Bio-Rad Laboratories (NYSE:BIO) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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The full earnings call is available at https://events.q4inc.com/attendee/969966609
Summary
Bio-Rad Laboratories reported a 1.1% increase in net sales for Q1 2026, but a 4.2% decrease on a currency-neutral basis, with significant headwinds from geopolitical conflicts in the Middle East impacting revenues.
The company is focusing on accelerating innovation and improving operational efficiencies, with a strategic emphasis on its digital PCR product line which saw a 24% revenue growth in instruments.
Bio-Rad Laboratories adjusted its 2026 guidance to a range of -3% to +0.5% currency-neutral revenue growth, citing challenges from the Middle East conflict and continued issues in the academic funding environment.
Operational highlights include manufacturing select life science instruments in China to meet local demand and reduce tariff exposure, and the successful integration of the QX700 platform in their digital PCR lineup.
Despite current challenges, management remains committed to achieving mid-teens operating margins in the near term, with a focus on disciplined M&A and operational agility to drive long-term growth.
Full Transcript
Regina (Operator)
Ladies and gentlemen, thank you for standing by. My name is Regina and I will be your conference operator today. At this time I would like to welcome everyone to Bio-Rad Laboratories' first quarter 2026 results, conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. I would now like to turn the conference over to Ruben Argeta, Bio Rad's Head of Investor Relations. You may begin.
Ruben Argeta
Thank you, Regina. Good afternoon everyone and thank you for joining us. My name is Ruben Argeta, Bio Rad's new head of Investor Relations. It's a pleasure to join the team and be with you here today. We will review the financial results for the first quarter ended March 31, 2026 and provide an update on key business trends for Bio-Rad. With me on the call today are Norman Schwartz, our Chief executive officer, John DiVincenzo, president and chief Operating Officer and Roop Lakaraju, Executive Vice President and Chief Financial Officer. Before we begin our review, I would like to remind everyone that we will 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 with 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 generally under Generally Accepted Accounting Principles. In addition to excluding certain atypical and non recurring items or non GAAP financial measures, exclude changes in the equity value of our stake in Sartorius AG. In order to provide investors with a better understanding of Bio Rad's underlying operational performance, investors should review the reconciliation of these non GAAP measures to the comparable GAAP results contained in our earnings release. We have also posted a supplemental earnings presentation in the Investor Relations section of our website for your reference. With that, I will now turn the call over to our Chief operating officer, John DiVincenzo.
John DiVincenzo (President and Chief Operating Officer)
Thanks Ruben and welcome to the team. Good to have you here and good afternoon everyone. Thank you for joining us. In the first quarter, our teams executed within a dynamic operating environment. We reported Q1 results within our revenue guidance as we navigated several external pressures, most notably associated with the ongoing conflict. The Middle east this region has been one of Bio-Rad's fastest growing markets for several years. We haven't highlighted this in the past, but in 2025 the region represented over 9% of our diagnostics segment, primarily driven by our blood typing franchise. The conflict substantially reduced our first quarter 2026 revenues and depending upon the timing of resolution, will be a significant headwind for revenue and margin for full year 2026. Despite the macro headwinds, our teams remain focused on executing our strategic initiatives, accelerating innovation and driving further efficiencies across the organization to increase competitiveness. In life science, reported net sales were flat reflecting mix and market conditions. Academic demand remained constrained, particularly in the Americas where our customers budgets have been significantly impacted by changes in funding. While NIH funding increased modestly year over year, our Voice of Customer Pulse surveys indicate that behind the scenes there continues to be considerable disruption and we continue to see a lag between funding approvals and purchasing activity. In biopharma we are seeing early signs of stabilization. Early stage biotech remains cautious, however activity among later stage companies is more robust. We expect gradual improvement through the year. On the commercial side, ensuring we capture our fair share of demand in a constrained market requires our sales organization to work differently. We have sharpened the focus of our commercial teams on segment level prioritization, directing coverage towards customers with active funding, accelerating conversions from our existing installed base and competing aggressively where competitive displacement opportunities exist. Our digital PCR product area continues to be a strategic differentiator in the quarter. DDPCR