On April 30, 2020 Bio-Techne Corporation (NASDAQ:TECH) reported its financial results for the third quarter ended March 31, 2020 (Press release, Bio-Techne, APR 30, 2020, View Source [SID1234556853]).
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Third Quarter FY2020 Snapshot
Third quarter organic revenue increased by 6% (5% reported) to $194.7 million and 8% (8% reported) in the first three quarters of fiscal 2020 to $562.9 million.
GAAP EPS was $0.92 versus $1.15 one year ago. Delivered adjusted earnings per share (EPS) of $1.39 versus $1.21 one year ago.
Adjusted Operating Margin increased to 36.4% in the third quarter of fiscal 2020 compared to 35.2% in the third quarter of fiscal 2019.
Maintained strong operating cash flows with an increase of over 27% in year-to-date operating cash flow from the prior fiscal year.
Bio-Techne is utilizing our deep product portfolio and expertise as a trusted partner in the fight against COVID-19. Our automated immunoassay platform EllaTM, is providing front-line support through real-time monitoring of an individual’s immune responses to COVID-19 while we deploy our other market-leading technologies to provide critical support for researchers further advancing the development of potential therapeutics and vaccinations worldwide.
Continued execution of long-term Exosome strategy with coverage expansion through a 10-year agreement with General Services covering approximately 9 million lives, product enhancements with an ExoDx at-home specimen collection kit, and certification of the ExoDx CLIA lab for virology testing expanding our CLIA lab capabilities.
The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). Adjusted EPS, adjusted earnings, adjusted gross margin, adjusted operating income, 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.
"Our Q3 performance is indicative of the resolve and energy our teams around the world have to succeed in these trying times. I want to thank all of our employees for their commitment and hard work," said Chuck Kummeth, President and Chief Executive Officer of Bio-Techne. "A finish of 6% organic growth is a great accomplishment for the company, given the unprecedented challenges we all faced with the COVID-19 virus pandemic during the second half of the quarter."
Kummeth added, "Going forward, we have all the necessary processes in place to service our customers remotely as their labs come back online. In addition, we have pivoted a significant part of the company to innovate for COVID-19 solutions. We are currently working on many COVID-19 related projects, and I am extremely excited about how our company can participate on a global level to help eradicate this horrible virus. As a premier Proteins, Antibody, Assay and Diagnostics producer, we are in a unique position to provide reagents for all aspects of COVID-19 research and diagnostics. Our mission thrives on helping solve these types of problems."
COVID-19 Business Update
COVID-19 negatively impacted sales growth during the third quarter of fiscal year 2020 due to numerous customer site shutdowns that occurred in our academia and Bio-Pharma end-markets, particularly in the last several weeks of the quarter. We estimate these customer site shutdowns negatively impacted our third quarter fiscal year 2020 sales by approximately 3%. Customer site shutdowns will continue to have a negative impact on sales while they remain in effect, and we are currently unable to forecast the impact given uncertainty over the duration of the COVID-19 pandemic. We are anticipating a positive long-term outlook for future sales growth resulting from expected future funding increases within life-science research in response to the current pandemic.
The Company has responded to COVID-19 by developing resources for SARS-CoV-2 detection, cytokine monitoring, and drug discovery, all which provide critical support in understanding the mechanisms of infection and developing effective treatments. The Company continues to pursue available opportunities to partner in the fight against COVID-19, which may partially offset the impact of our customer site closures.
Adjusted EPS was negatively impacted by COVID-19 by an estimated $0.07-$0.09 in the third quarter of fiscal 2020. The COVID-19 impact on adjusted EPS was primarily due to the sales impacts described above. We anticipate the short- and long-term impacts of COVID-19 on adjusted EPS to be similar to that of sales growth.
The Company remains in a strong financial position with sufficient available cash as well as access to additional funding if necessary, through our long-term debt agreement. We did not experience any material changes to our March 31, 2020 Balance Sheet resulting from COVID-19 for items such as additional reserves or asset impairments resulting from the pandemic.
The Company remains fully operational as we abide by local "stay at home" orders across the world. To achieve this, the Company is utilizing a remote workforce where possible. For employees who are unable to work remotely, the Company adopted significant protective measures at our sites, including staggered shifts, and distancing and hygiene best practices recommended by the Center for Disease Control (CDC). In addition, the Company has taken additional steps to monitor and strengthen our supply chain to ensure we can maintain an uninterrupted supply of our critical products and services.
Third Quarter Fiscal 2020
Revenue
Net sales for the third quarter increased 5% to $194.7 million. Organic growth was 6% compared to the prior year, with foreign currency exchange having an unfavorable impact of 1% and acquisitions having an immaterial impact on revenue.
GAAP Earnings Results
GAAP EPS decreased to $0.92 per diluted share, versus $1.15 in the same quarter last year. GAAP operating income for the third quarter of fiscal 2020 increased 8% to $47.8 million, compared to $44.1 million in the third quarter of fiscal 2019. GAAP operating margin was 24.5%, compared to 23.9% in the third quarter of fiscal 2019. GAAP operating margin compared to prior year was positively impacted by volume leverage on sales growth.
Non-GAAP Earnings Results
Adjusted EPS increased to $1.39 per diluted share, versus $1.21 in the same quarter last year, an increase of 15%. Adjusted EPS increased primarily due to revenue growth in the quarter. Adjusted operating income for the third quarter of fiscal 2020 increased 17% compared to the third quarter of fiscal 2019. Adjusted operating margin was 36.4%, compared to 35.2% in the third quarter of fiscal 2019. Adjusted operating margin compared to the prior year was favorably impacted by volume leverage on sales growth.
Segment Results
Management uses adjusted operating results to monitor and evaluate performance of the Company’s business segments, as highlighted below. Since these results are used for this purpose, they are also considered to be prepared in accordance with GAAP.
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 community. Additionally, the segment provides an array of platforms useful in various areas of protein analysis. Protein Sciences segment’s third quarter fiscal 2020 net sales were $145.5 million, an increase of 6% from $137.9 million for the third quarter of fiscal 2019. Organic growth for the segment was 6%, with foreign currency exchange having an unfavorable impact of 1% on revenue growth and acquisitions contributing 1% to revenue growth. Protein Sciences segment’s operating margin was 44.7% in the third quarter of fiscal 2020 compared to 45.1% in the third quarter of fiscal 2019. The segment’s operating margin compared to the prior year was negatively impacted by sales mix and the acquisition of B-Mogen in the fourth quarter of fiscal 2019.
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 third quarter fiscal 2020 net sales were $49.4 million compared to $47.1 million for the third quarter of fiscal 2019. Organic growth for the segment was 5%, with foreign currency exchange having an immaterial impact on revenue. The Diagnostics and Genomics segment’s operating margin was 14.3% in the third quarter of fiscal 2020 compared to 7.6% in the third quarter of fiscal 2019. The segment’s operating margin was favorably impacted by volume leverage.
Conference Call
Bio-Techne will host an earnings conference call today, April 30, 2020 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 13701798. A live webcast of the earnings conference call is also available on the Bio-Techne website (View Source). A recorded rebroadcast will be available for interested parties unable to participate in the live conference call by going to:
The replay will be available from 11:00 a.m. CDT on Thursday, April 30, 2020 until 11:00 p.m. CDT on Sunday, May 30, 2020.