Bio-Techne(TECH) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents Bio-Techne Corporation's unaudited condensed consolidated financial statements, including earnings, balance sheets, and cash flows, with detailed notes on accounting policies and segment information Condensed Consolidated Statements of Earnings and Comprehensive Income Net sales increased, but net earnings and diluted EPS significantly decreased due to higher operating expenses and a litigation charge Condensed Consolidated Statements of Earnings (in thousands, except per share data) | Financial Metric | Quarter Ended Mar 31, 2025 | Quarter Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $316,181 | $303,428 | $902,671 | $852,961 | | Gross margin | $214,556 | $204,599 | $591,460 | $566,377 | | Operating income | $38,708 | $66,998 | $126,115 | $160,863 | | Net earnings | $22,588 | $49,059 | $91,078 | $127,517 | | Diluted EPS | $0.14 | $0.31 | $0.57 | $0.79 | Condensed Consolidated Balance Sheets Total assets slightly decreased, while total liabilities increased due to long-term debt, resulting in a decrease in total shareholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (unaudited) | June 30, 2024 | | :--- | :--- | :--- | | Total Assets | $2,644,259 | $2,703,867 | | Cash and cash equivalents | $140,670 | $151,791 | | Goodwill | $968,612 | $972,663 | | Intangible assets, net | $443,699 | $507,081 | | Total Liabilities | $626,234 | $635,017 | | Long-term debt obligations | $330,000 | $319,000 | | Total Shareholders' Equity | $2,018,025 | $2,068,850 | Condensed Consolidated Statements of Cash Flows Operating cash flow decreased due to lower earnings, while investing cash outflow reduced, and financing cash outflow increased from share repurchases Condensed Consolidated Cash Flow Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $189,355 | $223,485 | | Net cash used in investing activities | ($35,589) | ($194,222) | | Net cash used in financing activities | ($163,453) | ($62,303) | | Net change in cash and cash equivalents | ($11,121) | ($40,656) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, segment changes, strategic investments, ongoing restructuring charges, and the resolution of a significant legal dispute - The company changed the name of its 'Diagnostics and Genomics' segment to 'Diagnostics and Spatial Biology' to better reflect its offerings[15] - In July 2024, the Company invested $15.0 million in Spear Bio, accounted for under the cost-method[16] - The Company initiated enterprise-wide restructuring in fiscal 2025 to improve operating margins, incurring total charges of $13.7 million for the nine months ended March 31, 2025[21][22] - A legal dispute with the former CEO regarding stock options was resolved through arbitration, resulting in a payment of $37.2 million, which was recognized as a litigation charge in the quarter[35][36] Revenue by Type (in thousands) | Revenue Type | Quarter Ended Mar 31, 2025 | Quarter Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Consumables | $257,785 | $246,732 | $719,345 | $682,405 | | Instruments | $26,111 | $26,493 | $83,185 | $81,178 | | Services | $27,246 | $25,501 | $81,953 | $71,084 | | Total revenues, net | $316,181 | $303,428 | $902,671 | $852,961 | Segment Revenue and Operating Income (in thousands) | Segment | Quarter Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2025 | | :--- | :--- | :--- | | Protein Sciences | | | | Net Sales | $227,687 | $643,774 | | Operating Income | $103,910 | $271,564 | | Diagnostics and Spatial Biology | | | | Net Sales | $89,231 | $256,558 | | Operating Income | $8,423 | $15,940 | - On April 30, 2025, the Board approved a new share repurchase plan authorizing the purchase of up to $500 million of the Company's stock[102] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased net sales driven by organic growth, offset by decreased net earnings due to a non-recurring arbitration award and restructuring costs Results of Operations Consolidated net sales increased due to organic growth, but SG&A expenses rose significantly from an arbitration award, impacting net earnings and the effective tax rate - Consolidated net sales for Q3 FY25 increased 4% YoY to $316.2 million[109][111] - Organic revenue grew 6%, while foreign currency and a business held-for-sale each had an unfavorable impact of 1%[111] - Net earnings for Q3 FY25 decreased to $22.6 million from $49.1 million YoY, primarily due to a non-recurring arbitration award[110] Adjusted Gross