Bio-Techne(TECH)2024-05-01 16:20Financial Data and Key Metrics - Q3 revenue was $303.4 million, a 2% year-over-year increase on an organic basis and a 3% increase on a reported basis [30] - Adjusted EPS was $0.48 compared to $0.53 in the prior year quarter, with foreign exchange having a material impact on EPS [30] - Adjusted operating margin increased sequentially by 290 basis points to 33% [15] - Cash generated from operations in the quarter was $81 million, with net investment in capital expenditures at $16.4 million [34] Business Line Performance - Protein Sciences segment revenue declined 1% year-over-year on an organic basis, reflecting stabilization in biopharma and Chinese end markets [22] - Diagnostics and Genomics segment reported 10% organic growth, with spatial biology and molecular diagnostics leading the way [46][80] - GMP reagents business achieved a new quarterly record with over 40% growth [25] - ExoDx Prostate test volume grew over 25% in Q3 [48] Market Performance - North America improved sequentially with low single-digit year-over-year growth, driven by strong performance in cell and gene therapy [41] - Europe declined mid-single digits due to challenging comps from mid-teens growth in the prior year [41] - China saw mid-single-digit revenue decline, but stabilization was observed, with early signs of improvement [20][21] Strategic Direction and Industry Competition - The company is leveraging AI to create new patentable, hyperactive designer proteins and reagents [9] - The Ella platform received ISO 13485 Certification, opening up clinical diagnostic opportunities [24] - The company is investing in scaling up production capacity for the Comet platform to meet growing demand [47][105] Management Commentary on Operating Environment and Future Outlook - Management noted stabilization in biopharma and China markets, with early indications of improvement in the back half of the calendar year [29] - The company expects Q4 to look similar to Q3, with incremental sequential improvement in revenue and adjusted operating margins [36] - Long-term confidence in China as the fastest-growing major region for life science tools, though the path to accelerated growth may take longer than previous cycles [53] Other Important Information - The company received two awards from CiteAb, including the ELISA Kit Supplier of the Year and an Innovation Award for RNAscope HiPlex 12 [16][8] - The company is on track to launch RNAscope HiPlex Pro on the Comet platform by the end of the fiscal year [27] Q&A Session Summary Question: Outlook for high single-digit or 10%+ organic growth in FY2025 [59] - Management believes the company will outperform the market, potentially reaching high single-digit or double-digit growth when markets return to mid-single-digit growth rates [60][83] Question: Biopharma funding and cell and gene therapy growth [61] - Early-stage funding is expected to flow into consumables first, with a delay of about two quarters before impacting the business [61] - Cell and gene therapy growth is sustainable, with GMP reagents growing over 40% in Q3 [62] Question: Impact of the expanded Fisher agreement in Europe [68] - The agreement is expected to enhance customer reach and convenience, similar to the successful U.S. distribution agreement [70][97] Question: Production capacity for the Comet platform [77] - Production constraints are expected to be resolved by the first fiscal quarter of 2025, with demand outpacing initial projections [105] Question: Margin outlook for Q4 and FY2025 [93] - Management aims to achieve mid-30s operating margin by the end of FY2024, with incremental improvement expected in Q4 [94] Question: Academic end market outlook [137] - The academic market remains stable, with continued growth expected in spatial biology and proteomic tools [145] Question: Competitive wins for Lunaphore and spatial biology market [139] - The Comet platform is seeing competitive wins due to its automation and workflow advantages [140] Question: ProteinSimple business growth [148] - The Simple Western platform grew double digits in both instruments and consumables, with strong performance in cell and gene therapy applications [114] Question: GMP facility capacity [150] - Capacity for GMP proteins is no longer an issue, with sufficient capacity expected to last for a decade or more [150]