Okay All right. We're going to lean into some of the policy angle and relationships and whatnot. Oh, look at that. Yeah, I think it'll be interesting. Yeah, that would be. I would agree. All right. Thumbs up, green light. That means we're live. Thank you, everybody, for joining us after lunch here. I'm Dan Leonard, the Life Science Tools Services and Diagnostics Analyst at UBS, and we're pleased to be hosting Bio-Rad Labs. We have Norman Schwartz, CEO, and Roop Lakkaraju, CFO. Thank you both for joining us. Thanks, Dan, for having us. Wanted to kick things off. We're on the heels of your reporting season here, so thought it would be worthwhile to just ask if you could flag some highlights from the Q3 results. Yeah, maybe I'll start it off. We thought Q3 was a good quarter for us, I think. From a revenue standpoint, it came in line, actually a little bit stronger than what we were originally expecting due to a couple of specific drivers which contributed. From an end market standpoint, Clinical Diagnostics continued to be strong as it has been throughout the year, which is fantastic, and we expect that to continue into the fourth quarter. Life Sciences started out slow in the year but has picked up a little steam, second half being better than the first half, and so we saw that play out in the third quarter, which we were happy about. Margins came in strong again, and so that was as expected, and we think that that'll continue as we get through the rest of the year. And so as we think about Q3 plus Q4, the guide update that we provided in our Q2 call, I think, still is holding, and actually we took the margins up slightly from an expansion standpoint from what we originally guided in the Q2 call. And then we had strong free cash flow again this quarter, so we were overall very happy with how the third quarter played out. Great. One of the things that caught my attention on your Q3 earnings call was that you provided some framing thoughts for 2025. Could you share those with the audience here? Yeah, I mean, I think from a 2025 standpoint, it's obviously still early. We're going through the planning cycle right now. There's a few different pieces. The biotech, biopharma market on the life science side and really on the diagnostic side as well continues to be softer than I think we'd like, and we think that that's going to carry into 2025. On the academia side, it's also tending to be a bit softer depending upon the jurisdiction especially, and so that's another item that we're cognizant of. On the process chromatography side, and we've talked extensively about where we place specifically in process chromatography, that destocking or inventory depletion that our customers invested in over the past few years has continued to occur, and we think that that destocking or inventory depletion will continue through 2025 and get back to a normal level. And the other part is we commented that we expect 2025 to be a growth year over 2024 in process chromatography specifically, so we're looking forward to that. And we think diagnostics is going to continue to be good. We've got a couple of very specific headwinds that we called out. One is a particular part of the business in the donor screening where one of our customers is getting out of that particular area, and so that'll be some headwind in 2025. And then this isn't anything in particular, but just more being mindful of China and where and how China continues to evolve. And I think with the new administration and how they might approach things, that could further influence China, we think, and so we're ever mindful of that. Okay. When it comes to China and diagnostics, though, it sounded like there were some very specific reimbursement pressures you had visibility towards, if I remember right? So nothing in particular. I mean, we're just very mindful of kind of what's going on in China and this whole VBP thing. It hasn't really affected us, but you start at the top. You start with the big pieces and then you work your way down, and we're just mindful of that and watching to see what happens in China in this next year. Okay. And from the donor screening market, when do you think? Welcome to the conference center. Your own business trajectory and the potential for recovery as you think about 2025 being a better year than 2024? Yeah, I think certainly we look at, driven by the biotech, biopharma markets, I think we look at specifically the Droplet Digital PCR part of the business. I think that's been affected by the biopharma biotech situation that we've had over the last year or two. So I think that would be one kind of internal that we would keep watching. We also watch kind of the general academic budgets and budget proposals that come, and that affects kind of all the products in the portfolio. So those are some that come to mind. Yeah, and I think just to add to Norman, I think part of it is just kind of internal funnel activity, right? And there's a lot of conversation happening, which is great. I think how those conversations turn into orders and order take rate will be another key element of that. How is funnel velocity trending? I mean, I think, again, it's a lot of conversation that's being had, especially on the capital side, the instrument side. People