Bio-Techne Corporation — Form 10-Q
Reporting period: Fiscal third quarter and nine months ended March 31, 2021. The filing was signed May 7, 2021. The supplied metadata says “2020 Q3,” but the filing itself reports fiscal Q3 2021.
Business context
Bio-Techne develops, manufactures, and sells biotechnology reagents, instruments, and services for research and clinical diagnostic markets. It reports two segments: Protein Sciences and Diagnostics and Genomics.
Financial performance
| Metric | Quarter ended March 31 | Nine months ended March 31 |
|---|---|---|
| Net sales | $243.6 million, up 25% | $672.0 million, up 19% |
| GAAP gross margin | 69.1%, versus 66.8% | 68.0%, versus 65.7% |
| Operating income | $68.6 million, versus $47.8 million | $168.7 million, versus $118.1 million |
| Net earnings attributable to Bio-Techne | $45.8 million, versus $36.4 million | $125.5 million, versus $170.5 million |
| Diluted EPS | $1.12, versus $0.92 | $3.11, versus $4.33 |
| Cash from operating activities | Not separately reported | $230.1 million, versus $160.4 million |
Quarterly sales growth included 22% organic growth and a 3% favorable foreign-currency effect; acquisitions contributed an immaterial amount. Nine-month organic growth was 17%, with a 2% favorable currency effect. Adjusted gross margin, a non-GAAP measure, was 72.9% for the quarter and 72.1% for the nine months.
Protein Sciences sales rose 28% for the quarter and 20% for the nine months; its operating margins were 47.6% and 46.7%, respectively. Diagnostics and Genomics sales rose 18% and 18%; segment operating margins were 17.9% and 16.9%.
Liquidity, debt, and capital allocation
- At March 31, cash and cash equivalents were $186.1 million and short-term available-for-sale investments were $90.1 million. The investment balance included $77.6 million in ChemoCentryx (CCXI).
- Debt outstanding was approximately $215.6 million under a credit agreement maturing August 1, 2023. The facility provides a $600 million revolving commitment, subject to its terms.
- Nine-month capital expenditures were $33.0 million; management expected approximately $10.8 million more for the remainder of fiscal 2021.
- The company paid $37.2 million in dividends, repurchased $43.2 million of shares, and repaid $141.4 million of debt during the nine months. About $67 million remained authorized for repurchases at March 31.
- Management said available cash, operating cash generation, and remaining credit capacity should meet operating, investment, and dividend needs for at least the next 12 months.
Changes, outlook, and notable items
- Quarterly earnings improved with sales growth, operating leverage, and cost management. Nine-month GAAP earnings declined chiefly because the prior-year period included substantial non-recurring gains from CCXI investment fair-value changes.
- Other non-operating expense was $20.7 million for the quarter and $17.3 million for the nine months, versus income of $3.4 million and $110.9 million in the comparable prior-year periods. The filing attributes the change primarily to CCXI investment fair value.
- COVID-19 product offerings contributed approximately 3% to quarterly sales and 4% to nine-month sales. The company could not forecast near-term pandemic impacts, but anticipated a positive long-term sales-growth outlook from expected increases in life-science research funding.
- For the remainder of fiscal 2021, management expected an effective tax rate of 24%–28% excluding discrete items. The unusually low reported rates—(0.1)% for the quarter and 11.4% year to date—reflected discrete tax benefits, principally from stock-based compensation.
- On April 6, 2021, Bio-Techne acquired Asuragen for approximately $215 million plus up to $105 million of milestone-based contingent consideration. On April 2, it invested a further approximately $6 million in Eminence, increasing ownership to 57.42%.
- Risks highlighted include COVID-19-related customer closures or supply constraints, acquisition integration, competition, foreign-exchange movements, regulation, intellectual-property protection, and investment-market volatility. A 10% fall in CCXI’s share value would reduce its fair value by approximately $7.8 million.
- No material adverse legal proceedings were reported as of May 7, 2021. Management reported effective disclosure controls; internal-control changes related to the Eminence acquisition had not yet been fully evaluated.
Important facts for investors to verify
- How much sales growth and margin expansion persist as pandemic-related product demand and customer-site reopening effects evolve.
- The extent to which CCXI fair-value movements and discrete stock-compensation tax benefits affect reported earnings, EPS, and comparability.
- Final purchase accounting, funding needs, and milestone obligations for Eminence and Asuragen, including integration and expected returns.
- Debt repayment, cash conversion, capital spending, and the sustainability of dividends and share repurchases.
- Exposure to CCXI valuation changes, foreign exchange, and supply-chain or customer disruptions.