Bio-Rad Reports Fourth-Quarter and Full-Year 2017 Financial Results
Fourth-quarter 2017 net sales were $620.4 million, an increase of 8.6 percent compared to $571.5 million reported for the fourth quarter of 2016. On a currency-neutral basis, quarterly sales increased 5.4 percent compared to the same period in 2016. Fourth-quarter gross margin was 54.7 percent compared to 55.0 percent during the fourth quarter in 2016.
Life Science segment net sales for the fourth quarter were $237.9 million, an increase of 15.0 percent compared to the same period in 2016. On a currency-neutral basis, Life Science segment sales increased by 12.3 percent compared to the same quarter in 2016. Currency-neutral sales growth was primarily attributed to sales of Droplet Digital PCR, cell biology product lines, and process media. The currency-neutral sales increase reflected growth in North America, Europe, and Asia Pacific.
Clinical Diagnostics segment net sales for the fourth quarter were $378.4 million, an increase of 4.9 percent compared to the same period in 2016. On a currency-neutral basis, net sales were up 1.5 percent. Currency-neutral sales from the fourth quarter reflected growth in blood typing, immunology, diabetes, and quality control product lines. The currency-neutral sales increase for the quarter was principally due to growth in EMEA, Asia Pacific, and Latin America.
Net income for the fourth quarter of 2017 was $69.9 million, or $2.32 per share on a diluted basis, compared to a net loss of $20.6 million, or ($0.70) per share on a diluted basis, during the same period in 2016. Net income for the fourth quarter 2017 was impacted by numerous non-cash or non-recurring items and by a substantial benefit as a result of the 2017 Tax Cuts and Jobs Act.
The effective tax rate for the fourth quarter of 2017 was an 85.5 percent benefit compared to a 27 percent benefit for the same period in 2016. The lower effective tax rate is primarily due to an estimated provisional tax benefit from the 2017 Tax Cuts and Jobs Act (“Tax Act”) of approximately $66 million. The fourth quarter tax rate includes a $121 million benefit for the remeasurement of federal net deferred tax liabilities as a result of the reduction in the corporate tax rate from 35 percent to 21 percent, offset by a tax expense of $55 million for the mandatory deemed repatriation on certain foreign earnings. The provisional estimate of the impact of U.S. tax reform is based on our initial analysis of the Tax Act and may be adjusted in future quarters.
Full Year 2017 Results
For the full year of 2017, net sales were $2,160.2 million compared to $2,068.2 million in 2016, an increase of 4.4 percent. On a currency neutral basis, sales increased by 3.5 percent. Full-year gross margin was 55.0 percent, unchanged, compared to the same period reported in 2016. Full-year reported sales for the Life Science segment were $785.2 million, an increase of 7.5 percent. On a currency-neutral basis, full-year sales increased 6.8 percent compared to the same period in 2016. Full-year reported sales for the Clinical Diagnostics segment were $1,360.8 million, an increase of 2.8 percent compared to the same period in 2016, or an increase of 1.6 percent on a currency-neutral basis.
Full-year net income in 2017 was $114.7 million, or $3.82 per share on a fully diluted basis, compared to $28.1 million, or $0.95 per share in 2016. Net income for the full year 2017 was impacted by numerous non-cash or non-recurring items and by a substantial benefit as a result of the 2017 Tax Cuts and Jobs Act.
The effective tax rate in 2017 was a 17.3 percent benefit compared to an expense of 32.3 percent in 2016. The effective tax rate for 2017 included a tax benefit of $66 million related to the 2017 Tax Cuts and Jobs Act. The effective tax rate for 2016 included additional tax liabilities for unrecognized tax benefits of $17.5 million related to the non-deductibility of interest expense in foreign jurisdictions.
“We are pleased with the growth and operating performance in the fourth quarter and for the year,” said Norman Schwartz, Bio-Rad President and Chief Executive Officer. “Reflecting on 2017, I would describe it as a year of focus and accomplishment. We are beginning to see the benefit of investments we have made over the past few years along with changes to both our structure and operations. This gives us good momentum as we enter 2018,” he said.
