Good morning and welcome to the Bio-Techne Earnings Conference Call for the Fourth Quarter of Fiscal Year 2016. At this time, all participants have been placed in listen-only mode and the call will be open for questions following management’s prepared remarks. I would now like to turn the call over to Mr. Jim Hippel, Bio-Techne’s Chief Financial Officer. Please go ahead.

Good morning, and thank you for joining us. On the call with me this morning is Chuck Kummeth, Chief Executive Officer of Bio-Techne. Before we begin, let me briefly cover our Safe Harbor statement. Some of the comments made during this conference call may be considered forward-looking statements, including beliefs and expectations about the Company’s future results. The Company’s 10-K for fiscal year 2015 identifies certain factors that could cause the Company’s actual results to differ materially from those projected in the forward-looking statements made during this call. The Company does not undertake to update any forward-looking statements as a result of any new information, or future events or developments. The 10-K, as well as the Company’s other SEC filings, are available on the Company’s website within its Investor Relations section. During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to the most comparable GAAP measures are available in the Company’s press release issued early this morning on the Bio-Techne website at www.bio-techne.com. And with that, I’ll turn the call over to Chuck.

Thanks, Jim, and good morning, everyone. Thank you for joining us for our fourth quarter conference call. As you saw in our press release this morning, we ended the year on a strong note, and I’m very pleased with our fourth quarter results, as well as the execution of our strategic plan all year. The Company delivered 10% organic growth in the quarter and achieved 6% growth organically for all of fiscal year 2016. This is a nice improvement over the 4% organic growth we had last year. In each of the past three years, we have improved organic growth each year. The biotech division had a great year, with 6% organic growth. And nice momentum at the finish, with 8% organic growth in Q4. Margins remained strong in the low-50s, due to leverage and scale and a strong year for productivity programs, which largely paid for our investments to drive growth. Europe had a solid year with mid-single-digit organic growth. The only issues we had with Europe happened in the final week, currency due to Brexit. Germany continues with a strong market, especially our biopharma customers. The UK finished the year with 6% growth and we see no changes to any of this momentum in the near-term. Our team has now expanded under new European leadership, and we have full subsidiaries in the UK, Germany, Scandinavia, Switzerland, and Italy, with good local distributors forming in the Middle East, Spain, and Eastern Europe. Europe now represents 22% of the total Company’s revenues and nearly 30% of the biotech division. In the APAC region, we have had double-digit growth for three years in a row, with China again leading the way with 20% organic growth in fiscal 2016. Also, unfortunately, once again, Japan had a poor year due to research funding…

Thank you, Chuck. As on our prior earnings calls, I will provide an overview of our Q4 financial performance for the total Company and then provide some color on each of our three segments. Starting with the overall fourth quarter financial performance, adjusted earnings increased 3% year over year to 34.5 million, while adjusted EPS was $0.92 a share versus $0.90 in the prior year. The impact of foreign exchange fluctuations represented a large headwind to EPS, approximately $0.06. The more pronounced foreign exchange impact to our adjusted EPS results is due primarily to the British pound volatility related to the Brexit outcome at the end of the quarter. As a reminder, our European headquarters is in the UK, making the British pound our functional currency in Europe, which unfavorably impacted our European transactional assets in the quarter. GAAP EPS for the quarter was $0.69 compared to $0.71 in the prior year. Q4 reported revenue was 134.8 million, an increase of 15% year over year, with organic revenue increasing 10%. Fourth quarter reported sales include a 6% growth contribution from acquisitions, partially offset by a 1% unfavorable foreign exchange headwind. Moving on to the details of the P&L. Total Company adjusted gross margin was 70.1% in Q4, decreasing 70 basis points in the prior year. Strong volume leverage and productivity gains were more than offset by the lower margin Cliniqa acquisition and unfavorable FX impact. Excluding the impact of acquisitions and FX, core gross margins improved 7 basis points year over year in the fourth quarter. Adjusted SG&A in Q4 was 22.5% of revenue, 160 basis points higher than last year. The SG&A increase was driven by the acquisitions made since the beginning of the fourth quarter of last year, investments made in China, and Chinese corporate-related expenses. R&D expense…

Thank you. [Operator Instructions] And our first question we will hear from Amanda Murphy with William Blair.

I just had -- two actually. One is on ProteinSimple. So obviously that business line in general has been doing quite well, and you had mentioned a few quarters ago that you had some sales force turnover. I just was wondering if you could give a little more context around how you guys have worked to turn that business around in quite a rapid fashion? Just looking for a little more context on performance there.

