Bio-Techne Corporation — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2021, the first quarter of fiscal 2022 (not calendar 2021 Q1). Comparative period is the quarter ended September 30, 2020. Financial statements are unaudited. Bio-Techne develops and sells biotechnology reagents, instruments and services through its Protein Sciences and Diagnostics and Genomics segments.
Financial results
| Metric | Quarter ended Sep. 30, 2021 | Prior-year quarter |
|---|---|---|
| Net sales | $257.7 million | $204.2 million |
| Gross margin | $171.0 million; 66.4% | $137.7 million; 67.4% |
| Operating income | $63.2 million | $49.1 million |
| Net earnings attributable to Bio-Techne | $69.6 million | $33.4 million |
| Diluted EPS | $1.69 | $0.83 |
| Cash from operating activities | $48.4 million | $66.0 million |
Sales grew 26% year over year: 21% organic growth, 4% contribution from acquisitions and 1% favorable foreign exchange. Reported gross margin declined 1.0 percentage point; management attributed pressure to product mix and investments supporting growth. Non-GAAP adjusted gross margin was 71.2%, versus 71.9%.
Protein Sciences sales increased 28% to $197.2 million, with a 45.7% segment operating margin versus 45.6%. Diagnostics and Genomics sales rose 22% to $61.0 million, largely reflecting Asuragen; its margin fell to 12.2% from 17.3%, with acquisitions and growth investments cited as factors.
Liquidity, debt and cash flows
At September 30, cash and cash equivalents were $196.3 million and short-term available-for-sale investments were $38.7 million. The company reported $235.1 million of cash and available-for-sale investments in total. Long-term debt obligations were $287.7 million, with $12.5 million current; outstanding borrowings under the credit agreement were approximately $300.2 million. Management said available cash, operating cash generation and remaining revolving credit capacity should meet needs for at least the next 12 months.
Operating cash flow declined to $48.4 million from $66.0 million, primarily due to timing of operating-asset and liability payments, partly offset by higher earnings. Capital expenditures were $6.1 million, compared with $10.9 million a year earlier; net cash used in investing was $7.1 million. Financing used $39.7 million, including $51.1 million of debt repayments and $12.5 million of dividends, partly offset by $37.9 million from option exercises and a $10.0 million revolving-credit draw.
Material changes, outlook and notable items
- Net earnings benefited from higher sales and a $5.3 million fair-value gain on the ChemoCentryx (CCXI) investment; the prior-year quarter included a $4.4 million loss on that investment. Earnings also reflected $17.7 million of net discrete tax benefits, including an $18.3 million share-based compensation excess tax benefit. The GAAP effective tax rate was negative 2.4%, versus 15.1% a year earlier.
- Management expects the fiscal 2022 tax rate, excluding discrete items, to range from 23% to 28%. No specific sales or earnings guidance is provided in the supplied filing text.
- Capital expenditures for the remainder of fiscal 2022 were expected to be approximately $60 million, principally to expand capacity for anticipated sales growth.
- In September, the company announced closure of its Exosome Germany facility, expected to be completed in fiscal Q3 2022. It recorded $1.2 million of restructuring charges in Diagnostics and Genomics.
- Asuragen, acquired in April 2021, contributed approximately $7.6 million in sales and a $3.2 million operating loss in the quarter. Purchase-price allocation remains preliminary. Contingent consideration of up to $105 million for Asuragen and $38 million for B-MoGen depends on specified milestones; the combined recorded fair value was $22.6 million.
- The company identified foreign-exchange exposure and volatility in its CCXI investment. A 10% decline in CCXI’s market value would reduce fair value by approximately $2.5 million. Management cited acquisition integration, competition, manufacturing, regulation, currency, investment values, hiring and facility-project delays among factors that could affect results. No material changes to previously disclosed risk factors or material adverse legal proceedings were reported.
Key facts for investors to verify
- Whether organic sales growth and Protein Sciences demand remain strong, and how much future growth depends on acquisitions and foreign exchange.
- Whether margin pressure in Diagnostics and Genomics and consolidated margins eases as growth investments and acquisition effects develop.
- The sustainability of earnings excluding the CCXI fair-value gain and unusually favorable discrete tax benefits.
- Asuragen integration, its operating performance, final purchase accounting and potential contingent-consideration payments.
- Cash conversion, planned capital spending, debt repayment and liquidity relative to management’s expectations.