Bio-Rad's Q2 2025 beat consensus on both revenue and operating margin, driven by strong double-digit process chromatography growth, durable academic consumables, the close of the Stilla acquisition, and the QX700/QX Continuum ddPCR launch. The company raised full-year guidance as tariff headwinds eased materially from up to 130 bps to 30-40 bps. Offsetting positives, non-GAAP gross and operating margins declined year-over-year on higher material costs and weak instrument demand, with China diagnostics and the broader academic instrument market remaining soft.
Please go ahead. Good afternoon everyone and thank you for joining us today. We will review the second quarter 2025 financial results 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 Lakkaraju, Executive Vice President and Chief Financial Officer. Before we begin our review, I'd 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 under generally accepted accounting principles. In addition to excluding certain atypical and non-recurring items, our 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 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'll now turn the call over to our Chief Operating Officer, John DiVincenzo.
Thank you, Ed. Good afternoon everyone and thank you for joining us today. We are pleased to share our second quarter 2025 results, which reflect solid execution across the business. Both revenue and operating margin exceeded consensus expectations, underscoring the strength of our portfolio and the discipline of our teams in a challenging and rapidly evolving macroeconomic environment. Our clinical diagnostics business remained stable while our life science segment benefited from the strength in our process chromatography portfolio. Product mix and a continued focus on cost control and discretionary spending helped drive an outperformance in operating margin for the quarter. While we continue to face headwinds in the academic market due to constrained government funding, we saw signs of stabilization, particularly in consumables. This resilience highlights the enduring demand for our differentiated assays and reagents, including droplet digital PCR consumables, which saw high single-digit revenue growth versus 2024.
The second quarter was a busy one for our ddPCR team as we completed the development of the QX Continuum platform and successfully closed the acquisition of Stilla Technologies, adding new platforms and a fantastic team of colleagues to Bio-Rad. Synchronized with the closing of the Stilla acquisition, we launched the rebranded QX700 Series ddPCR instruments. The combination of the QX Continuum and QX700 Series products are positioned to expand our droplet digital PCR portfolio for customers requiring a simplified workflow and flexibility at various budget levels. Although it is early, customer feedback has been very positive. We look forward to showcasing these innovations at the upcoming ddPCR World Conference in Seoul, Korea this September, along with a series of satellite events across APAC, EMEA, and the Americas. Also during the quarter, several of our key ddPCR partners made progress in bringing this technology to the diagnostic market.
Insight Molecular Diagnostics, formerly Oncocyte, announced positive clinical data for its assay in kidney transplant monitoring. We are supporting its path toward FDA approval in 2026 and the development of a kitted IVD solution, an exciting advancement for the transplant community. Genioscopy advanced its ColoSense colon cancer screening test, which is powered by our ddPCR technology. The assay was recently included in the National Comprehensive Cancer Network guidelines, a critical enabler for clinical adoption and reimbursement. We're encouraged with their progress and the potential of ColoSense. Operationally, our teams continue to drive improvements through strong execution of lean initiatives, careful cost management, and actions to actively mitigate tariff impacts in diagnostics. Strength outside of China helped offset local reimbursement pressures, resulting in 3.7% growth in our rest of world markets. In China, volume-based procurement or VBP has not impacted our portfolio beyond the previously noted diabetes testing reimbursement reductions.
We haven't faced any new reimbursement challenges. While we factored headwinds from the recent Diagnosis Related Group or DRG policy changes affecting diagnostic panels into our first quarter guidance, the impact was not significant. In the second quarter, our local team continues to diligently monitor the evolving landscape of Chinese government policies. Finally, I'm excited to welcome Rajat Mehta as Bio-Rad's new Executive Vice President of Global Commercial Operations. Rajat brings deep experience across diagnostics and life sciences, most recently leading a large regional diagnostics division of Labcorp. He has lived and worked globally and brings expertise in commercial transformation, digital innovation, and customer-centric strategies. Rajat succeeds Mike Crowley, who is retiring after a remarkable 26-year career with Bio-Rad. I have enjoyed working with Mike during my first year and personally thank him for his support. We all wish Mike all the best in his retirement, so thank you again for your continued support. I'll hand the call over to Roop for a detailed review of our financial results.
Thank you, John, and good afternoon. I'd like to start with a review of the second quarter 2025 results. Overall, we executed well during the quarter. Net sales for the second quarter of 2025 were approximately $652 million, which represented a 2.1% increase on a reported basis versus $638 million in Q2 of 2024 on a currency neutral basis. This represents a 1% year-over-year increase and was primarily driven by sales of our process chromatography products. Sales of the Life Science group in the second quarter of 2025 were $263 million compared to $251 million in Q2 of 2024, which is an increase of 4.9% on a reported basis and 3.8% on a currency neutral basis, primarily driven by the increase in process chromatography and food safety product sales. Currency neutral sales increased in the Americas and EMEA, partially offset by decreased sales in Asia Pacific.
Our process chromatography business experienced strong double digit growth on a year-over-year basis due to orders pulled into the second quarter by customers. The orders represented approximately 20% of the quarter's process chromatography sales. Zooming out of the second quarter results, we now expect low double digit growth for this product area in 2025 versus our prior high single digit growth outlook. Excluding process chromatography sales, our core Life Science group revenue decreased 1.7% year-over year and 2.7% on a currency neutral basis, reflecting ongoing softness in the biotech and academic research markets, which affects instrument demand. Sales of the Clinical Diagnostics group in the second quarter of 2025 were approximately $389 million compared to $388 million in Q2 of 2024, essentially flat on a reported basis and a decrease of 0.7% on a currency neutral basis.
