Organic Revenue Growth: 6% for the third quarter of fiscal year 2025. Adjusted Operating Margin: 34.9% for the quarter. Adjusted EPS: $0.56 compared to $0.48 in the prior year. GAAP EPS: $0.14 compared to $0.31 in the prior year. Q3 Revenue: $316.2 million, a 6% increase year over year on an organic basis. Adjusted Gross Margin: 71.6% in the quarter. Adjusted SG&A: 29% of revenue, down from 30.3% in the prior year. R&D Expense: 7.8% of revenue, down from 8.5% in the prior year. Cash Generated from Operations: $41.1 million in the quarter. Capital Expenditures: $10.1 million net investment. Dividends and Stock Buybacks: $12.6 million in dividends and $100 million in stock buybacks. Protein Sciences Segment Revenue: $227.7 million, with 7% organic growth. Diagnostics and Spatial Biology Segment Revenue: $89.2 million, with 2% organic growth. Net Interest Expense: $0.8 million, a decrease of $2.3 million compared to the prior year. Bank Debt: $330 million at the end of Q3. Cash Balance: $140.7 million at the end of Q3. Total Leverage Ratio: Well below 1 times EBITDA.

Warning! GuruFocus has detected 6 Warning Signs with VLN.

Release Date: May 07, 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 quarter with 6% organic revenue growth despite a challenging macro environment. The company achieved an adjusted operating margin of 34.9%, highlighting operational efficiencies and profitability. Bio-Techne's protein sciences segment saw 7% organic revenue growth, driven by strong demand for proteomic reagents and cell therapy workflow solutions. The diagnostics and spatial biology segment delivered 2% organic revenue growth, with notable progress in the ExoDx prostate cancer test and spatial biology instruments. Bio-Techne is well-positioned to benefit from potential shifts in NIH funding towards research areas like cancer and neurological disorders, aligning with their product portfolio.

Negative Points

Uncertainty around NIH funding and US policy shifts is causing concern among US academic customers, potentially impacting future research project funding. The recent escalation of global tariffs poses a challenge, with a potential $20 million annual impact on adjusted operating income if not mitigated. China's economic situation remains challenging, with mid-single-digit revenue declines in the region. The academic market in the US is facing headwinds due to NIH funding uncertainties, impacting purchase decisions, particularly for capital equipment. Bio-Techne anticipates a temporary slowdown in growth momentum to low single digits in Q4 due to macro uncertainties, including tariffs and potential NIH budget cuts.

Story Continues

Q & A Highlights

Q: Could you provide more context on the guidance, particularly regarding the impact on academic and pharma sectors? A: James Hippel, CFO: Large pharma experienced double-digit growth this quarter. However, we had some significant orders from life science tools companies that we don't expect to repeat in Q4, contributing to a step down in organic growth. In academia, we saw a slowdown due to policy announcements, stabilizing in March. We are being conservative with our Q4 guidance due to the tariff environment impacting pharma.

Q: How should we think about fiscal year 2026, especially with uncertainties like China, NIH, and tariffs? A: Kim Kelderman, CEO: We expect more clarity on these headwinds in the coming months. Regarding China, while tariffs are a concern, we are optimistic about offsetting their impact. The Chinese economy's stability and internal funding will be crucial for our growth there.

Q: Can you elaborate on your exposure to tariffs and how it affects your operations in China? A: Kim Kelderman, CEO: China accounts for 9% of our revenue. We have a strategy to mitigate tariff impacts by potentially relocating some instrument manufacturing outside the US. Our consumables are not significantly affected by tariffs, which helps minimize the overall impact.

Q: With the current tariff situation, are you considering expanding local manufacturing in China? A: Kim Kelderman, CEO: The tariffs haven't changed our strategy. We have a "China for China" approach, and our new facility in Shanghai positions us well to serve the Chinese market without significant cross-border tariffs.

Q: Regarding the academic market, even under severe scenarios, how do you plan to maintain double-digit growth long-term? A: James Hippel, CFO: Academic has never been a key growth driver for us. Even with a hypothetical 40% cut in academic revenue, our strategic plan still supports a double-digit growth trajectory over five years.

Q: What is the growth rate for cell and gene therapy, and how does it impact your model? A: Kim Kelderman, CEO: Our cell and gene therapy product line has a trailing 12-month growth rate of over 30%. The growth can be lumpy due to large, infrequent orders from customers in advanced clinical stages.

Q: Can you discuss the impact of potential US manufacturing tariffs on early-stage pharma work? A: James Hippel, CFO: The potential tariffs add uncertainty, which could temporarily impact pharma spending. However, large pharma companies are financially strong and may adjust their spending without significantly affecting R&D budgets.

Q: How is the spatial biology segment performing, especially outside the US? A: Kim Kelderman, CEO: Our spatial biology instruments are growing well, with strong competitive positioning. We offer unique capabilities like multi-omics and protein proximity detection, which are valuable for both academic and pharma markets.

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

This article first appeared on GuruFocus.

View Comments