Conference Transcript - BIO 2026-11-10

Doug Schenkel, Analyst — UBS

All right. Good morning, everybody. I'm Doug Schenkel, and on behalf of UBS, it is my pleasure to welcome Rup Lakaraju, EVP and Chief Financial Officer of Biorad. Rup, thank you for being here this morning.

Roop Lakkaraju, CFO

Thanks for having us, Doug.

Doug Schenkel, Analyst — UBS

So, BioRad sits at a unique position today, balancing a still-mixed demand environment against a more active focus on... Portfolio priorities, margins, and capital allocation. The company also, of course, has a meaningful stake in Sartorius, which introduces an interesting dimension in bioprocessing. And as I've started to look at BioRad more and more, I mean, it's a company I haven't formally covered in my career. It's a company, of course, I've followed across my career. It does seem like a lot is changing, and it's not necessarily your father's BioRad. Things are evolving. So I think it's a really interesting time to sit down and talk about a few things this morning. So with that in mind, Maybe the best place to start is to really talk about how things are evolving at BioRan, and then from a growth gap algorithm standpoint, and really what I'm talking about is if we think about how you've been growing more in the low single digits, how do we go from those levels of growth recently to get back to market growth? What are the key steps? How much of this is execution versus portfolio evolution? Maybe we can start there.

Roop Lakkaraju, CFO

Yeah, I appreciate the setup, Doug, and I've been with the company for about two and a half years now, and we have pretty much an all-new executive suite that's joined Norman, and Norman's the one who's hired us, obviously, and so it's an exciting time. We have a lot of transformation going on, and I appreciate the setup that you just provided. I think as we think about market growth rate, this is critical. And to your point, historically, we've been, let's call it 1.5% to 2%, as you said. It's multiple elements here. But it starts, in order to drive market growth rates, you've got to have portfolio. And one of the things that we have doubled down on, if you will, is R&D vitality. And so part of that is execution in terms of driving R&D vitality. We've got numerous examples. Most recently, we just announced a new imager technology that we brought out two quarters ahead of schedule, right? And that's not something we've historically been able to do. Not only that, but we've incorporated AI technology within there in terms of image analysis and what that provides. And so we're thinking about how the markets are evolving and what are the needs and how we can execute more effectively. And we have other examples of that. I think part of this is that R&D vitality and improving that portfolio. Part of that is also just execution, predictable execution that we need to have. Because when we look at the top-line growth rate opportunity, that's one thing. But the margin expansion opportunity is maybe just as great for us. And part of that is our own self-help that we've been working on over the last two years. Part of it is looking at M&A opportunities that can accelerate top-line growth, but also margin expansion. I'm happy to unpack that a little bit with us here today. But it's all of those elements, if you will.

Doug Schenkel, Analyst — UBS

What, like, from a signpost standpoint, what should we be looking for in terms of?

Roop Lakkaraju, CFO

Yeah.

Doug Schenkel, Analyst — UBS

Roop and the team are doing a good job when it comes to better commercial execution, better cost management, and R&D vitality. What should we be looking for and over what time frame?

Roop Lakkaraju, CFO

Yeah, I mean, what we've talked about, it's already been a multi-year journey, and really, we're doing a lot of foundational things. A lot of what we talked about, or I just mentioned just now, are foundational things that we're putting in place. As we think about moving things forward, that, you know, last few years, we've had negative growth rate. It's been a declining rate. Part of that end market challenges and where our portfolio sits as it relates to market opportunities, but part of it is execution, as we've talked about. So that's one aspect of, hey, do we turn to a positive growth rate? Do we then march ourselves up towards market growth rate? Unfortunately, there's no silver bullet that takes us from where we have been to that market growth rate, where we want to put that. So that's one aspect of it. The second piece is the continued margin expansion, and the margin expansions, both gross margin expansion based on mix evolution, based on execution improvements, and it's also operating margin, obviously, and that's the other piece of that. From an R&D vitality, that's a little bit more difficult because that's an internal metric that we monitor and measure and drive to, but from an external standpoint, really it's the pace of new product introductions that we bring to market. You've seen some of that over the last couple of years. As an example, we bought a small company last year in the Droplet Digital PCR technology area, Stila Technologies, which has been core to our DDPCR instrument strength over the last one year. When you look at, we have over 400,000 assays on digital PCR within BioRed. We were able to port that within a year, all of that over to the Stila technology. And those are critical improvements to make because then that's a differentiator for us. And so it allows us to position that technology in the marketplace with that asset library, which is market leading. And so it's these sort of things that you can measure specifically that ultimately have an impact on top line and margin.

