biopharma production. We've experienced really excellent growth over the last several years and feel we should continue to see this kind of move forward. In cell biology, this is something more recent where we've assembled what we believe to be a strong portfolio of technology assets, which we are looking to build upon. If we drop one level deeper, talk a little bit about more about Droplet Digital PCR. Ultimately, I think we're excited about this because our customers are excited. Whether they are kind of realizing the power of absolute quantification, achieving a new level of sensitivity when screening for early disease. Kind of all of these areas I think really are installed base of platforms have helped us to establish ddPCR, and we're really working to expand our reach and segmentation of this market with a series of targeted platforms for both research and biopharma, including what you see on the left, QX ONE, which we launched in 2020, targeted primarily at biopharma production and industrial scale settings with kind of high throughput and automation capabilities. More recently, the QX600 really setting a new standard for multiplexed rare event detection. There's QX Continuum. This is a lower-end system which we are working on, should be introduced at the end of the year and could even overlap with higher-end qPCR. Of course, continue to work on the reagent side of the equation. Second area is this area of biopharma production, process chromatography, as we like to call it. These are materials used for separating and purifying biologics at a production scale. We've become well known in the industry for our ceramic hydroxyapatite, among others, used extensively in the kinda really in the later polishing steps of production. As part of our growth strategy, we continue to invest in innovation. We have our new Nuvia mixed mode resins, which really help customers to consolidate purification steps. We're also working with our customers here on application development. Third pillar is centered around cell biology. Again, we've kind of built a strong portfolio, a broad portfolio of technology assets around flow cytometry, antibodies, single cell, all what we see as attractive market areas. For us, I think there's a particular focus on single cell analysis, where we see quite a bit of potential over the next several years in really in two areas. First is rare cell detection, enabling customers to isolate and analyze circulating tumor cells with a simple workflow and high sensitivity. The second is single cell multiomics, where we have some developments in the works. That's a little bit about life science, and this is diagnostics. It's really the other half of our business, accounting for about $1.5 billion of the total Bio-Rad revenue today. Here we serve three primary customer segments: transfusion labs, reference labs, hospital labs. We operate here in most markets globally. Current mix weighted a little more towards the Americas and Europe, with solid growth opportunities in Asia, much like life science. I think here, you know, is a good mix of reagents and instruments, but I think the important thing to understand is that these are mainly what we call closed systems, so the instruments and reagents are run together. We do generate strong consumable attachment to these instruments, with, as you see here, the reagents accounting for about 70% of the revenue. When we think about diagnostics and building on our solid base, we see these three growth pillars for diagnostics. The first is in our core diagnostics, a focus on extending that area with high-value applications. The second is expanding our quality control franchise, including reagents and supporting informatics solutions. The third is something a little bit new for us in diagnostics, which is entering this molecular area, leveraging current positions of technology innovation and commercial strength that we have. In diagnostics, kinda diving a little deeper on the core area, and the, what I call our BioPlex 2200 platform, series of clinical immunology. This is a highly automated multiplex immunoassay system. It's differentiated, and it really supports what we think of as complex disease diagnosis, serving growing clinical areas, particularly places like autoimmune and infectious disease. The idea here is you can detect multiple disease-specific proteins simultaneously. It adds significant clinical value, particularly in the area of autoimmune, where diagnosis is very complex. We offer more than 60 assays and today and have a rich pipeline in the works. Second pillar here is quality controls, where we have a leading position. You know, today, if you think about it, diagnostic tests inform 70% of all medical decisions. Ensuring test accuracy is really critically important for our healthcare system. I think the opportunity to expand this business is driven both by reagents, but also by software. Our software here is entirely unique, enables engagement with a large portion of clinical testing labs in the world. I think it's fair to say that customers who use our, what's called Unity QC data