instrument revenue grew 24% over prior year. This is an encouraging leading indicator since new customers typically drive consumable pull through within six to 12 months of purchase and installation. The new QX700 platform is driving both competitive wins and conversion from QPCR, supported by an extensive assay menu and expanding publication base and ahead of schedule, the team now has enabled over 99% of our digital PCR assays to be available on the new QX700 series which is driving instrument growth. Looking ahead, we continue to expect a measured recovery in life science led by Biopharma. In clinical diagnostics we delivered modest reported growth of just under 2%. As I mentioned earlier, performance in the quarter was impacted by geopolitical disruption in the Middle east which affected both demand and logistics. While this creates near term challenges, we expect eventual market normalization once the conflict is resolved. Outside of this region, the segment performed as planned, in particular demand for our quality systems and immunohematology franchises shows signs of strength from a margin standpoint. Diagnostics was adversely affected by a disproportionate share of supply chain cost pressures. In light of these continuing supply chain challenges, we understand the need to rationalize manufacturing capacity and network. We are also addressing these challenges through focused actions in procurement and manufacturing. Turning to our operational priorities, we are executing against a clear agenda focused on improving agility, resiliency and efficiency across the company. In our effort to become more agile, we are increasing flexibility in our manufacturing footprint. During the quarter we began manufacture of select life science instruments in China for China, improving responsiveness to local market demand and allowing us to compete in tenders while minimizing tariff exposure. This initiative is indicative of how we are using efficient capital deployment to build operational capabilities for long term business continuity. In R and D, we have re engineered our innovation engine to deliver improved return on investment. Following our portfolio prioritization decisions, we are concentrating investment in areas with the strongest commercial potential. As I mentioned earlier, one example of this prioritization is the fact that 99% of our digital assays are now supported on the new QX700 platform, again ahead of plan. As we prioritize our projects, our focus areas are expanding into high growth clinical applications, leveraging our ddPCR technology, advancing our digital PCR portfolio including our next gen system and oncology assays, and embedding AI capabilities to accelerate development and enhance platform performance. While it is early, this focus allows us to deliver more consistent, higher quality growth over time. So in closing we are executing with discipline in a challenging environment. We are making progress on the operational actions within our control, improving supply chain capability, strengthening execution and focusing investment where it matters most. We remain confident that these actions will translate into improved financial performance over time and with that I'll turn the call over to Roop.
Roop Lakaraju (Executive Vice President and Chief Financial Officer)
Thank you John and good afternoon. I'd like to start with a review of the first quarter 2026 results. Net sales for the first quarter of 2026 were approximately 592 million, which represents a 1.1% increase on a reported basis versus 585 million in Q1 of 2025 on a currency neutral basis. This represents a 4.2% year over year decrease and was driven by lower sales in both life science and clinical diagnostics segments. Sales of the life science segment in the first quarter of 2026 were 229 million, essentially flat compared to Q1 of 2025 on a reported basis and a 4.3% decrease on currency neutral basis, primarily driven by ongoing challenges in the academic research market, particularly in the Americas. Currency neutral sales decreased in the Americas and EMEA partially offset by increased sales in Asia Pacific. Our DDPCR portfolio was essentially flat in Q1 due to softer biopharma consumables as customers shift their R and D priorities despite the instrument growth. The year over year instrument growth that John noted we believe is a strong indicator of our market share gains especially considering the current market conditions. Finally, the STILA acquisition is on track to be accretive by mid year. More importantly, the QX700 is contributing to both revenue growth and margin expansion. Life Science X Process chromatography revenue increased 1% year over year and decreased 3.1% on a currency neutral basis. Consumables revenue in academic and biopharma research was down 3.9% reflecting the challenging academic research funding environment. Our process chromatography business as expected experienced a year over year currency neutral decline of 13%. Sales of the Clinical Diagnostic segment in the first quarter of 2026 were approximately 364 million compared to 357 million in Q1 of 2025, an increase of 1.9% on a reported basis and a decrease of 4.1% on a currency neutral basis primarily driven by revenue declines from our EMEA region as a result of the regional conflicts in the Middle