• Organic Revenue Growth: 9% for the quarter.
• Adjusted Operating Margin: Increased 110 basis points sequentially to 30.1%.
• Adjusted EPS: $0.42 compared to $0.40 in the prior year.
• GAAP EPS: $0.22 compared to $0.17 in the prior year.
• Q2 Revenue: $297 million, an increase of 9% year-over-year.
• Adjusted Gross Margin: 70.5% compared to 69.7% last year.
• Adjusted SG&A: 32% of revenue compared to 31.2% in the prior year.
• R&D Expense: 8.5% of revenue compared to 8.4% in the prior year.
• Cash Generated from Operations: $84.3 million.
• Dividends and Stock Buyback: $12.7 million in dividends and $75.6 million through a 1.1 million share stock buyback.
• Protein Sciences Segment Revenue: $211.6 million, organic growth of 8%.
• Diagnostics and Spatial Biology Segment Revenue: $84.1 million, organic growth of 12%.
• Net Interest Expense: $0.7 million, decreasing $2.7 million compared to the prior year.
• Bank Debt: $300 million, unchanged from last quarter.
• Cash Balance: $177.5 million.

• Warning! GuruFocus has detected 5 Warning Sign with COR.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Bio-Techne Corp (NASDAQ:TECH) reported a strong fiscal quarter with 9% organic revenue growth, exceeding initial projections.
• The company saw a significant increase in adjusted operating margin, up 110 basis points sequentially to 30.1%.
• Sales to biopharma end markets increased mid-teens, driven by strong demand from large pharma customers.
• The company's GMP reagents revenue increased over 90%, indicating robust growth in the cell therapy sector.
• Bio-Techne Corp (NASDAQ:TECH) expanded its geographic reach through new distribution agreements in the Gulf countries, Turkey, and Azerbaijan.

Negative Points

• Sales in China declined low single digits due to a challenging economic environment, impacting overall growth.
• The diagnostics and spatial biology segment's operating margin decreased compared to the prior year, partly due to incentive compensation accruals.
• The company faces a headwind of approximately 1% of sales in the second half of the fiscal year due to the strengthening of the US dollar.
• There is uncertainty regarding the timing of large GMP protein orders, which can lead to volatility in quarterly growth.
• Concerns around NIH funding and its potential impact on the academic market were noted, although no immediate effects were observed.

Q & A Highlights

Q: Can you elaborate on the pull forward of cell and gene therapy GMP products from Q3 to Q2 and your confidence in recovery across different vectors? A: Kim Kelderman, CEO, explained that the pull forward was due to customer demand, resulting in a 90% growth in GMP proteins. The company is confident in continued traction in China due to replacement funding and national science funding, expecting a shift from negative to positive growth in Q3. CFO James Hippel added that broad-based strength across pharma, including improved run rates in large pharma, supports their forecast despite the timing of large orders.

Q: What are your updated thoughts on M&A given the market backdrop and challenges faced by small-cap tools companies? A: Kim Kelderman stated that M&A remains a priority for capital deployment, with a focus on adding to their portfolio in areas like novel biological insights and advanced therapeutics. The company is strategically positioned with a strong balance sheet and management capability to integrate new acquisitions.

Q: How is the current run rate business performing, and what are your expectations for Q3 and Q4? A: James Hippel noted that the run rate business is performing closer to market levels, with gradual improvement. The company expects mid-single-digit growth in a normalized market, with growth vectors providing differentiation and acceleration. The January run rate showed improvement, particularly in the US academic market.

Q: Can you quantify the benefit from larger cell therapy customers in the quarter? A: Kim Kelderman highlighted that the company has 85 customers in clinical stages, with larger orders from those in later-stage trials contributing to growth. James Hippel added that about 2 points of overall growth were attributed to large cell and gene therapy customers, with additional growth from diagnostic reagents.

Q: What is your assessment of the competitive landscape in spatial biology, and how do you plan to improve operating margins in this segment? A: Kim Kelderman emphasized the positive market activity and the unique multiomic capabilities of their COMET system. The company expects continued uptake of instruments and consumables to drive profitability. They are confident in their position to outperform in the spatial biology market.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.