Release Date: August 07, 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 1% year-over-year organic revenue growth in a challenging fiscal year.
- The company saw mid-single digit growth in its Simple Plex and Simple Western platforms, with double-digit growth in related consumables.
- The cell and gene therapy vertical experienced mid-single digit growth and added more customers.
- The molecular diagnostics growth vertical achieved double-digit growth, driven by new product launches and ongoing traction.
- Bio-Techne Corp (TECH) maintained a strong balance sheet with $151.8 million in cash and a total leverage ratio well below one times EBITDA.
Negative Points
- The company faced a challenging funding environment for biotech and significant R&D budget recalibration by large pharma and academia customers.
- North America and Europe both declined low single digits in the quarter, reflecting constrained biopharma and academic end markets.
- China declined high single digits in the fourth quarter, in line with expectations but still a negative impact.
- Adjusted EPS decreased to $0.49 from $0.55 in the prior year quarter, with foreign exchange having a material impact.
- Adjusted operating margin for Q4 was 33.5%, a decrease of 360 basis points from the prior year period.
Q & A Highlights
Q: Can you elaborate on the performance of your antibodies and instrumentation portfolios this quarter?
A: Our instrumentation growth rates have been under pressure due to constrained biopharma funding, but consumables related to these instruments have been growing double digits for seven consecutive quarters. This indicates strong utilization of our installed base. Regarding antibodies, we see some quarter-to-quarter lumpiness but no significant concerns overall.
Q: Clarifying your comments on fiscal year 2025, does this mean mid to high single-digit growth overall for 2025 and an exit rate in Q4 of low double digits?
A: We anticipate gradual improvement in our end markets throughout the year. By the end of the year, we hope to see some uplift in biotech funding, which should translate into spending. This gradual progression forms our baseline for organic revenue growth in fiscal 2025.
Q: How should we think about incremental margins as growth picks up again, and is there any reason you couldn't get back to 40% operating margins over time?
A: We have significant headwinds from incentive compensation accruals, but we expect incremental margin improvement this year. Our long-term objective remains to achieve operating margins north of 35%, potentially up to 40%, depending on market recovery and M&A activities.
Q: Are there any of your core platforms where you're more confident in the current outlook, and any where you have more restrained expectations?
A: We remain confident in all four growth verticals. The end markets have slowed, delaying our timeline slightly, but we are still committed to our growth projections. Our platforms are well-positioned, and we expect to reach our targets, albeit with a slight delay.
Q: Can you provide more detail on GMP reagent revenue and growth expectations for 2025?
A: GMP reagent revenue grew mid-single digits for fiscal year 2024. We expect these growth rates to increase in an improving market, which is factored into our forward guidance.
Q: How do you see Bio-Techne's organic growth compared to peers in 2025?
A: Historically, Bio-Techne has outperformed peers by 500 to 1,000 basis points. We expect this trend to continue, with our growth verticals and new product launches driving our performance. We anticipate double-digit growth once the market recovers.
Q: Can you elaborate on the impact of the Chinese stimulus on your portfolio and confidence in a second-half fiscal year 2025 step-up?
A: The Chinese stimulus is expected to benefit our portfolio, particularly in research reagents and instruments. Our team in China is well-positioned to capitalize on this, and we expect a positive impact once the funds are released.
Q: What is the status of your capacity constraints for the Hyperflex platform, and how do you plan to address them?
A: We have been working to increase capacity for the Hyperflex platform, and we expect to resolve these constraints in Q1 of fiscal year 2025. This will allow us to meet the growing demand and focus on increasing market penetration.
Q: How do you see the academic end market recovering in fiscal year 2025?
A: We expect the academic market to gradually recover, with low single-digit growth. The normalization of funding towards broader scientific research areas will benefit us, as we are well-positioned in these fields.
Q: What is driving the strong growth in your molecular diagnostics segment, and can this momentum continue into 2025?
A: The growth is driven by both market share gains and underlying market growth. While some momentum may normalize, we expect continued strong performance due to our differentiated products and market positioning.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