management, they also see a strong preference for our QC reagents, our controls. We're also actively extending our quality controls menu here to include molecular diagnostics. The last growth pillar here is to enter the large and fast-growing market of molecular diagnostics. Here we have kind of a two-pronged approach. First, we're working a large comprehensive menu of tests for use with Bio-Rad's PCR instrumentation. We plan to do this with leveraging an exclusive partnership that we formed with Seegene Technologies for the U.S. market. I think it's fair to say that Seegene's expertise in developing highly multiplex PCR assays makes them an ideal partner for us. Here, we also recently acquired a platform in development called PCR|ONE. It will really allow us to enter another segment, this kind of syndromic testing market, with an innovative, rapid sample-to-answer proposition. The second piece of this is kind of leveraging our industry-leading Droplet Digital PCR franchise to develop high-value clinical assays in large growing markets, such as reproductive health, infectious disease, and transplant monitoring. We have a number of exciting opportunities to introduce here novel assays to replace costly, cumbersome, sequencing and other maybe low sensitivity methods. I think it's fair to say, I think we see a lot of opportunities here. You know, if I look back over the last few years, and what we've done, you know, I think that, I think we really have achieved the goals, of what we call the first phase of our transformation. Are now focused on the next phase of improving our operating performance and accelerating growth. It's a three-phased approach. Beginning with, began with globalization of operations, moves through to operational improvement, and then on to accelerated growth. Much of what you see here today, was put in motion several years ago. I guess back in, 2017, you know, we communicated our operational plans, kind of setting out these financial goals across these four metrics, you know, growth, margins, cash flow, and value. I think it's fair to say through 2021, we not only met but exceeded those goals, best represented by a 7%+ currency neutral growth rate and Adjusted EBITDA margins which have expanded by over 800 basis points. Earlier this last year, early this last year, we conducted another investor day in which we mapped out, again, a path to our next phase of growth and profitability for the years ahead. I think our success here will be driven by kind of the focused investments in new products and technologies to drive and enhance growth, coupled with our continuous efforts to increase operational efficiency. Our plan here is to move our revenue growth up again a little bit to about 9% in the next few years, and really to generate improved operating performance with targeting about 28% EBITDA margins by 2025. Another improvement of about 400 basis points over the next several years. 2022. What to say? I think in spite of the macro challenges of this last year, I think we all feel good about where we're headed and actually in what we've accomplished in this last year. I think we're making measurable progress in reducing what turned out to be supply chain issues in 2022. Beginning to reduce our high backlog of open orders. I will say that our customers, to a large extent, have been very patient while we work to get their orders filled in this process. I think it's also to say that we've learned a lot over the past few years about the fragility of our supply chain and how we classically managed supply and demand dynamics. You know, there are a number of changes and improvements coming out of this that should help us going forward. As we think about the recent inflationary pressures, you know, we're working to increase prices to help offset increased costs in our business. It's a question we get a lot. I think most important, I think our core businesses in healthcare, biopharma, and the research markets, I think they really continue to be robust and steady for us. I think we're. Well, I got one more here. This is a slide that outlines a little bit our environmental and social responsibility goals, ESG, which has become more and more important for investors. And we've had several initiatives in this over the last several years, you know, in terms of carbon emission and renewable. You know, we've done a lot, especially in the solar area. Big solar installation in our Hercules campus here in California. Also recently completed a big solar installation in Switzerland. And, you know, we've long been a kinda had a very diverse workforce, so this kinda comes naturally to us. Continue to work on those efforts. I think it's fair to say when you look here, we have a lot more we can do in the reduction of recycled packaging. These are some of the things that we're working on for the next several years. I think we are poised for continued progress in the years ahead. We see an accelerating revenue profile. It reflects kind of the transformations that we've done and the transformation of our product portfolio. We continue to invest in these