have been reluctant to put money down, if you will. And as we think about consumables, though, it's continued to have a strong pull-through throughout the year, and so we're very pleased with that, and we expect that to continue in the absence of stronger instrument sales. Okay. Yeah, we do get a lot of questions about what's the trajectory and whether we expect a big pop in March or something like that. My sense is that it's going to be kind of a steady kind of a recovery rather than a one-quarter event. You mean there's no magic that happens when you flip the page on the calendar? Probably not. We could be hopeful, but probably not. Understood. And then another theme that came up on your Q3 call was the concept of profitable growth as a corporate goal. Could you elaborate a bit more on your thoughts around what that means? Yeah, I mean, I guess profitable growth is, one, getting back to consistent market growth rates from an overall standpoint. With some of the improvements we've made in our overall factory and supply chain environment in resetting some of the cost structure there, there's further leverage that we should get as top line recovers and starts to flow through from there, right, and so we want to be mindful of that. The other piece of this is how do we continue to have strong consumable pull-through while driving stronger revenue growth in digital PCR, process chromatography, and then certain diagnostics areas like quality systems, these sort of areas, which we think are pillars for future revenue growth. Okay. As volume growth returns, and you've done a lot of things internally, do you think incremental margins on volume growth will look different going forward than they've looked in the past? I think so, and part of that is the cost restructuring that we've done in the COGS area specifically. When you look at some of the distribution center consolidation we've done, and we highlighted this in the Q3 call for our Singapore DC where we consolidate certain APAC DCs into Singapore, there's leverage that we get, cost efficiencies that we get from there. So that's important for us, and you're seeing that flow through as part of the margins. Then we have some of the French manufacturing that we consolidate into Singapore. That also adds some cost efficiency as well as centralization or consolidation. So all of these are contributing factors, and as we continue to evolve and evaluate how do we drive further margin expansion, we'll look at other opportunities, whether it's DC consolidation, factory consolidation, and just how we can drive efficiencies within our cost structure. Okay. Market growth is the goal, but again, you have a very broad portfolio. What would be the areas within your portfolio where you think there's opportunity for above-market growth? Yeah, so I think we called out certainly the Droplet Digital PCR area, and I think the other key area is process chromatography, both of which have really higher kind of underlying growth rates in those markets. And if I think about Droplet Digital PCR, it's not only the kind of academic biopharma market that we serve today, but I think there are tremendous opportunities to take that into the diagnostic world. And we've got a couple of projects going on there now, and obviously it'll take a while to get those on market, but that should help with kind of another kind of growth trajectory for us on the diagnostic side. Okay. As we were speaking earlier, digital PCR was a big topic at dinner last night, but your qPCR business is actually bigger than your digital PCR business. How do you get your qPCR business to grow again? Yeah, so I think certainly coming off of COVID, there was a lot of uptake of instruments for us during COVID, people standing up molecular tests in these various medical institutions. And I think maybe kind of the good news is those were, to a large extent, new customers. And so it doesn't seem that it has affected as much the traditional academic customer that we had for that technology. I think one of the things we think about is there's kind of a whole new contingent of platforms. What more could we do to feed reagents onto those platforms? Obviously, the COVID part has subsided, but are there other assays that would be appropriate? Where are you in those efforts to try to generate more recurring revenue off the installed base from COVID? Yeah, yeah. So there's some projects underway, and so it's still kind of early days, but there are things kind of going on. Okay. One of the things I often wonder, though, and I don't know the unit number, but there were a lot of units of instruments placed for you during COVID. Who needs to buy a qPCR instrument ever again, given? Okay, so you've always got kind of a turnover of instruments. They get old, they get outdated, and so there's always a kind of a refresh market, and then people start up new programs all the time and are looking for new instruments. Okay. So it's, again, depending a lot on not only the biopharma funding but academic funding around the world. You've mentioned academic funding a couple of times. The budgets, at least for the United States, are considered to be reasonably frozen for the foreseeable future. Do you have a different view outside of the United