NEW YORK – Supply chain constraints and lockdowns in China related to COVID-19 outbreaks resulted in a downturn in Bio-Rad Laboratories' Q2 revenues across its business segments, the company said on Thursday.
The Hercules, California-based company reported after the close of the market that its second quarter revenues decreased nearly 4 percent year over year due to a decline in COVID-19-related sales. Despite the decline, the firm's executives said on a conference call to discuss the results that overall demand for its products has been strong, but fulfillment has been hampered by issues accessing necessary supplies and lockdowns in China.
Andrew Last, the company's chief operating officer, said that expected improvements in supply chain challenges didn't "fully materialize," causing the order backlog and inventory levels of raw materials and work-in-progress instruments to build up. However, he noted that orders remained "sticky" and customers had remained patient as they waited for products. Logistics and raw materials costs were elevated, but Last said the company "remain[s] optimistic" about supply chain improvements in the second half of the year.
The company "has continued to excel in managing the supply chain challenges and supporting the needs of our customers," he said. It has seen "strong and consistent improvement in demand" across both business segments.
Those supply chain constraints are mostly related to electronic components, such as semiconductor chips, impacting instruments "across a large number of different product areas," he added. "Our ability to supply those just fluctuates based on getting those components in," he said.
The firm has also rolled out price increases, mostly across the Life Sciences business, to offset inflationary costs on logistics and raw materials, he said.
For the three months ended June 30, Bio-Rad reported revenues of $691.1 million compared to $715.9 million a year ago, beating analysts' average estimate of $682.6 million. On a currency-neutral basis, Q2 revenues were essentially flat.
Bio-Rad CFO Ilan Daskal said that the overall revenue decline was mainly the result of lower COVID-19-related sales, although he noted that there were elevated levels of demand in Asia in light of ongoing COVID-19 outbreaks in China.
News out of China has not all been positive, however. Extended and stringent lockdowns due to the pandemic negatively impacted both sides of the business, particularly when it came to instrument placements, although improvement is expected compared to the first half of the year as the lockdowns ease, both Daskal and Last said.
Life Science segment revenues fell approximately 4 percent in Q2 to $322.4 million. On a currency-neutral basis, they were essentially flat compared to the year-ago period. Excluding COVID-19-related sales, currency-neutral core revenue growth was nearly 11 percent. Daskal said that growth was driven by process media, western blotting, droplet digital PCR, and qPCR products.
In addition, Last said that the conflict between Russia and Ukraine contributed to a "modest" decline in life science sales to Russia but added that products from the clinical diagnostics business were "largely unaffected." That dynamic is expected to continue for at least the rest of the year, he said.
Clinical Diagnostics segment revenues, meanwhile, decreased 3 percent to $367.8 million but rose 1 percent on a currency-neutral basis. Excluding COVID-19-related sales, currency-neutral core revenues grew by 2 percent. That increase was driven by growth in the quality controls and immunohematology businesses, Bio-Rad said in a statement. Daskal said that the firm has seen increasing global demand for blood typing products as elective surgeries resume.
Dara Wright, president of the Clinical Diagnostics group, said that the lockdown in China had a broad impact during the quarter and was "compounded by logistics challenges," calling the combination a "one-two punch" that the firm will need to catch up from.
COVID-19-related revenue during the quarter was approximately $33 million compared to $69 million in Q2 2021. Excluding COVID-19-related sales, total revenues increased nearly 6 percent on a currency-neutral basis. Daskal said the firm anticipates "significant tapering" of demand compared to the last two years, expecting about $15 million in COVID-19-related revenues in the second half of the year.
Bio-Rad's net loss in Q2 was $927.2 million, or $31.12 per share, compared to net income of $914.1 million, or $30.32 per share, a year ago. Net income and loss amounts were primarily affected by "the recognition of changes in the fair market value of equity securities related to the holdings of the company's investment in Sartorius," a biopharmaceutical equipment supplier, the firm said.
On an adjusted basis, net income in Q2 was $3.38 per share, beating analysts' average estimate of $2.80 per share.
Bio-Rad exited the quarter with $596.6 million in cash and cash equivalents and $1.38 billion in short-term investments.
For full-year 2022, Bio-Rad anticipates non-GAAP currency-neutral revenue growth at the high end of the firm's previous guidance of approximately 1 to 2 percent, with COVID-19-related revenue expected to be about $93 million. Core revenue growth excluding COVID-19-related sales is expected to be at the lower end of Bio-Rad's previous guidance of 8.5 percent to 9.5 percent on a currency-neutral basis, Daskal said.
The firm also announced that its board of directors authorized an increase of the amount available under the company's share repurchase program. Bio-Rad is now able to repurchase up to an additional $200 million of stock, with a total of $298.1 million now available for repurchases under the program.
In Friday morning trading on the Nasdaq, Bio-Rad shares were essentially flat at $559.98.