Doug Schenkel, Analyst — UBS

I know the third quarter. It's not where you want to be, but it was a step in the right direction, right? Q3 sales returned to constant currency growth just under 1%. How important is that? And then does that improvement in some ways demonstrate the progress you're making? Essentially, how much of it is what you're doing versus market improvement?

Roop Lakkaraju, CFO

Yeah, there's a lot of both. I think end markets, there are areas that the end markets are improving from where they were. So that's important. And there's more, we think, in terms of market evolution there. It is so much about what we are trying to do ourselves. And quarters fluctuate, as you know, Doug, right? I mean, but it's over multiple quarters. Are we building successes in numerous areas? And we think we are, and it's starting to show up in those numbers. And, you know, we promised margin expansion over the next few years, and we're going to steadily click through that to get towards those targets that we've set.

Doug Schenkel, Analyst — UBS

Thank you. You gave me a nice setup there in terms of end markets getting better. Putting words in your mouth, it's still early, though, right? Yeah, I would say it's early in numerous areas. What's getting better more quickly, and then where are we still looking for signs of improvement?

Roop Lakkaraju, CFO

Yeah, I mean, you know, the one area that's continued to be good over the last, you know, couple of years, you could argue, less X quarters, is large pharma, right, bioprocessing. And we've got a smallish business in process chromatography, which we sit in the polishing stage. It continues to, you know, move up and to the right, and so we appreciate that opportunity. As we think about... Other end markets, though, A&G as an example, I think depending upon the geography that you're talking about, it varies. And in the U.S., we'll see where NIH budget falls out. I think researchers want to get research done for the grants they have, and it's imperative that they do. That's an opportunity, I think, for us. If you look at Europe, they're moving budgets around to defense and other things, but they also are driving medical research. China is another opportunity. I think in these pockets in A&G, there's sentiment improvement. There's the desire to get back to a more normalized world, if you will, but there's still market challenges, whether it's geopolitical or other things. Yeah, it'll be interesting to see if the psychology of things gets a little bit better. And I appreciate you saying it that way, because it really is the psychology, it's the sentiment that these researchers have inside the institutions that's really impacting kind of the level of activity, if you will, right? And so that's an area that we'll see. I think from a broader biopharma, ex-large pharma, that is the money is moving into those areas. It's especially moving into later stage commercial areas. For us, our portfolio skews towards discovery stage. And so we think ultimately that money does cascade down into the discovery stage as well, where we're well positioned. But over time, we also want to see what we can do in the commercial place.

Doug Schenkel, Analyst — UBS

You talked about biopharma being a little bit better. You talked about larger pharma being better. It has been a really good funding year, as Tommy mentioned earlier. At one point fairly recently, we pulled the data. Funding into biopharma have doubled year over year. How important is that to bio around?

Roop Lakkaraju, CFO

I mean, ultimately, it is important, right? Now it's a matter of where does that funding go, and does it get into our customer base's hands, or does it trickle down, and over what time frame? We think ultimately funding getting into the broader biopharma is good, and now it's, again, matter of time, and we're focused on identifying those opportunities commercially.

