Bio-Techne(TECH) - 2024 Q3 - Quarterly Results

Overall Performance Summary Bio-Techne reported a 2% organic revenue increase in Q3 FY2024, driven by strong Diagnostics & Genomics growth and improved adjusted operating margins due to efficiency initiatives Q3 FY2024 Highlights Bio-Techne reported a 2% organic revenue increase to $303.4 million in Q3 FY2024, driven by 10% organic growth in the Diagnostics & Genomics segment. While GAAP EPS declined to $0.31 from $0.43 year-over-year, adjusted EPS was $0.48. The company also saw a 31% increase in cash flow from operations Q3 FY2024 Key Financial Metrics | Metric | Q3 FY2024 | Q3 FY2023 | Change | | :--- | :--- | :--- | :--- | | Organic Revenue Growth | 2% | - | - | | Reported Revenue | $303.4M | $294.1M | +3% | | GAAP EPS | $0.31 | $0.43 | -28% | | Adjusted EPS | $0.48 | $0.53 | -9% | | Cash Flow from Operations | $223.5M | - | +31% YoY | - Strong commercial execution in the Diagnostics & Genomics segment led to 10% organic growth (16% reported)[6] - The company experienced continued uptake of its cell and gene therapy workflow solutions, achieving record sales for its GMP reagent portfolio[6] Management Commentary CEO Kim Kelderman highlighted the team's strong execution in challenging market conditions, noting subsiding de-stocking headwinds and growth despite a depressed biopharma market. He emphasized a 290 basis-point sequential improvement in adjusted operating margin to 33.0%, driven by cost and efficiency initiatives - Management noted solid top-line performance driven by strong execution despite challenging end market conditions, with subsiding headwinds from de-stocking[4] - Cost and efficiency initiatives contributed to a 33.0% adjusted operating margin, representing a 290 basis-point sequential improvement[4] - The company's portfolio of core reagents, proteomic analysis, cell & gene therapy, spatial biology, and diagnostic solutions is positioned to catalyze scientific advances and create long-term shareholder value[4] Financial Performance Analysis Bio-Techne's Q3 FY2024 net sales increased 3% to $303.4 million, with varied segment performance and operating margin impacts from acquisitions and restructuring costs Consolidated Financial Results (GAAP & Non-GAAP) In Q3 FY2024, total net sales increased 3% to $303.4 million, with organic revenue up 2%. GAAP EPS fell to $0.31 from $0.43 YoY, with GAAP operating margin contracting from 27.3% to 22.1% due to restructuring, CEO transition costs, and the Lunaphore acquisition. Adjusted EPS also decreased to $0.48 from $0.53, with the adjusted operating margin declining to 33.0% from 37.0% YoY, primarily impacted by the Lunaphore acquisition and unfavorable volume leverage Q3 FY2024 Consolidated Results vs. Prior Year | Metric | Q3 FY2024 | Q3 FY2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $303.4M | $294.1M | +3% | | Organic Revenue Growth | 2% | - | - | | GAAP Operating Margin | 22.1% | 27.3% | -520 bps | | Adjusted Operating Margin | 33.0% | 37.0% | -400 bps | | GAAP Diluted EPS | $0.31 | $0.43 | -28% | | Adjusted Diluted EPS | $0.48 | $0.53 | -9% | - The decline in GAAP operating margin was impacted by restructuring, CEO transition costs, the acquisition of Lunaphore, and unfavorable volume leverage in the Protein Sciences segment[8] - The decrease in adjusted operating margin was primarily due to the acquisition of Lunaphore and unfavorable volume leverage within the Protein Sciences segment[9] Segment Performance The Protein Sciences segment saw a 1% organic revenue decline to $214.6 million, with its operating margin slightly decreasing to 44.2% due to volume leverage and product mix. In contrast, the Diagnostics and Genomics segment achieved strong 10% organic revenue growth (16% reported) to $87.5 million, though its operating margin fell significantly to 9.3% from 15.2%, primarily due to the Lunaphore acquisition Protein Sciences Segment - Q3 FY2024 | Metric | Q3 FY2024 | Q3 FY2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $214.6M | $218.9M | -2% | | Organic Revenue Growth | -1% | - | - | | Operating Margin | 44.2% | 45.1% | -90 bps | Diagnostics and Genomics Segment - Q3 FY2024 | Metric | Q3 FY2024 | Q3 FY2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $87.5M | $75.7M | +16% | | Organic Revenue Growth | 10% | - | - | | Operating Margin | 9.3% | 15.2% | -590 bps | - The operating margin decrease in the Diagnostics and Genomics segment was primarily attributed to the Lunaphore acquisition[12] Financial Statements Bio-Techne's Q3 FY2024 financial statements show increased net sales but decreased operating income and net earnings, alongside growth in total assets and operating cash flow Consolidated Statements of Earnings For the third quarter ended March 31, 2024, Bio-Techne reported net sales of $303.4 million, up from $294.1 million in the prior year. However, operating income decreased to $67.0 million from $80.2 million, and net earnings attributable to Bio-Techne fell to $49.1 million from $70.2 million year-over-year. Diluted EPS was $0.31, compared to $0.43 in the same period last year Q3 FY2024 Income Statement Highlights (in thousands) | Account | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net Sales | $303,428 | $294,146 | | Gross Margin | $204,599 | $202,162 | | Operating Income | $66,998 | $80,211 | | Net Earnings | $49,059 | $70,218 | | Diluted EPS | $0.31 | $0.43 | Consolidated Condensed Balance Sheets As of March 31, 2024, Bio-Techne's total assets increased to $2.72 billion from $2.64 billion at June 30, 2023. Key changes include a decrease in cash and equivalents to $139.9 million and an increase in goodwill and intangible assets to $1.50 billion. Total liabilities rose, while stockholders' equity also increased to $2.01 billion Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Cash and equivalents | $139,915 | $180,571 | | Total current assets | $610,650 | $621,482 | | Goodwill and intangible assets, net | $1,497,394 | $1,407,382 | | Total assets | $2,721,170 | $2,638,692 | | Long-term debt obligations | $389,000 | $350,000 | | Stockholders' equity | $2,014,375 | $1,966,516 | Condensed Cash Flow Statement For the nine months ended March 31, 2024, net cash from operating activities increased to $223.5 million from $171.0 million in the prior year. Net cash used in investing activities was $194.2 million, primarily for acquisitions. Net cash used in financing activities was $62.3 million, driven by stock repurchases and dividends. The company ended the period with $139.9 million in cash and equivalents Nine Months Ended Cash Flow (in thousands) | Category | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $223,485 | $171,000 | | Net cash used in investing activities | ($194,222) | ($260,893) | | Net cash used in financing activities | ($62,303) | $46,838 | | Net decrease in cash | ($40,656) | ($45,285) | | Cash at end of period | $139,915 | $127,282 | Reconciliation of GAAP to Non-GAAP Measures Bio-Techne provides reconciliations for key non-GAAP metrics, including adjusted gross margin, operating margin, net earnings, EPS, EBITDA, and tax rate, to offer a clearer view of core financial performance Adjusted Gross Margin Reconciliation The company's adjusted gross margin for Q3 FY2024 was 71.9%, a decrease from 72.6% in the prior-year quarter. The adjustment from the GAAP gross margin of 67.4% primarily accounted for the amortization of intangibles (3.8%) and the impact of a business held-for-sale (0.4%) Q3 Gross Margin Reconciliation | Margin Type | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | GAAP Gross Margin | 67.4% | 68.7% | | Adjustments | +4.5% | +3.9% | | Adjusted Gross Margin | 71.9% | 72.6% | Adjusted Operating Margin Reconciliation Adjusted operating margin for Q3 FY2024 was 33.0%, down from 37.0% year-over-year. The reconciliation from the 22.1% GAAP operating margin included significant adjustments for amortization of intangibles (6.3%) and stock-based compensation (2.7%) Q3 Operating Margin Reconciliation | Margin Type | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | GAAP Operating Margin | 22.1% | 27.3% | | Adjustments | +10.9% | +9.7% | | Adjusted Operating Margin | 33.0% | 37.0% | Adjusted Net Earnings and EPS Reconciliation For Q3 FY2024, non-GAAP adjusted net earnings were $76.4 million, resulting in an adjusted diluted EPS of $0.48. This compares to adjusted net earnings of $85.7 million and an adjusted EPS of $0.53 in the prior year. Major adjustments to GAAP net earnings before taxes included amortization of intangibles ($19.3 million) and stock-based compensation ($8.4 million) Q3 Net Earnings and EPS Reconciliation (in thousands, except per share) | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | GAAP Net Earnings | $49,059 | $70,218 | | Adjusted Net Earnings | $76,425 | $85,734 | | GAAP Diluted EPS | $0.31 | $0.43 | | Adjusted Diluted EPS | $0.48 | $0.53 | Adjusted EBITDA Reconciliation Adjusted EBITDA for Q3 FY2024 was $109.3 million, a decrease from $116.6 million in the same quarter of the previous year. The calculation starts with GAAP net earnings of $49.1 million and adds back interest, taxes, D&A, as well as non-GAAP adjustments like stock-based compensation and acquisition-related expenses Q3 EBITDA Reconciliation (in thousands) | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Net Earnings | $49,059 | $70,218 | | EBITDA | $91,687 | $107,560 | | Adjusted EBITDA | $109,343 | $116,602 | Adjusted Tax Rate Reconciliation The non-GAAP adjusted tax rate for Q3 FY2024 was 22.0%, compared to a GAAP effective tax rate of 19.7%. The prior year's non-GAAP rate was 21.0%. The adjustments account for the tax effects of items like stock-based compensation and other discrete items to provide a more comparable rate Q3 Tax Rate Reconciliation | Rate Type | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | GAAP Effective Tax Rate | 19.7% | 12.4% | | Non-GAAP Adjusted Tax Rate | 22.0% | 21.0% | Supplementary Information Bio-Techne utilizes non-GAAP financial measures to enhance performance evaluation and provides forward-looking statements subject to inherent risks and uncertainties Use of Non-GAAP Financial Measures Bio-Techne explains that it uses non-GAAP financial measures like organic revenue, adjusted EPS, and adjusted operating margin to evaluate performance and facilitate period-to-period comparisons. These measures exclude items such as acquisition impacts, foreign currency effects, stock-based compensation, amortization of intangibles, and other non-recurring costs to provide investors with greater transparency into the company's core operating results - The company uses non-GAAP measures internally to evaluate performance, make financial and operational decisions, and for incentive compensation[13] - Organic revenue is a key non-GAAP metric that excludes revenue from recent acquisitions, foreign currency impacts, and businesses held-for-sale to improve period-to-period comparability[14] - Adjusted earnings measures exclude items such as stock-based compensation, amortization of acquisition intangibles, restructuring costs, and other non-recurring items that are not considered reflective of ongoing core operations[15][16] Forward-Looking Statements This section contains a standard safe harbor statement, warning that the press release includes forward-looking statements subject to risks and uncertainties. It advises investors not to place undue reliance on these statements and refers them to the company's SEC filings (Form 10-K and 10-Q) for a detailed discussion of risk factors - The press release contains forward-looking statements that involve risks and uncertainties which may affect actual results[19] - Key risk factors include integration of new businesses, acceptance of new products, price competition, general economic conditions, and currency exchange rate fluctuations[19] - Investors are directed to the "Risk Factors" section in the company's Form 10-K and 10-Q filings for more detailed information[20]