Bio-Techne(TECH) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The trailing 12-month revenue exceeded $1 billion for the first time in the company's history, reflecting a 17% growth rate in Q2 [5][6] - Adjusted EPS was a record $1.88, up 16% from $1.62 a year ago, while GAAP EPS increased to $1.94 from $1.15 [44][45] - Q2 revenue reached $269.3 million, marking a 20% year-over-year increase on a reported basis and 17% on an organic basis [45][46] - Adjusted gross margin improved to 72.3% from 71.5% in the prior year, driven by volume leverage and favorable segment mix [47] - Adjusted operating margin for Q2 was 38.3%, a decrease of 50 basis points year-over-year but an increase of 50 basis points from Q1 [49] Business Line Data and Key Metrics Changes - Protein Sciences segment reported sales of $205 million, with organic growth of 19%, driven by a nearly 80% increase in cell and gene therapy and over 180% growth in GMP protein products [53][54] - Diagnostics and Genomics segment saw reported sales of $64.5 million, with organic growth of 7% and acquisitions contributing 16% [55][57] - The Diagnostics Reagents business achieved upper single-digit growth, marking its tenth consecutive quarter of growth [39] Market Data and Key Metrics Changes - China led all territories with organic growth above 20%, followed closely by the US, which also grew over 20%, while Europe experienced mid-teens growth [14][46] - The biopharma market grew 30%, while academic growth was significantly lower, impacted by Omicron-related shutdowns [46][15] Company Strategy and Development Direction - The company aims to achieve a $2 billion revenue target by 2026, with a strong focus on cell and gene therapy initiatives [42][102] - The acquisition of Wilson Wolf is expected to enhance the company's position in the cell and gene therapy market, providing synergies with existing products [19][20] - The company continues to explore external opportunities to expand its cell and gene therapy offerings alongside organic growth efforts [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of demand for cell and gene therapy products, citing robust growth and customer interest [100][102] - The company anticipates a gradual recovery in academic growth as funding clarity improves and the impact of Omicron diminishes [15][116] - Management remains optimistic about the long-term growth potential in China, expecting continued strong performance despite geopolitical challenges [105][106] Other Important Information - The company filled several key positions within its technical and commercial organizations to support future growth [10][12] - The adjusted effective tax rate for Q2 was 21.4%, and the company ended the quarter with a strong balance sheet, including $279 million in cash [51][52] Q&A Session Summary Question: Clarification on expected mid-teens growth despite tougher comps - Management expects to maintain the same relative operating margin by the end of the year, with hiring continuing at the current pace [62] Question: Balancing capital deployment between M&A and buybacks - The company has prioritized M&A but is currently executing buybacks due to undervaluation and high acquisition valuations [64][67] Question: Competitive position in GMP proteins market - Management believes the company is years ahead of competitors and is well-positioned to meet future demand for GMP proteins [70][72] Question: Trends in ACD business and sales force impact - Management noted that the ACD business is recovering, with expectations for continued improvement despite some sales force attrition [86] Question: Sustainability of demand in biopharma funding - Management remains confident in the sustainability of demand, citing strong growth in cell and gene therapy applications [99][102] Question: Strength of the Chinese market - Management expects continued strong growth in China, projecting it to remain a significant market for the company [105][106]