faster-growing, high-margin businesses and expect our revenue growth rate to increase to nearly 9% by 2025. At the same time, we continue to optimize our cost structure, and are also looking to improve our, what I call our channel profitability to align our market strategies and help to support this greater top-line leverage. Overall, again, targeting to reach 28% Adjusted EBITDA margins in 2025. Certainly, I think we within this enhanced profitability, generate significant cash flow, should support our capital allocation strategy. Certainly, we also have opportunities to enhance our profile with targeted complementary inorganic opportunities along the way. Thank you, and appreciate all your interest in Bio-Rad. I think we're gonna open it up to Q&A. Yep. We're gonna shift over to Q&A. I'm gonna invite the rest of the management team to come join us up here. As a reminder, if you do have any questions, please feel free to raise your hand, and then a microner will hand you a microphone. Nice and cozy. Yes, I know. Yeah. Very cozy, isn't it? Awesome. Thank you, guys, for joining us. First off, you've had a really nice benefit from COVID-related sales during the pandemic. With new variants emerging and, you know, COVID kind of taking a resurgence again, how should we think about the durability of your COVID revenue in the coming year? You know, what do you see for 2023, 2024 and beyond? Should I take that one? Yeah, we were largely engaged through the supply of instrumentation. I think it's probably broadly accepted that the market is largely saturated from an instrumentation point of view. You know, certainly we've had a diminishing revenue stream from participation in COVID. I think, you know, we'd like to say we've come in for a nice soft landing towards the end of 2022. We don't see it as a material contributor to our revenue moving forward. Awesome. Maybe shifting over then to bioprocessing. Destocking has been a major theme this week with a lot of your peers also flagging some of those same, you know, stocking impacts. Can you walk us through your process for the chromatography business within that broader bioprocessing market? Are you seeing anything that would suggest that demand is, you know, either waning or anything for your chromatography business there? Yeah. We really don't see the same thing that other people have been talking about. It's, you know, the business is very steady. We don't see any kinda destocking trends. We tend to be kinda late in the process, so we're in the, kinda the polishing steps of these processes. Yeah, don't see the same things that some of the people are talking about. Great. That's helpful. Then maybe let's shift over to one of your key growth areas, Droplet Digital PCR for a few minutes here. The applications for this, the technology continue to really grow, and you've talked about that being a billion-dollar opportunity. you know, how big can the ddPCR get over time? has that outlook for this franchise been dampened by the emergence of the new competition in this segment from Qiagen, Roche, you know, Thermo in the past few years? Sure. I'll take that one. As it relates to market size, I think we've progressed our thinking as to the overall, let's call it TAM for digital PCR. In the early years, I think it was deemed to be a $300 million-$500 million opportunity. A couple of years ago, you know, we said maybe that's more like $1 billion. I think we now, you know, see that as a robust high single digit to $10 billion overall opportunity. A split between the diagnostic segment and life science segment. If you think about the life science segment, you know, the applicability of that technology is very broad. Whether it's translational medicine, biopharma, production of the new therapeutic modalities, even into the industrial segments in, you know, wastewater and other kind of broad-based applications. We've really upped our sizing of that opportunity on the life science side. When you consider clinical diagnostics, you know, a significant portion of the diagnostics world is molecular, PCR based. Here you have a next generation of PCR technology. The strategy here is to take, you know, a differentiated high-value opportunity as a market entry, and then build on that. You know, where the performance of precision and sensitivity is meaningful, and can, you know, add value, whether it's either displacement of another technology or advancing the capabilities of real-time PCR. When you look at that in collection, we think that's a very sizable market opportunity now. We've got product development initiatives and strategies to pursue and access that over the coming years. You know, this is gonna take a few years to get the product introductions positioned and adopted. We see it as a very robust long-term opportunity. Great. Helpful. maybe looking ahead then. Are there any new product introductions that you're excited for heading into 2023? Well, absolutely. By the end, you know, the end of this year, we will be introducing Continuum. We call it QX Continuum digital PCR platform. Droplet Digital PCR. This is another