States, other pockets where there's more strength? Yeah, there does seem to be pockets of more strength. There are parts of Asia where it's running pretty well, and pockets in Europe. In Europe, it's kind of country by country. Germany's been struggling, but the U.K. is doing well, or the Nordics are doing well. So it's kind of a mixed bag in Europe. Okay. And then when you think about the drop of digital growth curve, how important is that continuum product to the overall growth of the product family? So if I think about it and how the market's developed, it obviously started out with this kind of mid-range product which we introduced, and then the customers were asking for more features. So we introduced kind of the QX600, and then they wanted more automation, so the QX1000, or QX ONE. And then now they've developed this kind of low-end market. And I think the low-end market, if we look out several years, should be a material part of that business. And obviously, we're working to get a product on the market and start to compete in that area. Has the mid to high-end part of the market matured? I think there's still plenty of opportunities there, but I think there's probably a little more growth potential than the unit growth potential in the lower end. Okay. And if I could play back your commentary from earlier in terms of leading indicator products, to some degree, the answer to that question will be a function of biotech funding? Yep, yep. That’s right. And I would say the applications for that technology continue to expand into new areas, and so I think that's another driver for us. How much do you think about cannibalization between Digital PCR and qPCR? Yeah, that's certainly kind of a big question. You've got people at the qPCR level, and I think there will be people who say, "I'm going to step up and do digital instead of qPCR." So I think that certainly will happen, and probably we'll get also more market segmentation, even from kind of the mid-level platform to this kind of low-level platform. There'll probably be some adjustment along as we go forward. Okay. Well, shifting gears to process chromatography, I think one of the challenges in understanding the trajectory and process chromatography across the ecosystem is everybody plays in a little bit of a different spot. Some folks have a larger proportion of their revenue in clinical, some larger proportion in commercial. The breadth of everyone's portfolio is very different. Your portfolio, I think, is self-admittedly more narrow. Can you help us try to reconcile the trends we're seeing across the broader ecosystem with what you're seeing at Bio-Rad? So there are a couple of trends. I mean, the short-term trend has been this stocking-de-stocking situation where fundamentally everybody's in kind of a different place in that market. As you know, we're in kind of the end of that process and this polishing step so that the materials are much more critical and baked into the manufacturing process. At the earlier stages, you've got more flexibility so that it's not so important. It's not as critical a raw material as our material down at the end. And so in terms of stocking-de-stocking, I think we're seeing different levels of that depending on where you are in that process, all fundamentally because they stocked up on the things that were very critical to make sure they don't run out. Dan, just to build on Norman's comments, just to reinforce where we play in that polishing step is, [step in] resins, right? The pharma companies can't get to their therapeutic production without that resin, and therefore that's why they stocked up the way they did. The broader bioprocessing market, obviously, is something for us to be mindful of, but there are very specific dynamics that are happening with our customers because the majority of our revenue is commercial in the commercial stage. Therefore, as they work through that inventory depletion, they'll get back to a normalized ordering pattern, which we expect to occur throughout 2025. We expect 2026 to be a more normalized year for process chromatography. What's a normalized year for process chromatography? I think that's an open question, quite honestly. And part of it, quite honestly, is the fact that, like all of us, pharma companies are also trying to figure out how to get more efficient, right, in things while still supporting very strong demand for the therapeutics that they're putting out in the marketplace. And we're lucky enough to participate in some very strong therapeutic drugs that are being delivered in the marketplace. Okay. And you don't talk about it a whole lot, but you did launch a new single-cell prep product earlier in the year, and that product was the result of an acquisition you had done. So I guess if you could reflect on that, how important is that to your life sciences growth strategy? Yeah, so certainly it's developed as a significant market, and it's one of these where we're entering a market where there's a very strong and dominant player. So as we expected, it's going to take some time for that to kind of find its way and develop. We do think we've got a very strong value proposition for the customer, and again, just going to take time to make it a needle mover. The cost points