Sure Amanda. Well, we were very transparent starting about a year ago and we saw the growth rates slipping dramatically. And when you do an acquisition in Silicon Valley, you can expect about a quarter of the people to leave and head on and buy the next lottery ticket. We did see a lot of that. In fact, four of the top five managing teams moved on and we expected that. We kept [indiscernible] key guys was the Head of R&D and Development he has run the business for us and has done a great job. The commercial team however was definitely a little more lacking than we thought and we had to make additional changes quite early, and you guys know all about that. So overall, we turned over roughly 60% of commercial organization, including marketing some of those early first couple of quarters, which obviously is going to cause a big hit to the business and top lines. But those changes were made, I think, very well and very soundly and with great new people, great new head of marketing. We’ve changed the whole way we go to market, we’ve changed the way we address the customer, we’ve change the collateral, we’ve change the way we address customers at their trade shows. And most importantly, we’ve done a lot of synergy work with the biotech divisions. The instruments need reagents. Now we did this acquisition because there’s a lot of synergies with reagents of R&D Systems branded products. They’ve been working together quite strong, quite well. Our head of our commercial organization in the North America, Europe, and Asia side, biotech has worked closely with the organization there in protein platforms, and that also has paid off. We actually have new organizational work together on leads, drive the…

I think you said in the past that you think you can get to roughly 750 million revenue with the businesses you have now incorporating synergies. Is that still a fair assessment?

I think with ACD in the mix, that’s probably we were saying more like 650 million, 700 million with all of the currency hits before that. But it’s in that range. We cannot get to 1 billion without further acquisitions, but I think, run the math, run the models, run our growth rate of 8% or so or plus going forward, we should get close to that. Important factor, we also want to get these margins strong as well, so it goes together.

That was going to be my next question on the margin side. So obviously, you had some underlying margin expansion, but then offset by currency and transaction. So maybe just give a little perspective on what you’re doing just from an underlying perspective. And then when you think about margin, I think you’ve been pretty disciplined about the platforms you’re bringing online and where they sit from a margin perspective in your business. But just remind us what your target margins might look like.

No one is more disappointed than us to see the last week of the quarter, the Brexit hit and what we took with that, because we’re UK based in Europe; we’re a U.S. based business here. So, it is what it is there. We’ll dig out of that pretty quickly we think. Last quarter, we beat pretty soundly at 42.5% op margins [indiscernible] closer to plan, I think 39% or right around that range. And as Jim mentioned, with the dilution this coming year with ACD and then Zephyrus, what we’re doing, mid 30%s is a safe number. And we’ll be climbing back to that 40%, working on productivity, working on synergies and doing what we’ve done already a couple of times. We have been in this high 30% before and clawed our way back to 40%, and we’ve mentioned that and we’re going to drive that. So productivity is going to be key. We will not over-invest. We’re going to try to invest in systems and people and things that create synergies and can create value. We’ve got a pretty good team, a lot of experience and a lot of big companies that know how to do this. We actually have more opportunities, more things prioritizing than we can even do. So the list of things we’d like to do is a pretty long list. So I mentioned, we’re disciplined, we think we are very disciplined. And we understand how important it is to keep the margin in focus and I think we’ve done a really good job [indiscernible].

So are you thinking you can be back to 40% within, coming out of next year?

That’s hard to say. I doubt it. I think we will see how, ACD is in the press release. We bought them, and in the trailing 12 months, they were over a 50% grower. If we can keep that going, then who knows? It’s a business like our business. They make reagents, put them in little tubes, stick them in a box and sell them as kits with very high gross margins; we like that kind of business. And if that growth rate continues, it’s going to climb in the profitability range very quickly. And we’re going to, we have not discussed where the synergy is commercially. We’ve invested as a Company commercially, and that’s why they’re at where they’re at. And we have to wait out an 18-month earn out, work together with them, but there is a lot of synergies. But for sure, China and Europe, there’s a little Company did not leverage the reach we have. So we’ll see how fast they can dig into the land of profitability. But to say they’re going to give us 3, 4, 5 points of margin for the Company, that’s probably a reach. But we’ll see.

Next move to Catherine Ramsey with Robert W Baird.

Good morning, guys. Congrats on the great quarter. You’ve had pretty impressive growth on the biotechnology segment over the last few quarters. What do you think has been the biggest factor in that? How sustainable is the mid to high single-digit pace going forward?

If you back up a year or two, we talked about when you annualize these acquisitions, they were strong growers. We should be in that 8 to 12 range, which is a pretty big band, I understand that, and we’re kind of there now. It really comes down to, if ProteinSimple stays in that 20% region or better, we’re going to be, should be at 1% or better. The better question is, why is biotech division doing so well? It’s continued to do well five, six quarters in a row. We had an 8% quarter; this is really sound. And it’s just not just one reason, thank God for that. The website has been an amazing success. But academia, which is still a big portion of our business, it’s something like $800,000 or whatever report you want to believe. But our average order size, remember, is still like $900 or something like that. So you have to deal with this model of growth through the web. You can’t touch all of these people with just sales. You have to have a model that has a really nice quick, sharp-type web engine, an SEO engine, and then delivery mechanism. And we’ve overhauled ours and it’s working well. With more online activity and more touches on our website, you get more orders, and that’s one piece. Fisher Helms started out slow last year for us but ended pretty well and things were improving. I think they had their own growing and band of pains with absorbing life tech. And movement internally with their TSRs, which we’re constantly retraining now and stuff. So that’s improving as well. We’re depending on Fisher still, and it’s helping. And then biotech pharma has been strong and remains strong, and it’s even getting better. And we’re doing a lot more, we’ll call it custom work. We’re doing -- we’re developing -- we’re getting more known in the industry and we’re being approached more and more for very difficult assignments for developing reagents, proteins, antibodies, etcetera for these customers and being paid an amazingly nice premium for it. And there’s a nice reorder benefit as well. Roughly about half of that work is going in our catalog, so we like it. And that’s why we see this 500% increase [indiscernible]. There’s a lot of those things, those three things we stay in place, I think you’re going to see biotech division in the mid single digits or better in the growth region. That’s what we expect. That was the plan and we are executing to that point so.