Doug Schenkel, Analyst — UBS

I think we made it 10 minutes without me asking an AI question. So where do you see the most tangible opportunity with AI for Biorad? How do you think about it from an internal productivity standpoint? And then how do you think about it in terms of increasing demand? And that last part may tie into what we just talked about, new company creation, more funding.

Roop Lakkaraju, CFO

Yeah, it's absolutely, I mean, AI is, if you're not using AI internally and within your products, then we think you're missing an important evolution in the marketplace. And so it's critical. As we think about our internal usage, we have increased our internal usage from a productivity standpoint, just in terms of functional areas, whether that's in finance or in commercial or in R&D, right? Every area is a supply chain. So every functional area is using AI and driving productivity, and we're measuring that productivity. I think the other part of it, though, is products. It is critical that we incorporate, and you're starting to see that in terms of how we're accelerating software development, as an example, and we talked about that a couple of quarters ago on an earnings call. You look at the latest imager technology that we brought out. It's got AI capability in terms of image analysis for Western blot analysis, and so we are very mindful of ensuring that we are driving AI adoption and incorporation within our products, and you'll see more of that over time. I think when you marry that with automation and really workflow efficiency, that's where the power is, and that's how we're thinking about things from an R&D evolution and vitality. Internally. Internally. And then bringing those products to market in support of our customers, improving their productivity. I mean, you have less researchers on the RUO side today than you did, let's say, two years ago because of funding challenges. And so these are opportunities for us to help our customers in terms of their productivity as well. And that's how we look at it.

Doug Schenkel, Analyst — UBS

What about customers actually spending more because of AI or having new customers because of AI? Are you seeing that as an opportunity?

Roop Lakkaraju, CFO

I think that those are early, it's still early days, if you will, from that standpoint. Customers are talking about it, but it's about, again, how can we accelerate insights? You know, how do we do more in silico analysis to then isolate where we want to do our wet lab work, these sort of things, and be more focused and be more efficient, these sort of things. So I think you're seeing these things evolve, which are opportunities for us, and we have to be very mindful of how that's evolving as well.

Doug Schenkel, Analyst — UBS

All right, let's pivot to talk about some of the segments and build off of the recent updates. Life Sciences, about 40% of sales. So chromatography, and correct me if I'm messing up anything, chromatography. So I think the segment grew, was it about 2.5% in the third quarter, excluding chromatography, but declined just over to, I think it was 2.4% with a chrome. What's going on there? Inventory, timing, demand, and what gets us to growth without making an exclusion?

Roop Lakkaraju, CFO

Yeah. So you're right. Tools is roughly somewhere around 40-ish percent of total revenue, depending on which quarter you're talking about. To unpack that a little bit, from a process chromatography standpoint, we came into the year, we've talked about, actually, I'll step back in 25, we started talking about process chromatography as potentially a high single digit, which is kind of growth opportunity for us. And that's where we had it pegged. With that said, we had some customers who had some government policy changes that are unrelated to their own execution for certain vaccines that were in the marketplace. That changed our dynamic for 26 and 27. And as a result, you're seeing process chromatography. Be executed as expected, but at a lower level. We're going to get back to growth here starting in 27 and beyond. And the idea here is, as we've said, get to mid-single digits and then ultimately let that grow into high single digits because we've got opportunities or programs and clinical phases that are migrating towards commercial that we think can be successful commercial therapeutics. When you look at X-process chromatography, our life science area, whether it's our, you know, we've got a broad PCR portfolio, both real-time PCR, QPCR, and droplet digital PCR. Droplet digital PCR is the highest growth rate area for us, mid-single-7% in the quarter. Yeah, 7% in the quarter. We kind of look at it as a mid-single-digit opportunity on a long-term, sustainable basis. And you have some derivative areas of that, which is the applied markets, right? Whether that's wastewater testing, whether that's... So you've got other applied markets that the PCR technology applies. That's another mid-single-digit area for us, right? As we bring out imaging technology and some of these other areas, those are opportunities for future growth rate. And the focus is, how do we get tools to a mid-single-digit across the portfolio while having something like process chromatography being a high single-digit on a longer-term basis? So there's opportunity for us, and this is where I think the end markets can help us a little bit. It can provide a little bit more of a tailwind. But from our standpoint, we're very focused on execution, whether it's new product introductions or just execution within the customer base we have.