East. The regional conflict affected demand and execution of logistics for our diagnostics products resulting in an $11 million impact to the business in the quarter as a result of the ongoing challenges within the Middle east. This will have a continued effect on our business for the remainder of 2026. Consolidated gross margin was 52.3% for both the first quarter of 2026 and 2025 on a non GAAP basis. First quarter gross margin was 53.1% versus 53.8% in the year ago period. The lower Q1 gross margin was due to several factors including unfavorable manufacturing absorption as a result of the decreased Middle east revenue which contributed to margin pressure by 40 basis points. Higher instruments versus consumables mix which adversely affected margin by 30 basis points, higher freight fuel surcharges by 20 basis points and FX by 20 basis points. SG&A expense for the first quarter of 2026 was 212 million or 35.9% of sales compared to 209 million or 35.7% in Q1 of 2025. First quarter non GAAP SGA spend was 211 million versus 192 million in the year ago period increase in SGA expense was primarily due to foreign exchange impact resulting from a weaker US dollar on our international cost base partially offset by lower restructuring costs. Research and development expense in the first quarter of 2026 was 63 million or 10.6% of sales compared to 74 million or 12.6% of sales in Q1 of 2025. First quarter Non GAAP R&D spend was 65 million versus 60 million in the year ago period. Q1 operating income was approximately 34 million compared to operating income of approximately 24 million compared to in Q1 of 2025. On a Non GAAP basis, first quarter operating margin was 6.6% compared to 10.8% in Q1 of 2025, reflecting the lower gross margin year over year. The change in fair market value of equity security holdings and loan receivable primarily related to the ownership of Sartorius AG shares contributed 562 million to our reported net loss of 527 million or $19.55 per diluted share. Non GAAP net income which excludes the impact of the change in equity value of the Sartorius shares was 51 million or $1.89 diluted earnings per share for the first quarter of 2026 versus 71 million or $2.54 diluted earnings per share for Q1 of 2025. Moving on to the balance sheet and cash flow, total cash and short term investments at the end of Q1 were 1,565,000,000 compared to 1,541,000,000 at the end of 2025. Inventory at the end of Q1 was 771,000,000, up from 741,000,000 at the End of 2025. For the first quarter of 2026, net cash generated from operating activities was 108,000,000 compared to 130,000,000 for Q1 2025. Net capital expenditures for the first quarter of 2026 were approximately 30,000,000. Depreciation amortization for the first quarter was 41,000,000. Free cash flow for the first quarter was 78,000,000, which compares to 96,000,000 in Q1 of 2025 and represents a free cash flow to non GAAP net income conversion ratio of 153% for the first quarter of 2020 26. During the first quarter of 2026, we repurchased 176,000 shares through our buyback program at a total cost of approximately $48 million. Since Q1 of 2024, we've spent 542 million to repurchase 2.1 million shares at an average price per share of approximately $261. Moving on to our non GAAP guidance for 2026, we have decided to adjust our 2026 guidance. As John mentioned in his comments, the Middle east, which represented the fastest growing region for us over the past few years, was again expected to contribute growth in 2026. As a result of the ongoing conflict in the region, we are seeing continued demand softness challenges getting product to our channel partners and into end customers. Once the conflict resolves, we believe that infrastructure rebuild will be prioritized and ultimately when the region is stable, the Middle east will return to a double digit growth area for us. Our updated guidance is currency neutral revenue growth for the full year to be between minus 3% and plus 0.5%. The Life Science segment year over year currency neutral revenue growth is expected to be between minus 3% and minus 1%. Due to continued challenges in academic funding with an adverse impact from the Middle east conflict and the high single digit millions, we are still modeling a modest biopharma recovery. For the diagnostic segment, we estimate currency neutral revenue growth to be between minus 3% and plus 1%. We project mid single digit growth for our quality controls business. We are assuming that the remaining Diagnostics Portfolio excluding Quality controls is expected to decline between negative mid to low. Single digit full year non GAAP gross margin is projected to be between 53% and 54% due to the lower revenue which is reducing our fixed cost absorption and higher freight rates. Full year non GAAP operating margin is expected to project it to be between 10 and 12%. We estimate the non GAAP full year tax rate to be approximately 22% as a result of the lower revenue and operating profit. We've updated our 2026 full year free cash flow estimate to be in the range of approximately 290 to 340 million. Regarding share repurchases, we will continue to be opportunistic and as of March 31st we have approximately 237 million available for additional buybacks under the current board authorized program. I'll now turn the call over to Norman.
