Bio-Techne(TECH) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Presents Bio-Techne's unaudited Q1 FY2020 financial statements, showing $183.2 million net sales and $14.4 million net earnings Condensed Consolidated Statements of Earnings and Comprehensive Income Net sales rose 12.4% to $183.2 million, while net earnings decreased 17.3% to $14.4 million Condensed Consolidated Statements of Earnings and Comprehensive Income | Financial Metric | Q1 2020 (ended Sep 30, 2019, in millions) | Q1 2019 (ended Sep 30, 2018, in millions) | YoY Change | | :--- | :--- | :--- | :--- | | Net sales | $183.2 | $163.0 | +12.4% | | Gross margin | $118.4 | $107.6 | +10.1% | | Operating income | $33.3 | $25.8 | +29.4% | | Net earnings | $14.4 | $17.4 | -17.3% | | Diluted EPS | $0.37 | $0.45 | -17.8% | Condensed Consolidated Balance Sheets Total assets reached $1.925 billion, with liabilities at $750.8 million and equity at $1.174 billion Condensed Consolidated Balance Sheets | Balance Sheet Item | Sep 30, 2019 (unaudited, in millions) | June 30, 2019 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $391.9 | $412.6 | | Total Assets | $1,925.0 | $1,884.4 | | Total Current Liabilities | $88.3 | $102.0 | | Total Liabilities | $750.8 | $718.8 | | Total Shareholders' Equity | $1,174.2 | $1,165.6 | Condensed Consolidated Statements of Cash Flows Operating cash flow was $40.5 million, with $15.1 million used in investing and $24.3 million in financing Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Quarter Ended Sep 30, 2019 (in millions) | Quarter Ended Sep 30, 2018 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $40.5 | $39.4 | | Net cash used in investing activities | ($15.1) | ($288.1) | | Net cash provided by (used in) financing activities | ($24.3) | $222.5 | | Net decrease in cash and cash equivalents | ($1.0) | ($27.3) | | Cash and cash equivalents at end of period | $99.9 | $94.7 | Notes to Condensed Consolidated Financial Statements Notes detail ASC 842 adoption, disaggregated revenue, segment performance, and a 19.1% effective tax rate - The company adopted the new lease accounting standard, Leases (Topic 842), effective July 1, 2019, resulting in the recognition of incremental operating lease liabilities of $80.6 million and a right-of-use lease asset of $79.5 million[19] Revenue by Type (Q1 2020) | Revenue by Type (Q1 2020) | Amount (in millions) | | :--- | :--- | | Consumables | $151.4 | | Instruments | $17.0 | | Services | $10.6 | | Royalty revenues | $4.2 | | Total revenues, net | $183.2 | Revenue by Geography (Q1 2020) | Revenue by Geography (Q1 2020) | Amount (in millions) | | :--- | :--- | | United States | $102.4 | | EMEA, excluding UK | $38.8 | | Greater China | $16.1 | | APAC, excluding Greater China | $14.0 | | United Kingdom | $7.6 | | Rest of World | $4.4 | | Total revenues, net | $183.2 | Segment Performance (Q1 2020) | Segment Performance (Q1 2020) | Net Sales (in millions) | Operating Income (in millions) | | :--- | :--- | :--- | | Protein Sciences | $141.0 | $59.5 | | Diagnostics and Genomics | $42.6 | $0.9 | | Total Segment | $183.5 | $60.4 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 12% consolidated net sales growth, offset by a 17% net earnings decrease from an investment loss - Consolidated net sales increased 12% for the quarter, with organic growth of 13%, while foreign currency exchange had an unfavorable impact of 1%[80] - Consolidated net earnings decreased 17% compared to the prior year period, primarily due to an unrealized loss on the company's CCXI investment[81] - Geographically, the company saw broad-based revenue growth, with each major region achieving double-digit organic growth and China reaching nearly 20% organic growth[83] - Non-GAAP adjusted net earnings grew 9.0% to $41.7 million from $38.2 million in the prior year[95] Results of Operations Consolidated net sales reached $183.2 million with 13% organic growth, while gross margin declined Gross Margin Performance | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Consolidated Gross Margin % | 64.6% | 66.0% | | Non-GAAP Adjusted Gross Margin % | 69.5% | 72.0% | - SG&A expenses increased by $2.0 million (3%), driven by recent acquisitions but partially offset by the timing of stock compensation expense[86] - R&D expenses increased by $1.3 million (9%), primarily due to additional expenses from the ExosomeDx acquisition[87] Segment Results Protein Sciences net sales grew 12% to $141.0 million, while Diagnostics and Genomics saw 16% organic growth - Protein Sciences segment net sales grew 12% (12% organic) to $141.0 million, with an operating margin of 42.2%[88][89] - Diagnostics and Genomics segment net sales grew with 16% organic growth to $42.6 million, though its operating margin declined to 2.1% from 6.9% YoY due to the ExosomeDx acquisition[91][92] Liquidity and Capital Resources The company held $158.4 million in cash and investments, generated $40.5 million from operations - Cash and cash equivalents and available-for-sale investments totaled $158.4 million as of September 30, 2019[97] - Capital expenditures for the remainder of fiscal 2020 are expected to be approximately $50 million[103] - The company paid cash dividends of $12.2 million during the quarter and announced a further dividend of $0.32 per share payable in November 2019[104] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company faces market risk from its $28 million CCXI equity investment and foreign currency exposure - The company holds an investment in CCXI common stock valued at $28 million, where a 10% decrease in its market value would result in a $2.8 million loss in fair value[116] - Approximately 28% of consolidated net sales were made in foreign currencies, primarily the euro (13%), British pound sterling (4%), and Chinese yuan (5%)[117] - A hypothetical 10% appreciation in the U.S. dollar would decrease the annualized translation of earnings from foreign subsidiaries by approximately $2.7 million[118] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of September 30, 2019, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2019[120] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[121] PART II: OTHER INFORMATION Item 1. Legal Proceedings The company was not involved in any legal proceedings expected to have a material adverse effect on its business - The Company is not a party to any legal proceedings that are reasonably expected to have a material adverse effect on its business, results of operations, financial condition or cash flows[123] Item 1A. Risk Factors No material changes occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K - During the three months ended September 30, 2019, there were no material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended June 30, 2019[125] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not engage in any share repurchase activities during the quarter ended September 30, 2019 - There was no share repurchase activity by the Company in the quarter ended September 30, 2019[126] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[128] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[130] Item 5. Other Information There was no other information to report for the period - None[132] Item 6. Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including corporate governance documents and certifications Signatures