Doug Schenkel, Analyst — UBS

All right. There's a lot I want to follow up there on. On Chrome, yes. One thing, and this is more education for me, just how you describe it was really helpful. Does that revenue come back at some point?

Roop Lakkaraju, CFO

Yeah, I mean, I think we've got to pause with some of the customers that have the vaccine because they've taken their product needs down in terms of the resins. That does help support getting back to that mid to high single digit on a longer term basis. That plus allowing, having our customers continue migrating through the clinical phases towards commercial are the drivers of opportunity there.

Doug Schenkel, Analyst — UBS

We talked about the 7% DDPCR growth in the quarter. Instruments? Had a really good quarter as well. Yes. You were up more than 20%? More than 20% for the third quarter in a row. What's driving that across the portfolio, and how much of this is upgrades versus competitive wins? Those are obviously very robust numbers.

Roop Lakkaraju, CFO

Yeah, what's really supporting our ability to drive that instrument sales, and especially if you think about this, Doug, considering the softness in the A&GN market, right, this is especially important to us within it and it validates the quality of our products and the value creation that our products provide to the researchers. And so we really like that aspect of it. What's really behind that is our legacy droplet digital PCR instruments. But really, it's the new technology that we just acquired. And when you look at the QX700, which is the series of product there, marry that with the largest assay portfolio of anyone in the marketplace. Those elements really have driven the growth in instrument sales over the course of the last three quarters, but even the fourth quarter of last year, which is the first quarter that we were in the market selling the QX700 products, we had low double-digit growth rate there as well. So we're seeing that. Now, what we'd love to see, and I'm sure you're going to jump to this next, is the consumable pull-through. It hasn't normalized yet from our standpoint, and usually it takes six to 12 months to have research get to a more normal level. That's been a bit slower because of all the in-market softness that we've talked about, but we think over time that's a tailwind for us in our DDPCR area as we think about another growth driver to support getting to market growth rates.

Doug Schenkel, Analyst — UBS

Follow-up on the QX700. The full assay library is almost there, right? Are you there yet? It is there. Okay. So that helps, too, right? Absolutely. It was critical. What's the next major unlock from Stilla that hasn't shown up in numbers yet?

Roop Lakkaraju, CFO

I think it's that consumable pull-through, right? I really do think when you look at having more than 20% growth rate for three quarters in a row for instruments with the consumables lagging as much as they are, that's kind of the element that's to come. And that's going to be a nice growth driver as we move forward, hopefully in 27 and beyond.

Doug Schenkel, Analyst — UBS

Within tools, China, I think it's 6% of total sales. So you returned to growth in the third quarter across life science tools, across the sector. We're hearing about improvement in China. What are you seeing, and are you getting to the point where you feel like, all right, this isn't, as we've talked about, one quarter doesn't make a trend. Are you seeing things that make you feel better about China?

Roop Lakkaraju, CFO

Well, first of all, China is a critically important geo to be in, and we're committed to that. We've done some things, again, in terms of improving our own execution, things like we didn't have very much of a footprint from a manufacturing standpoint, China for China. We made a decision at the end of last year to put some manufacturing capacity for our tools, certain SKUs within our tools portfolio. We got that executed in the first quarter of this year. And what that allows us to do is participate in more government tenders and these sort of things. So we see that as an opportunity moving forward. Our DDPCR, our process chromatography areas, those are especially important areas in tools for us in China as we look at it, and part of what we're really evaluating from a China strategy standpoint is what else do we need to do, and we actually have a team of executives and folks over in China spending right now to really assess market conditions and identify where further opportunities are.

Doug Schenkel, Analyst — UBS

Do you think you can maintain growth in China for the foreseeable future?

