Bio-Techne(TECH) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported Q2 revenue of $174.5 million, an increase of 13% year-over-year, with organic revenue growth of 11% [32] - Adjusted EPS increased by 4% to $1.06, while GAAP EPS was $0.45 compared to $1.29 in the prior year [31] - Adjusted gross margin improved by 60 basis points to 70.8% [34] - Adjusted operating margin decreased by 250 basis points to 32.5%, but core adjusted operating margins expanded by 260 basis points year-over-year when excluding recent acquisitions [28][50] Performance by Business Segment - Protein Sciences Segment: Reported sales of $135.5 million, with a 16% increase and 14% organic growth. The segment's operating margin was 43.5%, up 60 basis points year-over-year [43][44] - Diagnostics and Genomics Segment: Reported sales of $39.3 million, a 6% increase, with organic revenue growth of 2%. The segment's operating margin was -2.7%, but improved to 17.7% when excluding the impact of recent acquisitions [45][50] Performance by Geography - The US grew in the low teens, Europe experienced high single-digit growth, and China grew over 30% [33][11] - The rest of Asia saw mid-teens organic growth, led by South Korea and India [33] Company Strategy and Industry Competition - The company aims to be a perennial double-digit grower, with a strategic plan that has been in place for five years [9] - The company is focused on innovation and meeting customer needs, as evidenced by new product launches in the Protein Sciences segment [15][18] - The competitive landscape in liquid biopsy is intense, with many players vying for market share [59] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the product portfolio and the consistency of growth rates across regions [12] - The company anticipates continued strong performance in the core business, despite challenges in the Diagnostics and Genomics segment due to reimbursement delays [52][64] Other Important Information - The NCCN's inclusion of the EPI test as a recommended test for prostate cancer is expected to broaden patient access and insurance coverage [22][24] - The company is actively pursuing Medicare reimbursement approval, which is critical for future revenue growth from ExosomeDx [26][69] Q&A Session Summary Question: Can you touch on reagents solutions and analytical solutions performance? - The company had a record quarter for antibodies with over 20% growth, and strong performance across assay lines [55] Question: Do you feel the pieces are in place for the LCD regarding EPI? - The company is confident in its science and results, but the reimbursement process is competitive and uncertain [59][61] Question: What are the expectations for margins in the back half of the year? - Strong operating margin expansion is expected in the core business, which will help offset dilution from Exosome [63] Question: What is the outlook for growth in Europe? - The company expects high single-digit growth in Europe, with no significant issues from macroeconomic factors [75] Question: What is driving growth in China? - Growth in China is driven by strong performance in cell therapy accounts and the R&D Systems brand, with significant room for future growth [72]