2017 Full-Year Highlights
- Full-year sales were $2,160.2 million compared to $2,068.2 million in 2016. After normalizing for the impact of currency, full year sales increased 3.5 percent.
- Year-over-year net income in 2017 was $114.7 million, or $3.82 per share on a fully diluted basis, compared to $28.1 million, or $0.95 per share, on a fully diluted basis, in 2016.
- In January, Bio-Rad and Illumina, Inc. (NASDAQ: ILMN) announced the launch of the Illumina® Bio-Rad® Single-Cell Sequencing Solution, the first next-generation sequencing (NGS) workflow that enables a deep view into the gene expression of individual cells to better understand their functions in complex tissues.
- In February, Bio-Rad acquired RainDance Technologies, Inc. The intellectual property portfolio and product lines of RainDance encompass a wide range of biological reactions in droplets, with applications in life science research and clinical research.
- Also during the first quarter, Bio-Rad launched the ChemiDoc MP Digital Imaging System for imaging and analyzing gels and western blots, offering precise, reproducible fluorescence, chemiluminescence, and colorimetric gel and blot detection, analysis, and documentation in a single system.
- In May, Bio-Rad announced that it had received 510(k) clearance from the U.S. Food and Drug Administration (FDA) for enhanced capability with its IH-Com data management software to manage patient results with the company’s IH-1000 automated blood typing instrument.
- In June, the company announced that it had received FDA clearance for its BioPlex 2200 Syphilis Total & RPR assay, a one-step universal testing method to aid in the diagnosis of syphilis infection.
- In July, the company announced FDA clearance for its BioPlex 2200 ToRC IgM Assay for the detection of IgM class antibodies to Toxoplasma gondii, rubella, and cytomegalovirus (CMV) offered in a multiplexed panel, offering a rapid and comprehensive prenatal testing solution for three of the most clinically significant diseases.
- Also during the third quarter, Bio-Rad announced that the D-10 Hemoglobin A1c assay received clearance from the FDA to aid in diagnosing pre-diabetes and diabetes, augmenting the use of the company's D-10 System beyond a monitoring method.
2018 Financial Outlook
For the full year 2018, the company anticipates currency neutral revenue growth of approximately 3.5 to 4.0 percent and improved profitability with a currency neutral operating margin target of 10 percent. Management will discuss this outlook in greater detail on the fourth-quarter and full-year 2017 financial results conference call.
“Looking ahead to 2018, we expect another year of growth in many of our key product areas and geographies,” Mr. Schwartz said. “The anticipated expansion in our operating margin for 2018 represents a significant step toward achieving our longer term goal of an EBITDA margin of 20 percent or better in 2020. Moreover, we will continue to look for ways to deploy our capital in a manner that enhances long-term shareholder value.”
Bio-Rad will begin to report non-GAAP results in the first quarter of 2018. Non-GAAP results will exclude amortization of acquired intangible assets, acquisition-related costs, restructuring charges, asset impairment, valuation changes of equity owned, and significant legal-related charges or benefits and associated legal costs, and if applicable, duplicate or non-recurring operating costs. The company will also exclude tax effects associated with these exclusions as well as significant discrete tax events. Management believes that these non-GAAP measures will provide useful information to investors to evaluate performance on an operational basis, provide quarter-over-quarter comparisons excluding unusual items, show better comparisons among company peers, and provide additional transparency to the financial community.
Management will discuss fourth quarter and fiscal year ended December 31, 2017 results in a conference call at 2 PM Pacific Time (5 PM Eastern Time) February 27, 2018. Interested parties may access the call at 855-779-9068 within the U.S. or 631-485-4862 outside the U.S., conference ID: 3097736. You may also listen to the conference call via a webcast that is available in the "Investor Relations" section of our website under “Quarterly Results” at www.bio-rad.com. The webcast will be available for up to a year.
Bio-Rad, BioPlex, ChemiDoc, D-10, and Droplet Digital are trademarks of Bio-Rad Laboratories, Inc. in certain jurisdictions.