Norman Schwartz (Chief Executive Officer)
Great. Thank you. Rup. You know, as you've heard from John and Rupe, you know we are operating in a challenged and challenging environment. However, you know, underlying the market noise, I think we continue to make progress on many fronts. In the last 24 months, for example, you know we've strengthened our management team and how we operate as a company. To me this is a team with Deep operational experience and I think it is reflected in the rigor, the discipline and consistency in current decision making and in implementation. We see that in our portfolio decisions where we're focusing investment and making the choices necessary to bring quality products to market more quickly and to improve returns. We see that in our operating model building capabilities like our In China for China initiative to improve responsiveness to local demand and allowing us to participate in local tenders in a cost effective manner. And you see it in our M and A with a focus on discipline, strategic opportunities where we can create value for our customers, the company and shareholders. So we do see M and A as a key lever for us in our longer term strategy to accelerate top line growth and margin expansion. And I would say here our focus has shifted from early stage opportunities to companies with demonstrated revenue and margin profiles. Businesses where we can leverage our capabilities and scale to accelerate growth in attractive markets. Stilla still is a good example of this approach. Strengthening a core platform with a scalable, commercially proven business. In terms of size today, our target acquisition is companies within the 100 million to $500 million revenue range. You know, with complementarity to our current business. You know, we're not at the moment focused on anything transformative. You know, in short, I think we see our strategy as disciplined, targeted and accretive. And finally, we always get the question on Sartorius. And so I thought maybe I'd just take a moment to reiterate our position. Fundamentally, we continue to be thoughtful, disciplined stewards of the asset. The Sartorius position is monetizable and provides us with optionality which we evaluate with the same rigor we apply to every capital decision we make. That said, our focus is really running, growing and positioning Bio-Rad for market leadership and maximizing long term shareholder value. And every capital allocation decision, including Sartorius, comes from that vantage point. Overall, if I think about where we are today, you know, our end markets in life science and diagnostics, although challenged in the near term, are durable and resilient. And I think we're well positioned as a market leader in a number of segments. In the meantime, we continue building on the operational discipline and required to deliver consistent revenue growth and mid teens operating margin in the near term. So that's all from me, operator. Now I think we'll open up the line for questions.
Operator
At this time I would like to remind everyone, in order to ask a question, press Star, then the number one on your telephone keypad. Our first question will come from the line of Jack Meehan with Nephron Research, please go ahead, Jack. Your line might be on mute.
Jack Meehan (Equity Analyst)
Sorry about that. Hello, good afternoon. I wanted to start just to get a little bit more color on the Middle East. You know, this has come up on a few of the earnings that have been reported so far, but it seemed like the impact was a little bit more prominent for Bio rad. I was wondering if you could just share like you know, why that might be the case either in terms of the exposure to the region or how that might have impacted your logistics. Just color on like exactly how it played out would be helpful.
John DiVincenzo (President and Chief Operating Officer)
Yeah, Jack, hi, it's John, thanks for joining us. You know, as we said on the call, the fact that it's been a fast growing region for us, you know, we've been very successful, successful in our diagnostic business, winning a number of tenders across the countries in the region. Last number of years it get to a scale where, you know, it's 9% of the diagnostic business mid single digit for the company and whole. So I think the exposure we had maybe a little different than some of our peers based on our strength and our wins there. And just as, as things kind of emerged, the channel, you know, kind of certainly slowed down. I mean obviously still had a revenue there, but we did not meet the revenue numbers that we had. We expected solid high double digit growth in that region. So it was just kind of a bit of a break there for us. And I think as we project forward, be great if the conflict was resolved here soon, but it'll take some time for the region to recover. And that was kind of the thinking behind the new guide that we've expressed. Got it. And yeah, obviously unfortunate situation. I did hear kind of reiterated kind of the ambition to get up to the mid teens operating margins, you know, in the near term. Can you just talk about like the cost actions that you're planning to take to kind of draw a line under earnings and you know, get, you know, obviously there's things that are out of your control, but what can you do to protect and grow earnings in this environment? Yeah, Jack, I appreciate this. I'll maybe start on that question. I think there's a number of things that we have under evaluation. We've already begun to tamp down discretionary spend and these sort of things. But I think more broadly if this sort of impact continues then obviously it's going to be a more meaningful impact which is reflected in our guide and therefore more significant actions. I think the other piece of this that Norman mentions about reaching that mid teens, part of what we're evaluating is just overall considering the continued challenges that seem to be arising, whether that tariffs last year, now Middle east conflict, which arguably can't be predicted to this magnitude. There are some structural things that maybe we need to be thinking about and how we run the business. And so those are the types of things we're looking at without getting into too many specifics at this time, which I think is a little bit early, but it's kind of all functional areas in how we operate and how we execute so we can be more efficient, effective in being more nimble in this environment. Got it. Maybe one final one is unrelated, but just on the China diagnostics business, you know, there was an update during the quarter from the NHSA around, you know, not vbp, but, you know, new strategies around cost containment. Any color on how you see that playing out? Any updates on the region there? Thank you. Yeah, maybe I'll start again. And to date, we're not seeing anything impacting us in terms of what our folks on the ground are saying from China. Obviously it's something we'll continue to monitor and evaluate, but nothing currently that we're anticipating.