The decrease is because of the previously discussed lower reimbursement rate for diabetes testing in China, partially offset by increased demand for our quality control and immunology products. On a geographic basis, currency neutral sales decreased in Asia Pacific, partially offset by increased sales in EMEA and the Americas. Q2 reported gross margin was 53% as compared to 55.6% in the second quarter of 2024. On a non-GAAP basis, second quarter gross margin was 53.7% versus 56.4% in the year ago period. The decrease in non-GAAP gross margin was due to higher material costs and reduced fixed manufacturing absorption because of lower instrument demand. SGA expense for the second quarter of 2025 was $208 million or 31.9% of sales compared to $195 million or 30.5% in Q2 of 2024. Second quarter non-GAAP SGA spend was $201 million versus $194 million in the year ago period.
The year-over-year increase in non-GAAP SGA expense was primarily due to higher variable compensation costs. Research and development expense in the second quarter on a GAAP and non-GAAP basis was $61 million or 9.3% of sales compared to $59 million or 9.2% of sales in Q2 2024. A slightly higher year-over-year R&D was primarily due to project-related spending. Q2 operating income was $77 million or 11.8% of sales compared to $101 million or 15.9% of sales in Q2 of 2024 on a non-GAAP basis. Second quarter operating margin was 13.6% compared to 16.7% in Q2 of 2024, reflecting the lower gross margin. The change in fair market value of equity security holdings, primarily related to the ownership of Sartorius AG shares, contributed $250 million to our reported net income of $318 million or $11.67 per diluted share.
Non-GAAP net income, which excludes the impact of the change in equity value to Sartorius shares, was $71 million or $2.61 diluted earnings per share for Q2 2025. Moving on to cash flow for the second quarter of 2025, net cash generated from operating activities was $117 million compared to $98 million for Q2 of 2024. Net capital expenditures for the second quarter of 2025 were $46 million and depreciation and amortization for the second quarter was $41 million. Regarding free cash flow, we were pleased with the generation of $71 million which compares to $55 million in Q2 of 2024. For the first six months of 2025, we generated free cash flow of $166 million resulting in a year-to-date free cash flow to non-GAAP net income conversion ratio of 117%. We continue to target full year free cash flow of approximately $310 million-$330 million for 2025.
During June, we purchased an additional 170,860 shares of our stock for a total cost of $40 million for an average purchase price of approximately $233 per share on top of the $99 million share repurchase we called out for April. In aggregate, we bought back 593,508 shares during the second quarter for a total cost of $139 million for an average price of approximately $234 per share. We will continue to be opportunistic with our buyback program and still have $337 million available for share repurchases under the current board authorized program. Moving on to the non-GAAP guidance for 2025, we are raising our 2025 full year guide to reflect the Q2 results, the close of the Stilla acquisition, the evolving state of academic and biotech research funding, and the impact of changes in the macroeconomy including tariffs.
Overall, we now expect total currency-neutral revenue to be in the range of flat to 1% growth, with the midpoint approximately 25 basis points higher than our previous guide. With respect to our life science business, we see consumable demand from academic customers more durable than our prior expectations, in addition to an improved outlook for our process chromatography business that I called out earlier. With the recent close of the Stilla acquisition, we now expect revenue for our ddPCR portfolio to increase mid-single digit in 2025 versus low single digit previously. We continue to see a slow biotech recovery and soft demand for instruments in aggregate. We now expect our life science business to increase in the range of flat to 1% for the full year versus flat to down 3% previously.
For our diagnostics business, we are further tightening our range to approximately growth of 0.5%-1.5% between 2025 versus 0.5%-2.5% previously. This represents a 50 basis point reduction at the midpoint and primarily reflects continued market softness. Reflecting the easing of trade tensions with China and delays in implementing tariffs in other regions, we now expect a reduced headwind of approximately 30-40 basis points to operating margin. The remaining tariff headwinds are primarily related to supplier cost and EU-manufactured products that are imported to the U.S. Factoring in the reduced tariff headwind, the updated full year non-GAAP gross margin is projected to be between 53.5% and 54.5% versus 53% and 54.5% previously.
Full year non-GAAP operating margin is now projected to be between 12% and 13% versus 10% and 12% previously, reflecting our updated gross margin outlook along with proactive cost actions we take in advantaging the business. We continue to anticipate incurring an IPR&D expense in the third quarter. As previously disclosed, due to a further weakening of the U.S. dollar, we now expect currency exchange to be approximately 100 basis point tailwind to 2025 revenue with a 10 basis point positive impact on operating income. Notwithstanding our updated outlook for 2025, there are still many moving pieces which we continue to monitor closely. Finally, we had previously mentioned having an investor day this November. However, after careful consideration of the continued market volatility and the global geopolitical status, we've decided to move our investor day to the spring of 2026. We will provide more detail on a specific date in early 2026. I'll now turn the call over to Norman for his remarks.
Thanks, Roop. I think as we all know, the second quarter remained tumultuous, but it does seem we're all getting used to it. For what it's worth, I think in any case, it's good to see our customers adapting to the current situation and figuring out how to navigate. It's nice to see some positive signals relating to NIH funding for 2026. We discussed tariffs. Obviously, it's still evolving. The U.S. Government policies are a work in process, but I think to the credit and determination of Bio-Rad employees around the world, as a company we remain resilient and continue to advance our business on many fronts. Probably good to take a moment here to welcome the Stilla employees to Bio-Rad. I've had the chance to interact with some of them in the last few weeks and I think they are a great addition to Bio-Rad.
As John mentioned, Mike Crowley, who's been leading our Global Commercial Operations, is retiring after a long and distinguished career at Bio-Rad. Mike has been an important part of Bio-Rad success over the years. Just a call out. Thank you, Mike, for all your contributions. I think that concludes our prepared remarks. Gail, I think we'll now open it up to take questions.