Roop Lakkaraju, CFO

I think it's going to be volatile. And when you look at our portfolio in China, and like you said, it's about a mid-single-digit area of revenue, it's a bit more skewed towards diagnostics than the tools, but the tools are an opportunity for sure. Makes sense.

Doug Schenkel, Analyst — UBS

We're going to pivot to diagnostics, but as I think about, you know, this is kind of my transition question with DDPCR and clinical. I mean, there's companies, Genioscopy is one of them, they're here, a tangible example of where this technology is being moved into diagnostics. As you think about the growth algo for that platform, Could clinical DD-PCR become a key part of what drives an acceleration of growth for the company?

Roop Lakkaraju, CFO

Yeah, it's another vector that we think is an opportunity. And let me step back for a moment because you mentioned Genoscopy, and Andrew and the team there have done a fantastic job of executing and really driving value to customers. And we made these decisions purposefully as we thought about, you know, do we want to dive directly into bringing digital PCR into the DX side, or do we use these partnerships? And some of these are investments, right, that we have. And so we chose those partnerships because we wanted that market validation from these companies because that's their core business, if you will. And what's transpired over the past few years is that validation of using DDPCR to help promote their diagnostics needs. And we've seen that not just with them, but other such partnerships and investments that we made. And so now what you have is the market looking at, to your point, hey, does it make sense to bring DDPCR into the diagnostic side? I think that's something to come over the coming years, especially as it gains traction. And we definitely think that that's an opportunity for us.

Doug Schenkel, Analyst — UBS

More broadly, this goes back to something we talked about earlier, keeping in mind clinical diagnostics grew about 3% in the third quarter. I'm sure you want that to be higher over time and see the opportunities.

Roop Lakkaraju, CFO

Again, is this an area where you think you have the right portfolio as we sit here today? We have some very good areas in diagnostics. I mean, when you look at our quality systems, we are market leaders in there. When you look at our immunohematology area, again, we've got a very strong position. We need to drive further life cycle evolution in our diagnostics portfolio. And I also look at M&A, and we talked about it. I mentioned it earlier. We look at M&A, and we've changed how we do M&A here because we have a history of maybe doing some deals that haven't panned out as well as they need to be, and that's been a headwind and a drag, but we changed how we approach it and how we execute and still is a great example of that. We are looking for – we're really agnostic from a tools or DX, but if I really – if we could find DX assets that can help support that product evolution, especially in the molecular area or some of these areas where there is growth opportunities, that would be very interesting.

Doug Schenkel, Analyst — UBS

One thing, More near-term and looking back at Q3, that growth rate, how much of that was underlying improvement versus, you know, timing dynamics like in quality systems and diabetes?

Roop Lakkaraju, CFO

Yeah, there was a bit of timing in there, and especially in China. And so there is underlying strength. But, of course, as we talked about quarter to quarter, there's going to be volatility. This last third quarter had some of that timing and orders that really helped us support what we posted. But ultimately, we are gaining traction in numerous areas.

Doug Schenkel, Analyst — UBS

What do you think, keeping in mind some of your R&D being redirected towards quality controls, how do you think about that opportunity? It's a pretty fragmented market. That seems like it could be something that would be pretty meaningful for you over time, or at least could be.

Roop Lakkaraju, CFO

Yeah, I mean, it's meaningful for us today, and we think because of that market leadership and because, as you said, it's a bit fragmented. It's an opportunity from an M&A standpoint, from a tuck-in and these sort of things. And so we actively think about these things, have it on our heat maps, and really evaluating that, right? So as we continue to drive internal R&D dollars over to quality controls, where we have that right to win, and accelerating that, and then looking for M&A opportunities to further our position.

Doug Schenkel, Analyst — UBS

Yeah, I mean, it's interesting. You have the clear leadership position in that vertical, but it sounds like there may be some opportunities to close some gaps in the portfolio, either internally or inorganically, to actually take the growth rate to another level.

