Bio-Techne Corporation — Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2022. The filing covers fiscal 2022 Q3; this differs from the “2021 Q3” period in the request metadata. Dollar amounts below are USD millions unless otherwise noted.
Financial performance
| Metric | Q3 FY2022 | Q3 FY2021 | Nine months FY2022 | Nine months FY2021 |
|---|---|---|---|---|
| Net sales | $290.4 | $243.6 | $817.4 | $672.0 |
| Gross margin | 69.4% | 69.1% | 68.0% | 68.0% |
| Operating income | $90.4 | $68.6 | $216.0 | $168.7 |
| Net earnings attributable to Bio-Techne | $60.7 | $45.8 | $210.5 | $125.5 |
| Diluted EPS | $1.48 | $1.12 | $5.12 | $3.11 |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $222.6 | $230.1 |
- Quarterly sales rose 19%; organic growth was 17%, acquisitions added 3%, and foreign exchange reduced growth by 1%. Nine-month sales rose 22%, with 18% organic growth and 4% from acquisitions.
- Quarterly operating income increased about 32% and attributable net earnings about 33% year over year. Nine-month operating income increased about 28% and attributable net earnings about 68%.
- Non-GAAP adjusted diluted EPS was $2.14 for Q3 versus $1.80, and $5.85 for nine months versus $4.88. These measures exclude specified acquisition, investment, compensation, impairment and other items; they are not GAAP results.
- Quarterly reported gross margin improved 0.3 percentage points. Nine-month reported gross margin was flat; adjusted gross margin was 72.3% versus 72.2%.
Segments and material changes
- Protein Sciences: Q3 sales were $213.2, up 15% (16% organic); nine-month sales were $615.3, up 20%. Segment operating margin was 45.4% for Q3 versus 47.9%, reflecting strategic growth investment partly offset by volume leverage. Management cited strong BioPharma demand and broad-based growth.
- Diagnostics and Genomics: Q3 sales were $77.7, up 34% (19% organic); nine-month sales were $203.2, up 26%. Acquisitions contributed 15% to growth in both periods. Q3 operating margin rose to 25.0% from 17.9%; nine-month margin was 18.6% versus 16.9%. Management cited Asuragen, organic growth, diagnostic reagents and the ExoTRU development and commercialization agreement.
- SG&A rose 8% in Q3 and 16% year to date; R&D rose 28% in both comparisons. The company attributed increases to strategic investment and the Asuragen acquisition.
Cash, debt and liquidity
- At March 31, 2022, cash and cash equivalents were $160.8 and short-term available-for-sale investments were $70.4, together $231.2, compared with $231.6 at June 30, 2021. Total current assets were $593.1 and current liabilities $166.8.
- Long-term debt was $246.5, with $12.5 current; the filing reports $259.1 outstanding under the credit agreement. The revolving facility is $600 million, and the agreement matures August 1, 2023. The company made $172.4 of debt repayments and borrowed $90.0 during the nine-month period.
- Nine-month operating cash flow was $222.6, down from $230.1, primarily due to timing of operating asset and liability payments, partly offset by higher earnings. Capital expenditures were $31.3; management expected approximately $23 million more for the remainder of FY2022.
- Financing included $102.1 of share repurchases and $37.6 of dividends in the nine months. A new $400 million repurchase authorization was adopted in February 2022; $339.2 remained available at March 31.
- Management said available cash, operating cash generation and remaining revolver capacity were expected to meet operating, expansion, capital spending and dividend needs for at least the next 12 months.
Outlook, unusual items and risks
- No consolidated revenue or earnings guidance is provided. Management expected the FY2022 tax rate, excluding discrete items, to range from 23% to 27%; the forecasted rate before discrete items at Q3 was 23.8%. Discrete tax benefits were $6.3 in Q3 and $31.6 for nine months, including share-based compensation tax benefits.
- The company recorded $18.7 of Eminence impairment charges in the nine months: goodwill, intangible assets, inventory and fixed assets. Eminence plans to cease operations and liquidate after the company declined further funding; approximately $4 of net tangible assets remained at March 31, with Bio-Techne holding an interest of about 57.4% in those assets.
- A $25 investment in a Wilson Wolf forward contract could require a $231 payment for a 19.9% stake if specified revenue or EBITDA thresholds are met. A later purchase of the remaining equity could require approximately $1 billion plus potential additional consideration if higher milestones are reached. Management forecast the first payment in FY2023 or FY2024 and the second between FY2026 and FY2028.
- Quarterly other non-operating expense included a $17.2 loss from the fair-value change in the CCXI investment; for the nine months, the investment contributed a $16.5 gain. The filing identifies market-value and foreign-exchange exposure; a hypothetical 10% U.S. dollar appreciation would reduce annualized foreign-subsidiary earnings translation by $4.2 and net asset translation by $80.1, and generate $3.1 of additional transaction losses.
- The company closed its Exosome Diagnostics Germany facility as part of a business realignment; restructuring was substantially complete by Q3. Management also noted cybersecurity exposure, supply-chain considerations, acquisition integration and other risks. It reported no material change to previously disclosed risk factors, no material legal proceedings, and no subsequent events.
Important facts for investors to verify
- Confirm the period: the filing is for fiscal 2022 Q3, ended March 31, 2022, not 2021 Q3.
- Assess the sustainability of reported earnings growth given discrete tax benefits, CCXI fair-value volatility, contingent-consideration remeasurement and non-GAAP adjustments.
- Monitor the Eminence liquidation and recovery of remaining assets, and the financial impact of the Wilson Wolf contract’s milestone-triggered potential payments.
- Review debt maturity and refinancing plans ahead of the August 2023 credit agreement maturity, alongside planned capital spending, dividends and buybacks.
- Track segment margins and investment spending, working-capital movements, and exposure to foreign exchange and investment-market fluctuations.