Operator
Our next question will come from the line of Brandon Couillard with Wells Fargo. Please go ahead.
Brandon Couillard
Thanks. Good afternoon. It'd be helpful if you could just maybe share any color on 2Q3Q. You know, revenue phasing, you do lap a tougher comp in the second quarter. And are you kind of assuming that you know, a fairly normal sequential seasonality for the business off of the 1Q base from here?
Roop Lakaraju (Executive Vice President and Chief Financial Officer)
Yeah. I appreciate the question, Brandon. So let me. Let me talk about the phasing from a Q1 to Q2. Obviously, Q1 is typically our low quarter. That'll be the case here in 2026. From a phasing standpoint, we see about a 5% lift from Q1 to Q2, and then it lifts a little bit from there just slightly into Q3, which has not been the case. Q2 Q3 has been relatively flat in the last couple years that I've been here. And then Q4 is expected to jump up again from that Q4 tending to be our seasonally strongest quarter in terms of the drivers of those. Obviously the Middle east, we pulled out specific revenue or most of the revenue associated with certain countries that are affected directly by the conflict. Obviously, Middle east is more broad than that in terms of additional countries that we've left unaffected. The other piece of it, though, more specifically to the Q2 Q3 Q4 increase in revenue over Time it's through other areas of our business and other regions. So specifically, quality controls based on batch releases are going to be strong in Q3 and Q4 this coming year. Our blood typing business in other regions has some uptick in Q3 and Q4, so there are some very specific drivers that allow us to get to that kind of phased increase of revenue as we get through the year based on other parts of our business.
Brandon Couillard
Okay, thanks, that's really helpful. One on the DDPCR business. So if I'm doing my math right, were consumables down something like low double digits in the quarter? It was really clear what was driving that. And last quarter you talked about the QX700 maybe driving some share gain versus your main competitor there. And from QPCR, has there been any acceleration in the cannibalization of QPCR? Because your main competitor still seems to be growing, you know, pretty nicely in that market. Thanks.
John DiVincenzo (President and Chief Operating Officer)
Yeah. So, Bren, it's John. We are pretty pleased with the kind of the results of the instrument sales, both for QX700, but also for our legacy Q100 systems, QX200 systems as well. So the consumables, which is the majority of overall the business was soft in the quarter combination of academic and even some on the biopharma side. So to answer your question, you know, that's just a matter of what projects are going forward when we did have pretty strong growth this first half of last year in consumables and probably just absorbing some of that growth this year. But as you know, the equation here is growing our installed base and we feel like we're growing our installed base both by taking share within QPCR as well as competitively holding our own as we look at our, you know, win loss analysis, et cetera. So we think of anything, you know, the healthiest we've been in our GDPCR portfolio in quite some time, both because of the portfolio itself and the breadth of this offering that we have, as well as just the increase in both the assays that we're developing and the number of publications which seems to, you know, be on an accelerating trajectory. So we feel really strong that we're certainly holding our own. In many cases we are taking share from qpcr and competitively, I think our team feels pretty good and our pipeline is larger today than it's been since I've been here.
Brandon Couillard
I'll just add one additional piece, Brandon, to your specific question on the change and you're spot on in terms of low double digits okay, great. And last one for Norman. You know, I couldn't help but notice, you know, I felt like your comments around M and A priorities there toward the end of your prepared remarks, a little bit more detailed and I think you've kind of shared in the past. Should we interpret that is, you know, an indication that the pipeline's full and maybe there's something more actionable, you know, over the relative near term.
Norman Schwartz (Chief Executive Officer)
No, I think. I think for me, it's. It's just a. Just explaining that part of the strategy. I think that, you know, the focus is on, you know, continuing to develop the business, growing the organic business. And, you know, this is another piece of the puzzle, which is M and A. Yeah. So, you know, it's just. It's just diving a little bit in on a piece of the strategy.
Brandon Couillard
Gotcha. Thanks. Thanks, Brandon.
Operator
Our next question comes from the line of Tycho Peterson with Jefferies. Please go ahead.
