Bio-Techne Corporation — Form 10-Q Summary
Reporting period: The quarter ended September 30, 2023, the first quarter of fiscal 2024. The filing is unaudited. Unless noted otherwise, amounts below are in U.S. dollars.
Business context and results
Bio-Techne develops and sells biotechnology reagents, instruments and services for research and clinical diagnostic markets. It reports two segments: Protein Sciences and Diagnostics and Genomics. On July 7, 2023, it acquired Lunaphore Technologies, a spatial biology instruments business, for approximately $170.1 million.
| Metric | Q1 FY2024 | Q1 FY2023 | Change |
|---|---|---|---|
| Net sales | $276.9 million | $269.7 million | Up 3%; organic growth 2% |
| Gross margin | 66.9% | 66.6% | Up 0.3 percentage points |
| Operating income | $55.9 million | $56.3 million | Down 1% |
| Net earnings attributable to Bio-Techne | $51.0 million | $89.6 million | Down 43% |
| Diluted EPS | $0.31 | $0.55 | Down 44% |
| Adjusted diluted EPS (non-GAAP) | $0.41 | $0.45 | Down 9% |
| Operating cash flow | $59.4 million | $56.1 million | Up $3.3 million |
Revenue, segments and margins
- Protein Sciences sales were $204.7 million, up 2%; segment operating margin was 43.2%, compared with 43.0%. Management cited ProteinSimple platforms and GMP proteins as growth drivers.
- Diagnostics and Genomics sales were $72.8 million, up 4% reported, with flat organic growth. Lunaphore contributed to reported growth; segment operating margin fell to 0.7% from 12.4%, reflecting Lunaphore, strategic growth investment and unfavorable product mix.
- Revenue growth was supported by ProteinSimple analytical solutions, Cell & Gene Therapy, Spatial Biology and the ExoDx prostate test, and was partly offset by broad weakness in China. Greater China sales were $25.5 million versus $31.5 million.
- Non-GAAP adjusted gross margin was 71.3%, compared with 70.9%. Management said product mix and future acquisitions may continue to affect margins.
Cash, debt and liquidity
- Cash and cash equivalents were $148.7 million at September 30, down from $180.6 million at June 30; there were no short-term available-for-sale investments at quarter-end. Cash and investments together were $148.7 million, versus $204.3 million at June 30.
- Long-term debt was $440 million, up from $350 million at June 30. The revolving credit facility is $1 billion, matures August 1, 2027, and had $560 million available at quarter-end. Borrowings bear variable interest.
- Operating cash flow was $59.4 million; investing cash outflow was $154.1 million, including $166.4 million for the Lunaphore acquisition; financing cash inflow was $71.5 million. Cash declined by $31.9 million during the quarter.
- Current assets were $591.5 million and current liabilities $127.8 million. Total shareholders’ equity was $2.0 billion.
- Capital expenditures were $13.6 million in the quarter; the company expects approximately $44 million of additional capital expenditures for the remainder of fiscal 2024.
Comparability, outlook and notable items
- The prior-year quarter included one-time gains of $37.2 million on the sale of the ChemoCentryx investment and $11.7 million on the sale of Eminence. Their absence largely explains the decline in reported net earnings; the current quarter also included a $2.3 million equity-method investment loss related to Wilson Wolf.
- The effective tax rate was negative 2.9%, including $13.6 million of net discrete tax benefits, compared with 13.5% in the prior-year quarter. Management expects a 24%–28% tax rate for the remainder of fiscal 2024, excluding discrete items.
- Management expects currently available cash, operating cash generation and credit availability to cover operating needs, facility expansion, capital additions and dividends for at least the next 12 months.
- Bio-Techne’s Wilson Wolf agreement requires acquisition of the remaining equity interest on December 31, 2027, with earlier acceleration possible if specified performance milestones are met. Management currently forecasts a payment of approximately $1 billion, plus potential additional consideration, between fiscal 2026 and fiscal 2028. The company had invested $252 million in Wilson Wolf by quarter-end.
- The company declared a $0.08-per-share dividend payable November 24, 2023. No shares were repurchased in the quarter; $260.8 million remained available under the repurchase authorization.
- Key risks cited include acquisition integration, product acceptance, competition, manufacturing and supply-chain issues, foreign-exchange movements, regulation, intellectual property, talent retention and facility-project delays. Approximately 37% of quarterly sales were in foreign currencies; a hypothetical 10% U.S. dollar appreciation would reduce annualized translated foreign-subsidiary earnings by an estimated $5.6 million and net assets by $82.6 million, and cause $4.1 million of additional transaction losses.
- Management reported effective disclosure controls and no material change in internal controls. The filing reported no material legal proceedings and no material changes to the risk factors in the fiscal 2023 Form 10-K.
Important facts for investors to verify
- Whether organic growth and demand improve, particularly in China, and how Lunaphore performs and integrates.
- Drivers of the Diagnostics and Genomics margin decline and the expected timing of any recovery.
- Funding, timing, valuation and potential additional consideration for the Wilson Wolf acquisition commitment, including the conditions that could accelerate payment.
- Debt levels, variable-rate exposure, available credit and cash needs alongside planned capital expenditure and dividends.
- Whether reported earnings comparisons are being interpreted in light of prior-year investment and divestiture gains and current-quarter discrete tax benefits.