Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bio-Techne Corp (TECH, Financial) reported a 2% year-over-year organic revenue growth, surpassing initial expectations for the third quarter.
- Adjusted operating margin increased by 290 basis points sequentially to 33%, indicating effective cost management and profitability focus.
- Recognition by CiteAb as ELISA Kit Supplier of the Year and for innovation in RNAscope HiPlex12, highlighting strong market adoption and leadership in research tools.
- Strong performance in growth pillars such as GMP reagents, ExoDx Prostate test, and proteomic analytical tools, with new records set in quarterly revenues for GMP reagents.
- Strategic initiatives like leveraging AI for developing new patentable proteins and the expansion into clinical diagnostics with the Ella platform, positioning TECH for future growth.
Negative Points
- Continued macroeconomic challenges and biotech funding issues, although showing signs of stabilization, still pose risks to sustained growth.
- Revenue decline in China by mid-single digits year-over-year, reflecting ongoing market challenges despite stabilization in recent quarters.
- Protein Sciences segment saw a 1% year-over-year decline in organic revenue, mainly due to exposure to biopharma and Chinese markets.
- Higher operating expenses due to acquisitions, such as Lunaphore, impacting the adjusted operating margin which decreased by 400 basis points from the previous year.
- Uncertainties in biotech funding recovery and Chinese economic stimulus, making it difficult to predict the timing and impact on future growth.
Q & A Highlights
Q: Jim, based on current trends, can we expect high single-digit or even 10%+ organic growth in fiscal year '25?
A: James T. Hippel - Bio-Techne Corporation - Executive VP of Finance & CFO: Yes, historically, our growth rates have been 500 to 1,000 basis points better than the market. When the market returns to mid-single-digit growth, we expect to achieve high single-digit or double-digit growth. The exact timing of market normalization is uncertain, but the sentiment and funding are improving.
Q: Kim, regarding the early-stage biopharma funding, how much could flow into discovery versus development stages? Also, can you elaborate on the sustainability of the 40% growth in GMP in the cell and gene therapy sector?
A: Kim Kelderman - Bio-Techne Corporation - CEO, President & Director: Funding typically flows into consumables first, with a delay before impacting CapEx. The cell and gene therapy sector has consistently outpaced overall company growth, and we have a strong product line there. The growth can be somewhat lumpy due to large orders from advanced pipeline companies, but the foundation is strengthening with more early-stage companies starting to order.
Q: What are you watching for to signal an improved backdrop in China?
A: Kim Kelderman - Bio-Techne Corporation - CEO, President & Director: We're optimistic about China's long-term growth and are monitoring funding efforts and customer interest in our automation, which offers consistency, efficiency, and fast results. The $70 billion government funding aimed at innovating instrumentation could benefit us significantly.
Q: Jim, can you clarify the guidance on margins and revenue for Q4?
A: James T. Hippel - Bio-Techne Corporation - Executive VP of Finance & CFO: We aim for mid-30s margin by fiscal year-end, aligning with consensus expectations. Revenue should be slightly higher in Q4 than Q3, but organic growth may face challenges due to tough comps, especially from China.
Q: Kim, can you discuss the expanded Fisher agreement in Europe and its potential impact?
A: Kim Kelderman - Bio-Techne Corporation - CEO, President & Director: The agreement with Fisher Scientific in Europe mirrors our successful 10-year partnership in the U.S., enhancing customer reach and transaction ease. We expect similar benefits in Europe, improving customer service and expanding our direct channels.
Q: What trends are driving the strong performance in cell and gene therapy, and what's the status of Wilson Wolf?
A: Kim Kelderman - Bio-Techne Corporation - CEO, President & Director: The cell and gene therapy market is robust, driven by our comprehensive product offerings and partnerships, like with Wilson Wolf. Wilson Wolf is growing again, participating in 45% of clinical trials in this space, and showing strong revenue and margin performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