Margin Reconciliation (Q3 FY25) | Metric | Amount (in thousands) | Percentage | | :--- | :--- | :--- | | Gross margin - GAAP | $214,556 | 67.9% | | Adjustments | $11,980 | - | | Adjusted gross margin | $226,536 | 71.6% | Segment Performance (Q3 FY25 vs Q3 FY24) | Segment | Net Sales (Q3'25) | YoY Growth | Organic Growth | Operating Margin (Q3'25) | | :--- | :--- | :--- | :--- | :--- | | Protein Sciences | $227.7M | 6% | 7% | 45.6% | | Diagnostics and Spatial Biology | $89.2M | 2% | 2% | 9.4% | Adjusted Diluted EPS Reconciliation (Q3 FY25 vs Q3 FY24) | Metric | Q3 FY25 | Q3 FY24 | | :--- | :--- | :--- | | Net earnings before taxes - GAAP | $38,274 | $61,084 | | Total Adjustments | $74,234 | $36,943 | | Net earnings before taxes - Adjusted | $112,508 | $98,027 | | Non-GAAP adjusted net earnings | $88,318 | $76,425 | | Earnings per share - diluted - Adjusted | $0.56 | $0.48 | Liquidity and Capital Resources The company maintains strong liquidity with substantial cash and credit availability, expecting to meet future cash requirements despite significant share repurchases - As of March 31, 2025, the Company had $140.7 million in cash and cash equivalents and $670 million available on its line-of-credit[128][129] - The Company has a future commitment to acquire the remaining 80.1% of Wilson Wolf, with a potential payment of up to $1 billion plus contingent consideration, forecasted to occur between fiscal 2026 and 2028[130] - For the nine months ended March 31, 2025, cash from operations was $189.4 million, capital expenditures were $26.1 million, dividends paid were $38.0 million, and share repurchases were $175.7 million[132][134][138][140] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company reports no material changes to its market risk exposure from interest rates and currency exchange rates since the last annual report - There have been no material changes in the Company's exposure to market risk from interest rates and currency exchange rates since the last annual report[152] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[155] - There were no material changes in the Company's internal control over financial reporting during the third quarter of fiscal 2025[156] PART II: OTHER INFORMATION Item 1. Legal Proceedings The company is not involved in any material legal proceedings, with a significant dispute involving the former CEO resolved during the quarter - The Company is not a party to any legal proceedings expected to have a material adverse effect on its business[158] - A dispute with the former CEO was resolved through a binding arbitration award during the quarter ended March 31, 2025, for which the Company paid $37.2 million inclusive of interest and legal fees[35] Item 1A. Risk Factors The company reports no material changes to its risk factors, except for an expanded discussion on global market conditions, including the adverse effects of tariffs and trade actions - A key risk factor highlighted is the changing conditions and uncertainty in global markets, including the adverse effects of tariffs, sanctions, and other trade actions[161] - These actions, such as those between the U.S. and China, could increase costs, disrupt supply chains, and negatively impact margins and profitability[161] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's common stock repurchases under its publicly announced plan, with a remaining balance available for future repurchases Share Repurchase Activity (Fiscal Year 2025 to March 31, 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Dollar Amount Remaining Under Plan | | :--- | :--- | :--- | :--- | | Nov 1 - 30, 2024 | 1,118,492 | $67.62 | $105,110,738 | | Feb 1 - 29, 2025 | 1,488,563 | $67.21 | $5,066,126 | | Total YTD | 2,607,055 | $67.38 | $5,066,126 | - The share repurchase plan, approved on February 2, 2022, authorized the purchase of up to $400 million in stock[162] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[165] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[167] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter - No director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the third quarter of fiscal 2025[169] Item 6. Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including corporate governance documents, compensation plans, and required certifications - The report includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[174] - Financial statements are provided in Inline Extensible Business Reporting Language (iXBRL) format[174]