Roop Lakkaraju, CFO

Yeah, there's definitely opportunity. And I don't know that I would say there are gaps, but there's opportunities to expand our reach from a product positioning standpoint. You know, do we quality controls in, you know, oncology areas or some of these, you know, what are those opportunities? And we're really thinking through that and being mindful of how do we optimize our returns?

Doug Schenkel, Analyst — UBS

All right. Let's spend the rest of our time talking about the P&L, the balance sheet, and strategic. Starting on margins, in the third quarter, non-GAAP operating margin improved, I think, 100 basis points year over year to 12.8%. How important is that? And as we think about that as a signpost, where do you go from here? In the quarter, it does seem like there were structural efficiencies. R&D spend came down. I think there may have been some mixed benefit. Can you help us unpack this?

Roop Lakkaraju, CFO

Yeah, no, absolutely. It's an important stepping stone, right, of continuing. Our focus is driving that operating margin expansion. When you compare us to peers, we've got a tremendous opportunity in terms of expanding our margins. When we start to unpack where did it come from, part of it is about execution and the efficiencies we're driving across the enterprise, whether that's in the COGS area or the OPEX area. Part of it is mixed. We had especially strong process chromatography quarter. We had quality control strength. And these are areas that really help. When you look at, you know, the instrument sales from a QX700, strong margins with those instruments, right? So we have a mix that's really helped, but underlying that is also execution improvements. And for us, it's about, you know, building blocks of margin expansion towards what we've said is, you know, a near-term targeted fuel or near-term, let's call it over the next two to three years, of how do we get to mid-teens? And that becomes a milestone, not the destination, as we continue to march up from that over time. And each of these are building blocks to get there.

Doug Schenkel, Analyst — UBS

You've talked about, I think it's $30 to $35 million in targeted net annual savings ramping, I think, between now and sometime in 2028. How do you, like, when you think about the opportunities to reinvest in some of the areas you're talking about, but then the margin improvement targets you just talked about, how do you balance those things?

Roop Lakkaraju, CFO

Well, it's an and conversation, right? It really is, because you have to invest, and as we've talked about, there are so many areas that we're investing in. And, you know, folks have asked, you know, the restructuring charge, most recent restructuring charge that we took was is much larger than than what you just quoted of 30 to 35 million dollars in net savings that really take hold in 28. And it kind of, you know, starting in 27, we'll start to see some benefit. And it's because the net number is lower because we are investing in capabilities to help support what we're trying to execute from a strategy standpoint. So we're doing it together in terms of being mindful of where we spend and how much we spend and getting returns for that, but also then investing appropriately so we can accelerate whether it's top-line growth or that margin expansion.

Doug Schenkel, Analyst — UBS

And the charges and the investment you made in the quarter, I mean, free cash flow did drop a bit in the quarter. It does seem like you need a bit of improvement, if I'm doing the math right, to get to the target, which I think is 290 to 340 for the year, is the right way to think about this. You took a lot of the investment and a lot of the charges in Q3, and that doesn't repeat in the fourth quarter.

Roop Lakkaraju, CFO

Yeah, I mean, that's absolutely right. So we did about $210 through the first three quarters of this year. We stand by the range of $290 to $340. There is working capital opportunities. We seek to, again, rationalize our CapEx because, again, we want to ensure we're going to get the returns where we're investing. And so all of that helps support that free cash flow range that you just cited. But we also look at it between the margin expansion and further working capital efficiencies that we can drive over multiple years. There's further free cash flow expansion that we think is out there for us. So, you know, really, it's... The top line growth, getting to that market growth rate, it's that margin expansion, and it's free cash flow improvement in terms of our focus areas.

Doug Schenkel, Analyst — UBS

And in terms of just fourth quarter P&L guidance, even though things are getting a bit better, as we've talked about throughout our discussion here, it doesn't sound like you have.

