Bio-Techne(US:TECH)2023-05-03 19:39Financial Data and Key Metrics Changes - Adjusted EPS for Q3 was $0.53, consistent with the prior year quarter, while GAAP EPS increased to $0.43 from $0.37 in the prior year [13][14] - Q3 revenue was $294.1 million, representing a 3% year-over-year increase on an organic basis and a 1% increase on a reported basis [14][15] - Total company adjusted gross margin was 72.6%, down from 73.2% in the prior year, primarily due to unfavorable foreign exchange and product mix [20] - Adjusted operating margin for Q3 was 37%, a decrease of 260 basis points from the prior year, but a 150 basis point improvement sequentially [22] Business Line Data and Key Metrics Changes - The Protein Sciences segment reported sales of $218.9 million, with organic growth of 5% despite a strong prior year comp [63] - The Diagnostics and Genomics segment reported sales of $75.7 million, with organic revenue declining by 2%, but upper single digits growth when adjusted for the ExoTRU milestone payment from the prior year [52][49] - The spatial biology business returned to double-digit growth, driven by strong performances in RNAscope, BaseScope, and microRNA product lines [53] Market Data and Key Metrics Changes - North America grew mid-single digits, Europe saw upper single-digit growth, while China experienced low-single-digit growth [19][31] - Biopharma grew high single digits, while academia grew mid-single digits, both partially offset by OEM destocking [19] Company Strategy and Development Direction - The company is focused on strategic growth investments and expanding its portfolio in cell and gene therapy, liquid biopsy platforms, and spatial biology capabilities [11][18] - A significant investment in Wilson Wolf aims to enhance the company's position in cell therapy manufacturing [36][39] - The company anticipates that as top-line headwinds subside, it will continue to make strategic investments in key growth platforms to ensure long-term momentum [22] Management's Comments on Operating Environment and Future Outlook - Management noted that the accumulation of specific headwinds in Q3 was approximately 7.5%, which when added back, results in an adjusted organic growth rate of over 10% [17] - The company expects to see continued improvement in Q4, particularly in China, as COVID-related impacts diminish [28][32] - Management expressed confidence in returning to double-digit growth in fiscal year 2024 as headwinds diminish [102] Other Important Information - The company has implemented strategic price increases to offset inflation impacts on operating income [21] - The balance sheet remains strong with $157.2 million in cash and short-term investments, and a total leverage ratio below one turn [25] Q&A Session Summary Question: What does the company expect for growth in the fourth quarter? - Management indicated that growth in Q4 is expected to be in line with the first quarter, with potential for mid-teens growth in subsequent quarters as headwinds subside [68][83] Question: How does the investment in Wilson Wolf change the relationship? - The investment allows for deeper collaboration and operational integration, enhancing growth opportunities [72] Question: What is the outlook for the ACD growth and partnerships? - Management highlighted that the partnerships with Akoya and Lunaphore are expected to drive incremental revenue, with spatial biology being a hot area of innovation [76][97] Question: What is the visibility into the OEM destocking dynamic? - Management noted that the OEM destocking impact is about 1.5%, with expectations for recovery as customers return to normal ordering patterns [101] Question: Will the company return to double-digit growth in fiscal 2024? - Management confirmed that underlying double-digit growth is already seen in key growth programs, suggesting a return to overall double-digit growth in fiscal 2024 [102]