On February 2, 2023 Bio-Techne Corporation (NASDAQ: TECH) today reported its financial results for the second quarter ended December 31, 2022 (Press release, Bio-Techne, FEB 2, 2023, View Source [SID1234626729]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
Second Quarter FY2023 Highlights
Second quarter organic revenue increased by 4% (1% reported) to $271.6 million and 5% (3% reported) in the first half of fiscal 2023 to $541.2 million.
GAAP earnings per share1) (EPS) was $0.31 versus $0.49 one year ago. Delivered adjusted EPS1) of $0.47, consistent with the prior year, with foreign currency exchange negatively impacting EPS by $0.02 per share when compared to the prior year.
Growth in the ExoDx Prostate test continued with its fourth consecutive record quarter, as tests performed grew over 70% and revenue more than doubled year-over-year.
Successful execution and expansion of our cell and gene therapy platform with a record quarter in GMP protein sales and the launch of RNAscope Plus.
Enhancement of our ProteinSimple branded product offering with the launch of the MauriceFlex instrument and the opening of a state-of-the-art immunoassay product innovation and manufacturing facility.
1)On November 29, 2022, the company executed a four-for-one split of Bio-Techne’s common stock in the form of a stock dividend to all shareholders of record on November 14, 2022. All references made to share or per share amounts in this press release have been retroactively adjusted to reflect the effects of the stock split.
The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). Adjusted diluted EPS, adjusted earnings, adjusted gross margin, adjusted operating income, adjusted tax rate, organic growth, and adjusted operating margin are non-GAAP measures that exclude certain items detailed later in this press release under the heading "Use of non-GAAP Adjusted Financial Measures." A reconciliation of GAAP to non-GAAP financial measures is included in this press release.
"As we lap high revenue growth rates from last year, we continued to grow in Q2 despite a slow-down in Biotech funding and the Covid illness that is sweeping China," said Chuck Kummeth, President and CEO of Bio-Techne. "Within the quarter, we delivered much improved results in Europe. Also, our run-rate consumable business in the US and our Cell Therapy portfolio grew double-digits, indicating continued underlying strength in our end markets."
Kummeth continued, "Meanwhile, our ExoDx Prostate test continued its rapid adoption, with revenues more than doubling in the quarter compared to the prior year. Our portfolio of innovative tools, bioactive reagents, and technologies are aimed at some of the highest growth life science tools and diagnostic markets. This diverse portfolio combined with the investments we have made in our people, our facilities, and our new product pipeline, position the Company to execute on our strategic growth plan and deliver our long-term targets."
Second Quarter Fiscal 2023
Revenue
Net sales for the second quarter increased 1% to $271.6 million. Organic growth was 4% compared to the prior year with acquisitions contributing 1% and foreign currency exchange having an unfavorable impact of 4%.
GAAP Earnings Results
GAAP EPS was $0.31 per diluted share, versus $0.49 in the same quarter last year. Prior year GAAP EPS was favorably impacted by a non-recurring gain of approximately $28.4 million on our ChemoCentryx investment. GAAP operating income for the second quarter of fiscal 2023 increased 9% to $67.9 million, compared to $62.3 million in the second quarter of fiscal 2022. GAAP operating margin was 25.0%, compared to 23.2% in the second quarter of fiscal 2022. GAAP operating margin compared to prior year was positively impacted by a non-recurring impairment in the prior year related to our Eminence investment.
Non-GAAP Earnings Results
Adjusted EPS was $0.47 per diluted share in both the second quarter of fiscal 2023 and in the comparative period. Adjusted EPS remained flat year-over-year with unfavorable foreign currency exchange being offset by reduced net interest expense. Adjusted operating income for the second quarter of fiscal 2023 decreased 6% compared to the second quarter of fiscal 2022. Adjusted operating margin was 35.5%, compared to 38.3% in the second quarter of fiscal 2022. Adjusted operating margin decreased compared to the prior year due to unfavorable foreign currency exchange, higher inflation, and strategic growth investments including the Namocell acquisition.
Segment Results
Management uses adjusted operating results to monitor and evaluate performance of the Company’s business segments, as highlighted below.
Protein Sciences Segment
The Company’s Protein Sciences segment is one of the world’s leading suppliers of specialized proteins such as cytokines and growth factors, immunoassays, antibodies and reagents, to the biotechnology and academic research communities. Additionally, the segment provides an array of platforms useful in various areas of protein analysis. Protein Sciences segment’s second quarter fiscal 2023 net sales were $203.9 million, a decrease of 1% from $205.0 million for the second quarter of fiscal 2022. Organic growth for the segment was 2%, with foreign currency exchange having an unfavorable impact of 4% and acquisitions contributing 1%. Protein Sciences segment’s operating margin was 43.8% in the second quarter of fiscal 2023 compared to 45.5% in the second quarter of fiscal 2022. The segment’s operating margin compared to the prior year was negatively impacted by unfavorable foreign currency exchange, higher inflation, and the Namocell acquisition.
