MINNEAPOLIS, May 2, 2017 /PRNewswire/ -- Bio-Techne Corporation (NASDAQ:TECH) today reported its financial results for the third quarter ended March 31, 2017.
Third Quarter FY2017 Snapshot
- Third quarter revenue increased by 10% to $144.0 million.
- GAAP fully diluted earnings per share (EPS) for third quarter decreased 30% to $0.57 due to acquisition-related amortization, contingent consideration fair value adjustments, and other acquisition related costs.
- Delivered third quarter adjusted earnings per share (EPS) of $0.97, a decrease of 4% from the prior year, with foreign currency exchange headwinds impacting results by $0.01 or 1%.
- Biotechnology segment delivered 6% organic growth in Q3, led by the antibody portfolio and strong commercial execution in Europe.
- Protein Platforms segment delivered 20% organic growth in Q3, led by the Biologics (iCE) platform and acceleration of multiplex ELISAs (Ella).
- Advanced Cell Diagnostics (ACD) continued its high double-digit growth with revenues increasing nearly 60% on a stand-alone basis.
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 Adjusted Financial Measures.” A reconciliation of GAAP to non-GAAP financial measures is included in this press release.
“My compliments to our global teams for a solid quarter with organic growth in the mid-single digits, led by Europe with organic growth in the upper-teens, a record for us,” said Chuck Kummeth, President and Chief Executive Officer of Bio-Techne. “We have many highlights to discuss this quarter including a return to growth in Japan and strong 20% growth in Protein Platforms. ACD also continues to surprise us, with growth nearing 60%, well on its way to surpassing the milestones we gave the team for the final earn-out payment this December.”
Kummeth added, “However, timing of orders in our Diagnostics segment is still impacting overall Company quarterly growth rates. No business has been lost in this division, but an emphasis on inventory metrics by its large Dx customer base has pushed out some deliveries into next fiscal year. Longer term, the pipeline of new business for this division looks stronger than ever.”
Kummeth concluded, “With the ongoing integration of the nine acquisitions we have done over the past 3.5 years, our focus has been on maintaining high margins along with revenue growth. With our latest acquisition, ACD, now absorbed into Bio-Techne’s operating processes, our adjusted operating margins continue to improve. True to our word, our adjusted operating margins in Q3 increased sequentially by over 200 basis points from Q2. My thanks to our employees worldwide, now totaling near 1800, for the wonderful execution.”
Third Quarter Fiscal 2017
Revenue
Net sales for the third quarter increased 10% to $144.0 million. Organic growth was 4% compared to the prior year, with currency translation having a negative impact of 2% and acquisitions contributing 8% to revenue growth.
GAAP Earnings Results
GAAP EPS decreased to $0.57 per diluted share, versus $0.81 in the same quarter last year. GAAP operating income for the third quarter of fiscal 2017 decreased 26% to $32.3 million, compared with $43.5 million in the third quarter of fiscal 2016. GAAP operating margin was 22.4%, compared with 33.2% in the third quarter of fiscal 2016. GAAP operating margin compared to prior year was negatively impacted by additional expenses associated with the acquisitions made in fiscal 2017. These expenses include selling, general and administrative expenses, acquisition intangible amortization, contingent consideration fair value adjustments, and other acquisition costs. GAAP diluted EPS was also negatively impacted by higher interest costs associated with the financing of recent acquisitions.
Non-GAAP Earnings Results
Adjusted EPS decreased to $0.97 per diluted share, versus $1.01 in the same quarter last year. Adjusted operating income for the third quarter of fiscal 2017 decreased 3% compared to the same quarter last year. Adjusted operating margin was 37.3%, compared with 42.4% in the third quarter of fiscal 2016. Adjusted operating margin compared to prior year was negatively impacted by the mix of lower-margin acquisitions made in fiscal 2017. Adjusted EPS was negatively impacted by higher interest costs associated with the financing of recent acquisitions and benefitted from a lower adjusted effective income tax rate due to geographic mix.
Segment Results
Management uses adjusted operating results to monitor and evaluate performance of the Company’s three business segments, as highlighted below. Since these results are used for this purpose, they are also considered to be prepared in accordance with GAAP.