Tycho Peterson
Okay, thanks. Maybe just starting on R and D, you know, you are spending 12%, which is, you know, relatively high, versus peers. Can you maybe just help us think about. You've talked about, you know, bringing products to market faster, getting better ROI on those dollars. Just talk a little bit about what we can expect from that. Any metrics you can put around that. And is, you know, are you a source of leverage over time as well for you guys?
John DiVincenzo (President and Chief Operating Officer)
Certainly is. And if anything, it's kind of a foundational growth opportunity for us. And, you know, whether it was through Covid or some pretty large bets we were making in diagnostic side, we've reset the bar on the projects that we're working on. We've kind of redirected some of our resources, but maybe more importantly, Tycho, a disciplined approach to the life cycle of our existing portfolio. Looking at ways to really make an impact. As I said, applying AI into some of the imaging and other platforms we have and a couple of bets that are kind of new to the world. Bets. And I think it's just the comprehensive management and governance of that investment. As you said, it's a pretty high investment. If anything, we have even more in life sciences rather than diagnostics compared to some of our peers. We need a better return, and I think over time, maybe we become more efficient and we're not investing at that level. But today it's kind of all hands on deck to get a very, very robust innovation pipeline going and to really see the fruits of that labor.
Tycho Peterson
Okay, follow up on qq. Rube, I'm hoping you can kind of clarify. I think there's been a little bit of confusion. Are you saying kind of down mid single digit core? Is that what you're implying here, given the sequential comments you made?
Roop Lakaraju (Executive Vice President and Chief Financial Officer)
Hey Tech, I apologize, I missed the first part. In what area?
Tycho Peterson
Asking for clarification on your 2Q comments, I think people are getting to kind of down 5, down 6% organic. Is that the right number?
Roop Lakaraju (Executive Vice President and Chief Financial Officer)
Yeah, that's not an unreasonable number we're going to see. And revenue will pick up a little bit gross margin. We'll see that tick down just tad in Q2. And quite honestly, it's specific to freight because we had effectively one month of freight due to the Middle east conflict. Now we've got three months of freight. We've got mitigating actions that we're working through, but not sure that they're going to have the level of impact. Starting in Q2 it'll have some, but in Q3, Q4 we'll see a bit more of that. But Q2 is a revenue increase, slight dip in gross margin and then that flows through.
Tycho Peterson
Okay. And then I guess just on the actions, how much of this is a wait and see on the backdrop here? If things get better, I mean overall you're back to 2018 levels and operating margins. Can you maybe just talk about your commitment to actually driving those higher and how much of this is timing related, Watching the backdrop here? In the near term,
Roop Lakaraju (Executive Vice President and Chief Financial Officer)
maybe I'll start and I'll have Norman jump in. I'll just speak to obviously there's near term actions that we're taking as Norman talked about more broadly and I'll turn it over to him. I think we are factoring in the Middle east conflict to be transitory, not permanent. I think it's hard to predict exactly when that ends. And so we wanted to give that color from that standpoint, knowing that we then need to evaluate the broader business.
Norman Schwartz (Chief Executive Officer)
Yeah, so I think that certainly we are, you know, we've been working on making the business more agile in these kinds of environments. And you know, I think that's, that's our focus really is, you know, we can't control the kind of what's going on in these environments that we just have to, we just have to kind of work on what we can control, which is improving our kind of operations and our capabilities. And you know, when the markets return, I think we'll be in very good shape.
Roop Lakaraju (Executive Vice President and Chief Financial Officer)
And maybe the last thing to add, the fact that Norman was explicit in that manner, you can be assured that it's a focus for us in terms of driving that operating margin expansion in the near term, as he said.
Tycho Peterson
Okay, thank you.
Operator
Our next question comes from the line of Patrick Donnelly with Citi. Please go ahead.
Patrick Donnelly
Hey guys, thank you for. Thank you for taking the question. Maybe we're on the Process Chrome business. Can you just talk about performance and visibility there? We've heard some noise from some of that more concentrated vaccine exposure, some customers lowering ordering patterns down the line. Are you seeing any changes in Process Chrome? What's the right way to think about the pacing of that as we go through this year and the recovery path?
Roop Lakaraju (Executive Vice President and Chief Financial Officer)
Yeah, so Patrick, from a Process Chrome standpoint, it's actually played out, Q1 played out as expected. We are mindful of kind of staying close to our customers as part of understanding order patterns, demand patterns, these sort of things. We're not necessarily seeing any changes, change in inflection for the rest of the year at this point in time. But that is something that we're keeping a pulse on, if you will.