in that market seem to be a bit of a moving target. Has that influenced your view of the opportunity at all? No, no. Actually, we designed this product with this kind of price point in mind. So I think we're in pretty good shape in that regard. Norman, I know as we've talked before, and I want to pivot to the margin discussion here, but one of the levers to getting margins higher is you have a number of R&D programs internally which aren't generating any revenue to cover the R&D costs. Where are you in that journey of having the right products in the market to get you back to that market growth rate, but also they're not burning a hole in your pocket any longer? Yeah, so if you look at some of the large projects, they are staged. And so as I think about it, there are things that are kind of in the medium term and some things that are a little longer, things that are going to take another two, three years to get to market. So it's kind of a step function, getting those things to market that we've got in the hopper today. Okay, so there's no one point in time where you feel like the R&D investments are sunk, now the revenue harvesting has arrived? You have continual R&D investments and continual cadence. Yeah, it's a continuous cycle. Understood. Well, what would you point to are the couple, call it two, three items that are most important outside of volume growth? And we could all try to predict when volume growth will return, but what are the couple, two, three items you would point to as being most meaningful for your margin expansion opportunity? Yeah, when you ask that question, Dan, from a 25 or just a long-term model? Long-term. Yeah, I think there's, as you've been pointing it out, the revenue and the revenue mix associated with that is a critical component. With that said, as we've articulated, there's a number of different cost improvement areas within the COGS area, specifically thinking from a gross margin standpoint. There's more work for us to do in that area that we'll continue on, and that'll help support. The other piece is just that revenue growth, as we target kind of getting to that market-level growth rate, the cost leverage that we get on the OpEx, and that'll help us in terms of operating margin expansion and EBITDA expansion. I think the other part of it is rationalizing the spend that we have in OpEx and what's the return on that, how do we get more productive in the spend that we have in that area, that will continue to evaluate and drive cost efficiencies around, and I think all of those will contribute to further margin expansion on a multi-year basis. When you say more work to do on the COGS front, you had a big lift over the past couple of years when you closed a couple of rooftops in France. Are there similar opportunities like that going forward, or are you thinking more nuanced and surgical? There's the nuance and surgical, but I think there is always the evaluation of the footprint and as customer needs evolve, markets evolve. It's only appropriate for us to continue to evaluate what footprint we have and how do we make that footprint more efficient and more productive. Okay. And I still think there's some mining to do from those transitions. We've moved platforms from, say, Europe to Asia. We haven't necessarily reset the supply chain, and so there are opportunities to reset the supply chain for some of those products and drive a little more margin. So the same supply chain you would have had when something's manufactured in France, they're just on a longer boat now to Singapore, and there's an opportunity to streamline that? Yes. Yeah, and some of that's in transition, right? And so the ability to consolidate that supply chain closer to that Singapore manufacturing hub is something that continues to evolve. Okay. What are your thoughts on manufacturing in China? So it's a real complicated answer. Maybe a complicated question too, but first of all, we have thousands of products, thousands of products, and so what do you manufacture in China? And so we've got to be very selective about what do we manufacture in China and what do we manufacture in China that will make a difference? And so that's part of the analysis. And then we need to think about where is it coming from, and does it, at the end of the day, add cost or does it add benefit? In other words, you've got a duplicated manufacturing site now. Over the last several years, we've been trying to consolidate manufacturing sites, and so that's good for margins. So if we start up a new manufacturing site in China, what does that do? Is the opportunity in China greater than the extra cost of establishing a new manufacturing base? And then we can't make everything in China, so we've got to be very selective about what it is and where those opportunities are. So it's kind of a three-dimensional puzzle to try to put together. I mean, obviously, it's something we need to solve for. China, at the end of the day, is still a very large market and a very large potential market. Right now, it's not clear what the playing field is going to look like. They keep kind of changing the rules, but we've got to come up with a solution for that and move forward. That's right. And I just want to emphasize the last point. With the new