Roop Lakkaraju, CFO

We don't. It's kind of a continuation of the third quarter as we think about the fourth quarter. And really, we made a few different comments within our last earnings call. We really think these conditions, you know, just because the turn of the calendar happens doesn't mean that these headwinds. If you will, at the beginning of the new year. So really, they're going to carry into the 27 period. Question is how deep into 27 might we see those headlines?

Doug Schenkel, Analyst — UBS

Publicly described constructive dialogue with Elliott and broad alignment on execution and capital allocation. Is that really consistent with what a lot of what we've talked about here in this discussion in terms of how you're evolving priorities and how you are allocating capital?

Roop Lakkaraju, CFO

Yeah, absolutely. I mean, whether it's the investors sitting in the room here or the investors that we will talk to throughout today, everyone has the same consistent kind of opportunities that they see for us. It's not surprising. And so, you know, as we've laid out to the investment community at large, where we think those opportunities are and how we intend to go after them, I think broadly we have alignment with the investment base. Now it's a matter of, okay, when, right? And everyone has that sense of urgency, as we do. And so we've got strong alignment with the investment community at large, and Elliott is part of that.

Doug Schenkel, Analyst — UBS

Um, Sartorius. How important is Sartorius as part of the BioRad story?

Roop Lakkaraju, CFO

It's... It's not that important, quite honestly. And I say that from our own execution standpoint. I mean, we do own Sartorius from an economic interest standpoint. So it is important from that standpoint. It's a strong asset. It's a tremendous asset, an incredibly successful asset. So I don't want to minimize the importance of the investment because it's been so successful. But Sartorius doesn't impact our day-to-day operations. And we have so much improvement from a day-to-day operational standpoint. That's where we're focused. And when we look at Sartorius, I look at Sartorius, and we look in the board, it's an opportunity to continue to be a growing asset and appreciate on our balance sheet. And it gives us optionality. It's a monetizable asset, as we've spoken about in the time I've been here. But... That's a monetizable asset sitting on our balance sheet, not something that's driving top-line growth and margin expansion for us on a day-to-day basis where our focus is.

Doug Schenkel, Analyst — UBS

Anything you can share in terms of how would you favor monetizing the stake versus holding? Further appreciation, any framework that you can share with us?

Roop Lakkaraju, CFO

I mean, I don't know that I've got, there's any scientific framework to really speak of. As I just said, we've got so much. Our own improvement to do. As we think about M&A opportunities, these trends, could it be a monetizable asset towards an M&A deal? Sure. But it's not necessary. When you look at the strength of our balance sheet today, we're a positive net cash standpoint, right? One of the strongest balance sheets you're going to find out there. And then you have this monetizable asset. So we've got liquidity ourselves to do the kinds of deals because we're not looking to do transformative deals. We want to do deals that have products that are in the marketplace, that have a market position that can help accelerate that top line growth and that margin expansion that we've spoken about numerous times today. And that's our focus. But outside of that, it really is about how do we focus on our own execution.

Doug Schenkel, Analyst — UBS

In closing, as we think about, I mean, you've been with the company for a couple of years. As we think ahead, two, three years. If we think about, if we're looking at the company at that point, and we say, Wow, Roop and the team crushed it. They did a really good job. What are the three things we're going to point to?

Roop Lakkaraju, CFO

The three things I would say is marching towards that market growth rate. And if we talk about it in three years, the product portfolios take time to shift. And if M&A can help support accelerating that shift, then we can talk about market growth rates. But continue getting towards market growth, if not there, over the next few years. Get to that mid-teens operating margin as that within the next few years target. And if we can accelerate that, again, we're going to be focused on accelerating it. And then finally, driving further free cash flow expansion from where we are today. And if we drive that operating margin expansion, that free cash flow will also grow. And then it's about working capital unlock from the balance sheet.

Doug Schenkel, Analyst — UBS

All right. That's fantastic. Let's leave it there. Really appreciate you being here. Thanks, Doug.