John DiVincenzo (President and Chief Operating Officer)
I think it was last call Norman kind of mentioned. Yep, go ahead. Sorry, sorry. Just the fact that certainly there is a bit of concentration today in our revenues. However, you know, we have several hundred projects we're working on from early stage clinical trials to later stage in preparing for commercialization. So we're projecting forward, you know, how do we bring a little more stability by broadening out the revenue sources across and some of that is with existing customers that have been successful and they have new molecules coming to market. You know, there are new customers, but there's quite a bit of transparency in where we're. We're building out process development, method development and participating in molecules that could pretty exciting in the future. But time will tell. These are things that don't happen in weeks, months or quarters over a period of years. But we feel good that we're bringing some balance and spreading if you will, out the revenues to various molecules that are coming to market.
Patrick Donnelly
Yeah, that's helpful. And then I think it was last quarter Norman kind of mentioned the path back to mid single digit growth for Fostas Co. Maybe next year is still a little subdued in the low singles. That still the right way to think about it. Just any updated thoughts on the path to recovery there? Hey Patrick, really apologize. You're a bit muffled so would you mind repeating that? Yeah, sure. It was just on the path back to recovery of Process Chrome. I think last quarter Norman mentioned, you know, maybe it's a low single digit number next year on the path back to mid single. Is that still the right way to think about it and just the visibility you guys have.
Roop Lakaraju (Executive Vice President and Chief Financial Officer)
I think that's still the right answer. Yes.
Patrick Donnelly
Okay, great. And last one. On the pcr, digital PCR side in particular, are you seeing any changes competitively in the market? Just an updated thoughts on the growth outlook for that business would be helpful. Thank you, guys.
John DiVincenzo (President and Chief Operating Officer)
I think as I mentioned earlier, Patrick, we feel really confident our commercial team is working quite strongly with our marketing teams. We have a number of new assays that are being built out to our portfolio as we transition to this broader portfolio. I think that the teams have, they're in a position today where they feel like they have a broad set of solutions, the right solution for the right customers and customers are, I think, receiving the new portfolio very well. So we still have more R and D projects to work on to expand what we have today. And I think that compared to a year ago, we're in a much better position maybe than we were starting 2025.
Operator
Our next question will come from the line of Dan Leonard with rbc. Please go ahead.
Dan Leonard
Thank you very much. I have a follow up question on the guidance and I think this, it touches a thread that we've been speaking to earlier in the call, but the reduction in the margin forecast suggests that the decremental margins on lower revenue are pretty severe. So can you clarify whether there's any offsetting actions you're taking today or are any potential offsets something we should stay tuned for in the future?
Roop Lakaraju (Executive Vice President and Chief Financial Officer)
Dan, great to have you on the call and chatting with us. So we've got near term actions that we are in process of having put in place and evaluating further. I think in terms of broader evaluation of things. Stay tuned for that as we continue to work through the different aspects.
John DiVincenzo (President and Chief Operating Officer)
Yeah, I think, you know, there are things like increased fuel costs and logistics costs which we've absorbed at this point in time, which you really see the impact. And we have to decide whether there are appropriate surcharges or ways to mitigate some of the additional costs we have. So it's a pretty comprehensive board that we have of things we can do to improve our margins in light of the conflict and overall challenges.
Dan Leonard
Okay, that's helpful. And then my follow up question. Can you elaborate a bit more on your assumptions for the biopharma end market? It sounded like you were more optimistic in that market.
John DiVincenzo (President and Chief Operating Officer)
Yeah. Again we think of biopharma kind of in three different segments, obviously large pharmaceutical biopharmaceutical companies that are I think in pretty good shape and our portfolio looks good. There when you get to the smaller biotechs. But they have molecules and phase three clinical trials, they're doing pretty well. There's still some softness in the early stage biotechs. I guess we tried to elucidate in our comments that there's still some concern there that even though they may or may not be funded, they're still quite conservative in their spending. So across that spectrum, there's good strength and other areas where it's softer than we'd like it to be.
Dan Leonard
Thank you very much. Thank you. Thanks, Dave.
Operator
And there are no further questions at this time. I will now turn the call back over to Ruben Orguetta for any closing comments.
Ruben Argeta
Thank you for joining Today's call. As always, we appreciate your interest and look forward to connecting with you soon. Thank you.
Operator
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
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