Biotechnology Segment
The Company’s Biotechnology segment includes proteins, antibodies, immunoassays, flow cytometry products, intracellular signaling products, and biologically active chemical compounds used in biological research. Biotechnology segment’s third quarter fiscal 2017 net sales were $94.5 million, an increase of 16% from $81.4 million for the third quarter of fiscal 2016. Organic growth for the segment was 6%, with currency translation having an unfavorable impact of 2% on revenue growth and acquisitions contributing 12% to revenue growth. Biotechnology segment adjusted operating margin was 47.9% in the third quarter of fiscal 2017 compared to 55.5% in the third quarter of fiscal 2016. The lower operating margin is largely the result of recent acquisitions, namely ACD, made in this segment.
Protein Platforms Segment
The Company’s Protein Platforms segment develops proprietary systems and consumables for protein analysis. In the third quarter of fiscal 2017, segment revenue was $23.6 million, an increase of 20% from $19.7 million for the third quarter of fiscal 2016. Organic growth for the segment was 20% with currency translation having an unfavorable impact of 2% and acquisitions contributing 1%. The Protein Platforms segment’s adjusted operating margin was 13.8% in the third quarter of fiscal 2017 compared to 8.1% in the third quarter of fiscal 2016. The higher segment operating margin was primarily the result of volume leverage.
Diagnostics Segment
The Company’s Diagnostics segment provides a range of controls and calibrators for various blood and blood chemistry clinical instruments, as well as quality controls, diagnostic immunoassays and other bulk and custom reagents for the in vitro diagnostic market. The Diagnostics segment’s third quarter fiscal 2017 net sales were $26.0 million, a decrease of 13% (all organic) compared to the third quarter of fiscal 2016. The Diagnostics segment’s adjusted operating margin was 23.1% in the third quarter of fiscal 2017 compared to 31.6% in the third quarter of fiscal 2016. The lower operating margins were driven by a lower volume leverage and margin mix of product sales.
Conference Call
Bio-Techne will host an earnings conference call today, May 2, 2017 at 8:00 A.M. Central time. To listen, please dial (877) 879-6203 or (719) 325-4749 for international callers. A recorded rebroadcast will be available for interested parties unable to participate in the live conference call. The replay will be available from 11:00 P.M. Central time on Tuesday, May 2, until 5:00 P.M. Central time on Friday, June 2, 2017. To access the replay please go to: http://audio.viavid.com/20170502-123977-bio-techne.mp3
Use of 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:
- Adjusted diluted earnings per share
- Adjusted net earnings
- Adjusted gross margin
- Adjusted operating income
- Adjusted operating margin
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 measures for adjusted gross margin, adjusted operating margin, and adjusted net earnings, in total and on a per share basis, exclude the costs recognized upon the sale of acquired inventory, amortization of acquisition intangibles, and acquisition related expenses. The Company excludes amortization of purchased intangible assets and purchase accounting adjustments, including costs recognized upon the sale of acquired inventory and acquisition-related expenses, 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’s non-GAAP adjusted operating margin and adjusted net earnings, in total and on a per share basis, also excludes stock based compensation expense and certain adjustments to income tax expense. Stock based compensation is excluded from non-GAAP adjusted earnings because of the nature of this charge, specifically the varying available valuation methodologies, subjective assumptions, and the variety of award types. 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.
Forward Looking Statements:
Our press releases may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Such statements involve risks and uncertainties that may affect the actual results of operations. The following important factors, among others, have affected and, in the future, could affect the Company’s actual results: the effect of new branding and marketing initiatives, the integration of new leadership, the introduction and acceptance of new products, the funding and focus of the types of research by the Company’s customers, the impact of the growing number of producers of biotechnology research products and related price competition, general economic conditions, the impact of currency exchange rate fluctuations, and the costs and results of research and product development efforts of the Company and of companies in which the Company has invested or with which it has formed strategic relationships.
For additional information concerning such factors, see the section titled “Risk Factors” in the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the Securities and Exchange Commission. We undertake no obligation to update or revise any forward-looking statements we make in our press releases due to new information or future events. Investors are cautioned not to place undue emphasis on these statements.
Bio-Techne Corporation (NASDAQ: TECH) is a leading developer and manufacturer of high quality purified proteinsnotably cytokines and growth factors, antibodies, immunoassays, as well as biologically active small molecule compounds --- which are sold to biomedical researchers and clinical research laboratories; these operations constitute the core Biotechnology Division, headquartered in Minneapolis, Minnesota. The Protein Platforms Division manufactures innovative protein analysis tools under the ProteinSimple brand name that greatly automate western blotting and immunoassay practices.
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