administration coming on board here domestically, how China might interplay with the new administration, their perspective, I think, is another set of variables that we need to be mindful of. So when we look at the business case analysis, that also needs to be brought into the fold. That sounds incredibly complicated. It's complicated. If we're having this discussion two years from now, will you have made a go or no-go decision? I mean, I would say we will have had to have made a decision, yeah. And so part of this is over the next 12 months, seeing how things play out. If the administration is aggressive on tariffs, does China in turn, are they aggressive and only move more strongly towards China for China and these sort of things? I think we'll have a better sense of that over the next 12 months and how that evolves and how that plays into our business analysis. But it is a very active analysis today. Okay. Do you spend a lot of time thinking about a potential change in the tariff environment and how your business would respond if you need to respond? I don't know that we'd spend a lot of time on it, but it's something that we, amongst many other things, that we continue to evaluate, right? It could have some pluses. It could have some minuses. Okay. Roop, inventory turns. Inventory turns. 1.4. Yes. What's the right number for Bio-Rad? Not 1.4. It needs to be a higher number than 1.4. It's a focus area for us, working capital in general. When you look at our overall working capital efficiency, it needs to be better. Inventory is the largest piece of that. The reason I wouldn't necessarily want to put a number out there right now, Dan, as we think about the portfolio and how it evolves, 2024's mix between diagnostics and life sciences, it's about 60/40, right? 60% diagnostics. I think over time, we expect that not to be as skewed towards diagnostics and maybe closer to 50/50. That obviously influences how turns would look as well. So as we think about a longer-term model over the next few years, that's an area that we'll get some further clarity around on what that target looks like, but it's got to be far north of 1.4. And is that the longer-term kind of structure and targets and such, is that the objective for the analyst day that you're planning to host in 2025? Yeah, I think it is. I think there's a few different things that we'd like to achieve with that Investor Day in 2025. The way we're thinking about it right now, it'll either be the spring or the fall, and it really depends on how the markets shake out and get into a little bit more of a stable ground on the markets. One, we've got new leadership that we've brought on over the last 12 months or so. So some of that new leadership, we'll have an opportunity to meet you all and present our business areas, right? Number two, we'll give a perspective on market growth and how we get there and what those drivers are. Then margin expansion, both from a gross and operating and EBITDA margin expansion, what that roadmap can look like over the next three years. Then finally, from a working capital standpoint, how do we drive even more free cash flow, which is another focus area for us? Norman, we don't talk about your SAP deployment much anymore. No. No. Pretty much done. How'd that go? Are you getting out of it what you wanted? Yeah, I think we are starting to see it. It does start to get reflected in the margins and does start to get reflected in kind of the information, the additional information we have to help manage the business. So I think it's been a valuable investment. Obviously, it took a little longer than anybody expected, but I think looking back, I think it was the right thing to do, consolidate on a single platform. And are the benefits, do they accrue on margins, on revenue growth? Where do you see the biggest benefit from having that additional insight into the business? Yeah, I think ultimately it's margins, but it kind of helps all the way through the business. Got it. And then maybe the final question here. It's a capital allocation question, and I'm a bit Sartorius’ out after yesterday, so we'll put that to one side. Appetite for M&A. In the current challenging environment, a lot of companies are struggling. Bio-Rad has a big cash balance. Has the market evolved, or has your opportunity set evolved as a result of the market challenges, and just how active do you want to be on the M&A front? I think it has evolved quite a bit, certainly during COVID when people had kind of a big COVID component of their business. Valuations were kind of a little bit speculative, I would say. And I think that's kind of settled out now, and we can see what the net business is. And so I think it does give us more opportunities now, and we are very active kind of looking at things that fit with either life science or diagnostics. And yeah, the kind of things we're looking at are what we think of as more kind of bite-sized things that are complementary to our current business, whether it's in, again, life science or diagnostics. And yeah, I think it looks pretty good right now. Okay, so bite-sized. Yeah. Okay. Great. Well, we'll leave it there. We're over time. Norman, Roop, thank you both for joining us today. Thanks, Dan, for having us. Appreciate it.