Diagnostics and Genomics Segment
The Company’s Diagnostics and Genomics segment provides blood chemistry and blood gas quality controls, hematology instrument controls, immunoassays and other bulk and custom reagents for the in vitro diagnostic market. The Diagnostics and Genomics segment also develops and provides in situ hybridization products as well as exosome-based diagnostics for various pathologies, including prostate cancer. The Diagnostics and Genomics segment’s second quarter fiscal 2023 net sales were $68.0 million, an increase of 5% from $64.5 million for the second quarter of fiscal 2022. Organic growth for the segment was 7%, with foreign exchange having an unfavorable impact of 2%. The Diagnostics and Genomics segment’s operating margin was 12.2% in the second quarter of fiscal 2023 compared to 16.9% in the second quarter of fiscal 2022. The segment’s operating margin was negatively impacted by foreign exchange, higher inflation, and the timing of strategic growth investments.
Conference Call
Bio-Techne will host an earnings conference call today, February 2, 2023 at 8:00 a.m. CST. To listen, please dial 1-877-407-9208 or 1-201-493-6784 for international callers, and reference conference ID 13735661. The earnings call can also be accessed via webcast through the following link View Source
A recorded rebroadcast will be available for interested parties unable to participate in the live conference call by dialing 1-844-512- 2921 or 1-412-317-6671 (for international callers) and referencing Conference ID 13735661. The replay will be available from 11:00 a.m. CST on Thursday, February 2, 2023, until 11:00 p.m. CST on Thursday, March 2, 2023.
Use of non-GAAP Adjusted Financial Measures:
This press release contains financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (GAAP). These non-GAAP measures include:
Organic growth
Adjusted diluted earnings per share
Adjusted net earnings
Adjusted tax rate
Adjusted gross margin
Adjusted operating income
Adjusted operating margin
Earnings before interest, taxes, depreciation, and amortization (EBITDA)
Adjusted EBITDA
We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.
Our non-GAAP financial measure of organic growth represents revenue growth excluding revenue from acquisitions within the preceding 12 months, the impact of foreign currency, as well as the impact of partially-owned consolidated subsidiaries. Excluding these measures provides more useful period-to-period comparison of revenue results as it excludes the impact of foreign currency exchange rates, which can vary significantly from period to period, and revenue from acquisitions that would not be included in the comparable prior period. Revenues from partially-owned subsidiaries consolidated in our financial statements are also excluded from our organic revenue calculation, as those revenues are not fully attributable to the Company. There was no revenue from partially-owned consolidated subsidiaries for the quarter ended December 31, 2022 due to the sale of Changzhou Eminence Biotechnology Co., Ltd. (Eminence) in the first quarter of fiscal 2023. Revenue from partially-owned consolidated subsidiaries was $2.0 million for the six months ended December 31, 2022.
Our non-GAAP financial measures for adjusted gross margin, adjusted operating margin, adjusted EBITDA, and adjusted net earnings, in total and on a per share basis, exclude stock-based compensation, the costs recognized upon the sale of acquired inventory, amortization of acquisition intangibles, acquisition related expenses inclusive of the changes in fair value of contingent consideration, and other non-recurring items including non-recurring costs, goodwill and long-lived asset impairments, and gains. Stock-based compensation is excluded from non-GAAP adjusted net earnings because of the nature of this charge, specifically the varying available valuation methodologies, subjection assumptions, variety of award types, and unpredictability of amount and timing of employer related tax obligations. The Company excludes amortization of purchased intangible assets, purchase accounting adjustments, including costs recognized upon the sale of acquired inventory and acquisition-related expenses inclusive of the changes in fair value contingent consideration, and other non-recurring items including gains or losses on legal settlements, goodwill and long-lived asset impairment charges, and one-time assessments from this measure because they occur as a result of specific events, and are not reflective of our internal investments, the costs of developing, producing, supporting and selling our products, and the other ongoing costs to support our operating structure. Additionally, these amounts can vary significantly from period to period based on current activity. The Company also excludes revenue and expense attributable to partially-owned consolidated subsidiaries in the calculation of our non-GAAP financial measures as the revenues and expenses are not fully attributable to the Company.
The Company’s non-GAAP adjusted operating margin and adjusted net earnings, in total and on a per share basis, also excludes stock-based compensation expense, which is inclusive of the employer portion of payroll taxes on those stock awards, restructuring, impairments of equity method investments, gain and losses from investments, and certain adjustments to income tax expense.
Impairments of equity investments are excluded as they are not part of our day-to-day operating decisions. Additionally, gains and losses from other investments that are either isolated or cannot be expected to occur again with any predictability are excluded.
Costs related to restructuring activities, including reducing overhead and consolidating facilities, are excluded because we believe they are not indicative of our normal operating costs. The Company independently calculates a non-GAAP adjusted tax rate to be applied to the identified non-GAAP adjustments considering the impact of discrete items on these adjustments and the jurisdictional mix of the adjustments. In addition, the tax impact of other discrete and non-recurring charges which impact our reported GAAP tax rate are adjusted from net earnings. We believe these tax items can significantly affect the period-over-period assessment of operating results and not necessarily reflect costs and/or income associated with historical trends and future results.
Investors are encouraged to review the reconciliations of adjusted financial measures used in this press release to their most directly comparable GAAP financial measures as provided with the financial statements attached to this press release.