one. It's another segmentation of the market, in this case, towards the lower end of the market, which we think is ripe for exploitation. You know, we'll have an entire suite of product offerings from very, you know, high throughput, fully automated, which is largely biopharma, all the way through to the low-end segment, qPCR-based predominantly. You know, we're working on our PCR|ONE platform. That's not an introduction this year, but that will progress. We'll see a single-cell introduction towards the end of the year. You know, just general life cycle replacements across the bulk of our portfolio. Great. Maybe we can shift over to more of a macro discussion now. On the supply chain front, you cited that some of these supply chain disruptions, have contributed to a significant increase in order backlog in the past year. Were you finally able to work down, some of that order backlog during 4Q? We were. Yeah, this, it's been quite a challenge the past year. Not just for ourselves. Through the year, we, you know, perhaps underestimated the magnitude of, you know, supply of chips and related components. You know, that was particularly challenging in Q3. We saw improvement towards the end of Q3, and we saw that improvement progress in Q4. We do. You know, we guided in Q3 that we would improve that situation by the end of the year but that we would still continue with elevated backlog into 2023. Got it. Okay. Maybe how can you characterize the visibility on that supply chain? You know, when will you actually be able to fully work through that backlog? You said it's, you know, extending into 2023. Yeah. Our current perspective on that is to a large degree, component supply on life science has improved a lot. I wouldn't say it's the biggest challenge for us anymore. It's much more a work through the volume, you know, the capacity, the backlog. It's a little harder on the clinical diagnostics side. The, you know, alternative sources have to be fully validated in a clear platform. They're larger more complex systems that take longer to build. We anticipate that, you know, at least in the first half of the year that the clinical backlog will still be burning that down. By the end of the year we feel we should be past all of these issues. What about cancellations? How should we think about order cancellations playing into that as well? Yeah. Cancellations have not really been a major factor. I think Norman mentioned in his talk that our customers have been pretty patient and very loyal. I think that's a real testament to the products and the platforms. There have been cancellations but they've really not been a material factor in our numbers. Yeah. Yeah. Shifting over to pricing then, that's been a common topic this week as well. Can you talk about what level of pricing power and, you know, contribution did you exit 2022 with? How are you thinking about pricing being a factor for 2023? Do you wanna answer that one or should? I can do it while we're talking. Yes. Please go ahead. You know, we started the year, you know, with a certain, you know, price increase and targets that we communicated. Obviously, the supply chain constraints, you know, had some headwind on the ability to realize the entire kind of goal that we set for ourselves. Generally speaking, you know, we do target, you know, to mitigate, you know, the inflationary cost with price increase. Now when, you know, Andy just mentioned, you know, we're working through the supply chain challenges and that will allow us, you know, hopefully now to realize kind of the incremental challenge that we had there. Then I wanted to distinguish also more so in the life science on the diagnostic side, you know, these are tenders that are every few years. It will take kind of a few cycles kind of until you can realize, you know, more price increase. We target more on the life science. Got it. Okay, that's helpful. maybe shifting over to inventory. You've increased your inventory the last year specifically, you know, much higher work in progress, in process. to help work down from your back orders, especially, once you've addressed those back orders, where do you see inventory levels going in terms of a steady run rate? Yeah. Again, due to the supply chain challenges, our elevated inventory will continue for a while. We work through the elevated level. We will see probably going into the first half continuing that elevated level. Hopefully the second half of this year we try to get it put to a more normalized level. Some of the procurement of the components we are trying to secure longer term kind of level of inventory for those. Again, it may take a bit longer but generally speaking, second half of the year, the goal would be to kind of normalize that level to historical levels. Helpful. A question from the audience online. Life science 4Q guidance implies a big step up for 4Q. Can you speak to some of the drivers about this step up? Is that sustainable demand? Is it budget flush or is it some of these alleviating supply chain constraints that you've been facing? As a follow-up, should we consider this as