Business context and reporting period
Bio-Techne develops and sells life-science reagents, instruments and services for research, diagnostics and bioprocessing. Its two segments are Protein Sciences and Diagnostics and Genomics. This is the Form 10-K for the fiscal year ended June 30, 2021, with fiscal 2020 as the principal comparable period; the supplied filing text does not provide standalone 2020 Q4 results.
Key financial metrics
Amounts are in U.S. dollars; financial statement amounts are in millions unless otherwise noted.
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | $931.0 | $738.7 |
| GAAP gross margin | 68.0% | 65.4% |
| Operating income | $237.3 | $157.4 |
| Net earnings attributable to Bio-Techne | $140.4 | $229.3 |
| Diluted GAAP EPS | $3.47 | $5.82 |
| Adjusted net earnings (non-GAAP) | $273.2 | $179.3 |
| Adjusted diluted EPS (non-GAAP) | $6.75 | $4.55 |
| Cash from operations | $352.2 | $205.2 |
| Cash and cash equivalents | $199.1 | $146.6 |
| Cash, cash equivalents and available-for-sale investments | $231.6 | $270.9 |
| Debt outstanding at year-end | $341.0 | $357.0 |
- Net sales rose 26%: 22% organic growth, 3% from currency translation and 1% from acquisitions. Protein Sciences sales increased 27% to $704.6 million; Diagnostics and Genomics increased 23% to $227.7 million.
- Adjusted gross margin was 72.2%, versus 70.3%. Management attributed improvement mainly to volume leverage and product mix. R&D expense was $70.6 million, up 8%; SG&A was $325.0 million, up 25%.
- Capital expenditures were $44.3 million. The company paid $49.6 million in dividends and repurchased $43.2 million of shares. Management expected FY2022 capital additions of approximately $68.4 million.
- At June 30, 2021, current assets were $510.6 million and current liabilities $152.3 million. The $600 million revolving facility matures August 1, 2023; a further $200 million increase is subject to conditions. A $250 million term loan is also part of the credit agreement.
Material changes versus the prior comparable period
- Growth accelerated from 4% sales growth in FY2020 to 26% in FY2021, partly reflecting reopened customer sites after pandemic-related closures in the latter half of FY2020.
- GAAP net earnings fell 39%, principally because the ChemoCentryx investment recorded a $67.9 million fair-value loss in FY2021, compared with a $137.5 million gain in FY2020. Adjusted net earnings increased 52% by the company’s non-GAAP measure.
- Cash from operations increased by $147.0 million year over year, supported by higher operating income and favorable changes in operating assets and liabilities.
- Cash, cash equivalents and investments declined $39.3 million. FY2021 investing included $225.4 million, net of cash acquired, for the Eminence and Asuragen acquisitions.
- The effective GAAP tax rate was 5.8%, down from 17.1%, primarily reflecting discrete tax benefits, including $28.1 million of excess tax benefits from share-based compensation.
Outlook, risks and unusual items
- No specific revenue or earnings guidance is provided in the supplied filing text. Management described a positive long-term growth outlook, including anticipated increases in life-science research funding, but said COVID-19’s future revenue impact was not forecastable. Future EPS impact was expected to be similar to sales growth.
- Management said available cash, operating cash generation and access to the credit facility should cover operations, facility expansion, capital additions and dividends for at least the next 12 months. Future acquisitions may require additional borrowing.
- COVID-19 continued to pose risks to customer demand, workforce availability, supply chains and distribution. COVID-specific product sales were described as modest; the filing also notes that the pandemic’s effects varied across businesses.
- Other material risks include acquisition integration and valuation, competition and pricing pressure, talent retention, manufacturing and supplier disruptions, foreign exchange, data privacy/cybersecurity, and extensive FDA, CLIA and international regulatory requirements. EU IVDR compliance required significant quality-system, documentation and clinical-data work by the May 2022 deadline.
- Asuragen was acquired in April 2021 for approximately $216 million net of cash, plus contingent consideration of up to $105 million. Its purchase-price allocation was preliminary. Eminence became consolidated after Bio-Techne acquired a controlling interest; the company’s investment at risk was $15.8 million.
- Goodwill was $843.1 million, or 37.3% of total assets. Annual impairment testing found substantial headroom and no impairment, though the auditor identified Exosome goodwill testing and Asuragen asset and contingent-consideration valuations as critical audit matters involving forecast and discount-rate assumptions.
- The auditor issued unqualified opinions on the financial statements and internal controls. Management and the auditor excluded Asuragen and Eminence controls from the FY2021 control assessment; management had not fully evaluated acquisition-related control changes.
- No legal proceedings expected to have a material adverse effect were disclosed as of August 20, 2021; no subsequent events were reported. The FY2021 result also included $51.8 million of stock-based compensation in the company’s non-GAAP earnings reconciliation.
Most important facts for investors to verify
- Whether organic growth and customer-site reopening momentum persist, and how much future performance depends on pandemic-related comparisons or research funding.
- The reconciliation of GAAP earnings to adjusted earnings, particularly the treatment and volatility of the ChemoCentryx investment and other excluded items.
- Asuragen’s integration, revenue and profitability, final purchase accounting, and the likelihood and amount of contingent payments; also the performance and funding needs of Eminence.
- Debt levels, variable-rate exposure, credit-agreement covenants and maturity, alongside planned FY2022 capital spending and dividend commitments.
- Progress on regulatory compliance, especially EU IVDR, and the status of internal-control evaluation and integration at acquired businesses.