Bio-Techne Corporation — Q2 FY2021 Form 10-Q
Reporting period: Quarter and six months ended December 31, 2020. The filing’s “Q2” refers to the company’s fiscal second quarter, not calendar-year Q2. Bio-Techne develops and sells biotechnology reagents, instruments, and services through Protein Sciences and Diagnostics and Genomics.
Financial performance
| Metric | Quarter ended Dec. 31, 2020 | Prior-year quarter | Six months ended Dec. 31, 2020 | Prior-year six months |
|---|---|---|---|---|
| Net sales | $224.3 million | $184.9 million | $428.5 million | $368.2 million |
| Gross margin | 67.3% | 65.6% | 67.4% | 65.1% |
| Operating income | $51.0 million | $37.0 million | $100.1 million | $70.3 million |
| Net earnings attributable to Bio-Techne | $46.3 million | $119.6 million | $79.7 million | $134.0 million |
| Diluted EPS | $1.15 | $3.02 | $1.98 | $3.40 |
| Cash provided by operating activities | — | $155.3 million | $111.0 million |
- Quarterly sales grew 21% (19% organic); six-month sales grew 16% (15% organic). Foreign currency contributed 2% and 1%, respectively; acquisitions had an immaterial impact.
- Quarterly segment sales were $172.2 million for Protein Sciences and $52.5 million for Diagnostics and Genomics. Their operating margins were 46.6% and 15.5%, versus 43.0% and 2.2% a year earlier.
- Management reported adjusted gross margin of 71.5% for the quarter and 71.7% for the six months, up from 70.6% and 70.0%. Non-GAAP adjusted net earnings attributable to Bio-Techne increased 52.2% to $65.2 million for the quarter and 45.6% to $123.0 million for the six months.
- At December 31, cash and cash equivalents were $165.5 million and short-term available-for-sale investments were $117.4 million. Current assets were $541.9 million and current liabilities $117.6 million.
- Debt obligations totaled approximately $231.5 million on the balance sheet ($12.5 million current and $219.0 million long-term); the company reported $231.8 million outstanding under its credit agreement. It repaid $125.3 million of debt during the six-month period.
- Capital expenditures were $22.4 million for the six months. Cash dividends paid were $24.7 million; the company subsequently announced a $0.32-per-share dividend payable February 26, 2021.
Changes, outlook, and risks
- GAAP net earnings and EPS fell sharply versus the prior-year periods because 2019 included nonrecurring gains on available-for-sale investments of approximately $121 million for the quarter and $110 million for the six months, principally related to CCXI. Operating income rose in both periods.
- Management attributed record growth to customer-site reopenings, its COVID-19 product and service offering, and continued portfolio expansion. COVID-19 offerings contributed approximately 3% to sales growth year over year. The company said it could not forecast near-term pandemic impacts, but expected a positive long-term sales-growth effect from anticipated increased life-science research funding.
- Management expects capital expenditures of approximately $20 million for the remainder of fiscal 2021, funded from available resources and operating cash flow. It expects the tax rate, excluding discrete items, to range from 24% to 28% for the rest of fiscal 2021. No specific sales or earnings guidance was provided.
- Management said available cash, operating cash generation, and remaining revolving credit capacity should cover operating needs, facility expansion, capital additions, and dividends for at least the next 12 months.
- The company acquired a controlling interest in Eminence Biotechnology after purchasing 47.6% for approximately $9.8 million net of acquired cash. It expects to provide an additional $8–$13 million of equity funding, likely increasing its ownership. Acquisition accounting valuations remain preliminary.
- Remaining potential contingent consideration for the Quad and B-MoGen acquisitions was up to $47 million and $38 million, respectively; its reported fair value was $10.6 million. Fair-value changes are estimate-sensitive.
- Risks include COVID-19-related customer closures or supply disruption, foreign-exchange movements, competition, acquisition integration, and changes in the market value of investments. CCXI was valued at $94.2 million; a 10% price decline would reduce fair value by an estimated $9.4 million. Approximately 33% of quarterly sales were in foreign currencies.
- There were no material changes to the previously disclosed risk factors and no legal proceedings expected to have a material adverse effect. Disclosure controls were deemed effective; controls related to the Eminence acquisition had not yet been fully evaluated.
Important facts for investors to verify
- Separate underlying operating and organic growth from the prior-year CCXI investment gain when assessing reported earnings and EPS trends.
- Review the CCXI investment’s valuation and concentration risk, along with the effect of any future share-price changes.
- Track Eminence’s additional funding needs, expected ownership changes, and final purchase-price allocation.
- Monitor debt repayments, credit-agreement capacity and terms, and the company’s stated liquidity and capital-spending plans.
- Assess whether COVID-19-related demand, customer-site reopening, and expected research-funding trends persist; the filing gives no clear near-term forecast.