an indication of momentum into 2023 or is that just a factor, you know, specific to 4Q, really? Yeah. Excuse me. I would say that demand has remained consistent. The, the step up, you know, in a sense since Q3 was, you know, softer than we had anticipated initially. That's a factor. The other is burning down some of that backlog as we enter into Q4. As we entered into Q4. Behind that is a pretty consistent demand. I don't, I don't think we would characterize it that this past Q4 is showing, you know, oversized budget flush. I think it was pretty much in line with Q4 business historically. Yeah. I would add, you know, seasonality for us, Q4 is a strong quarter. It is pretty much in line. I mean, maybe also relative to the weaker than normal third quarter, the fourth quarter looks stronger but it is in line with the historical kind of seasonality for the fourth quarter. Yeah. Great. Helpful context. Shifting over to kind of capital deployment priorities. You've talked about an increased appetite for larger transactions the past few years and have indicated that it's been a higher priority for management. Can you share with us, you know, what's holding up a transformative acquisition? Is it assets? Is it prices? You know, valuation remains high. Fit. Is it something else? Kind of walk us through your thoughts there. It's always kind of a combination of those things. It's, you know, it's finding the right, the right company, the right products. We're always looking for something that's very complementary to what we do. And then, and then it's the kind of the, kind of the dance to try to put the things together. It's a lot of factors. I think prices have come in a little bit. I think that's very helpful. And, you know, it does seem that we have a kind of a good portfolio of potential opportunities. And we've got a pretty strong balance sheet. I think we can action something. Helpful. Yeah. Level of appetite has not changed, I mean in the last 18 months. As I mentioned again, I mean, to emphasize that valuations did come down. Mm-hmm. That does create, you know, hopefully, you know, more opportunities for us. You know, in the M&A world, you know, it's unpredictable. You can work on a transaction for a long time and the day before signing, it can be called off. Mm-hmm. You can think about a target that probably will never become available and something changes. Mm-hmm. You can transact in a few weeks. You know, we have to be a little bit more patient but that continues to be, you know, a top priority for us. Got it. Yeah, it can be very dynamic. Kind of going off that, what would be an ideal transaction for you guys then on the larger side of things? Do you have a preference towards a life science tools type of asset, something more on the clinical diagnostics side of things or something else entirely altogether? No, we're probably targeted at either life science or diagnostics or maybe a little bit of both. Probably not probably not foraying out to a third leg. Something where we can leverage the strengths that we have in the company, something that's complementary and at the end of the day, something that really makes us more valuable to our customers. I think that's the kind of thing that we look for. Helpful. Can we talk about Sartorius for a minute? How does your ownership and then that long-term strategic interest in Sartorius influence your thinking as you pursue some type of transformative deal? Does that limit you to transactions of a certain size as well? You know, I'm not sure it really limits us in terms of our thinking. You know, as you know, we have a significant interest in Sartorius. It's, we continue to see it as a strategic asset. There's still, I don't know, five, six years left on the trust. So in the meantime, you know, we wanna be in the market and continue to build the business. Helpful. We've got, you know, a minute and a half here left. With that can you just talk about, you know, what do you think investors are really missing about the Bio-Rad stories? What are a few things that you think are misunderstood that you'd like us to understand today? You know, I'm not sure that it's misunderstood. I think that investors are still monitoring kind of the progress towards our 2025 target model. Mm-hmm. I think, you know, in the last several years, you know, Bio-Rad has done a lot in terms of the transformation. Specifically in the last three to four years, you know, we, you know, here, you know, that we deserve, you know, a lot of credit. I think we are still in the mid-innings in terms of the goals that we are trying to achieve. You know, just if you think about the top line growth profile, changing, you know, from the mid-single digit to the high single digit, that's a pretty heavy lifting, you know, for a company like ours. I think investors continue to monitor the progress. 2025, you know, we still believe that we will get to these targets. You know, there is still a lot to do but we'll get there. Perfect. With that we are out of time. Thank you so much for joining us today, everyone. Thanks for having us. Thank you. Thank you.