Okay, that’s helpful. And then on your last earnings call, you mentioned starting phase one of your ERP system in July. Any color on how that is progressing?

Say it again? Oh, ERP. I’ve been involved in five of them; none of them have ever been flawless. We’ve all heard horror stories with some of our peers are really suffering. I come from a very large Company that actually had operations shut down for weeks. We’ve seen none of that, but we are definitely seeing the pain in the first month of the preliminary ERP. We are ready for it; we have temps in place. We are working through digging it out. We expect to be in decent shape end of the quarter. And you have the usual stuff -- you’ve got back orders growing wild. You find out that orders are held up because one stock number was screwed up or wasn’t right and so it’s holding up the order. We have the usual percentage of customer information is inaccurate, so it’s not going out being held up the order. So you have got to claw through all of that stuff. And we’re not making airplanes here, right? It’s a complex business. There’s a lot of products, a lot of orders, a lot of SKUs, which is the life blood of what EFP is supposed to handle with all of that complexity. So even though we’re just a $500 million business, we have the complexity of something much larger. So overall, I’m actually pretty impressed. This is by far one of the better ERP implementations we’ve done. But we’ve definitely have some work to do to be to claim victory and say we’re really humming along here like we are say with the website design. So it will take a quarter or two, I think, to work out all the kinks. But it is what it is; it’s ERP.

[Operator Instructions] Next we will move to Paul Knight with Janney Montgomery Scott.

Hello, good morning. This is actually Katerina Ivana Vintasoe [ph] on for Paul Knight. What are the end markets driving the strong growth that you are seeing in China? Also, what are the segments or line of products that are finding their -- more momentum there?

That’s a good question. I’m actually not that happy with China this last quarter; it’s actually our worst quarter in years here, with mid-teen growth. And the reason for that is this bayou scandal that’s happened. We sell a lot of products into what we call the academic therapeutics, where we had institutions working on therapies without re-approval of the CFDA. So the CFDA now has their hooks into all this and the government has shut down a lot on what’s going on in academia. And you’ve got to realize, academia in China is a lot bigger percentage of the overall market that it is anywhere else because China funds academia very well, as you know. We’re talking about hundreds of institutions. So we took a bit of a hit there, but for the year it was 20% growth, which part of your question is very good number. Then last year we were like 25% and it was like 25% as well. We see that continuing, even as we scale. We’re still not that big in China. I think when you add all our businesses together with PPD as well, I think we’re roughly a $40 million business, it was $12 million three years ago, so we’ve come a long way, but there’s a way to go. The key to China is customers, customers, customers. It’s a direct model and we keep adding sales people, you cover it province and city-by-city. We have to have strong leaders. We’ve had almost zero attrition, which is remarkable. The leadership we have in China as well as overall Asia is wonderful. And we did a good job with our people; we hired great people. We constantly have really good people trying to get to us. R&D Systems brand is really well known in China. As, many of the leaders of institutions in China running things academia wise are actually Chinese, but they’re U.S. Chinese. They are U.S. citizens; they are people that have gone back. They call them sea turtles. We have a large amount of researchers in China that actually were educated in the U.S. but know our brand and know our Company. So, we really carry the same weight there as we do here in the U.S., known for our premium brand, our quality, our service etcetera and so on. That is the key to it and we hope to leverage that across the new businesses. Our ACD people as well as the [Indiscernible]. And we’ve not seen that chapter hit yet. That chapter is still yet to come. When that takes off it will get even better.

Okay, great. And then outside China, have you started seen a pickup in academic spending, and in particular, in the U.S.?

You’re asking, is there’s an academic increase?

Yes.

We did see an academic increase this quarter. We did pretty well. In China, I would say it’s about like the same thing I mentioned. I think it’s mostly academic anyway. We would still put the business we had supporting therapeutics there with academia, and that took a little bit of a hit this quarter. We think it will take about a year to work through that; it’s not going to be near as tough as the last couple of years, as they run through their corruption scandal policies, etcetera. So we will see.

Thank you.

We enjoy a wonderful POL network in China. The team there are doctors and scientists themselves; they know each other pretty well. I’m very pleased with our POL network and the visibility we get, the trade shows we drive; there’s literally dozens. We run a good operation and so it’s for selling new hostages for agents and so we’re now, our focus going forward now is really getting instruments pretty aligned and synergistic with that core business, just like we’ve done here. It’s working well [Indiscernible].

And next we move on to Matt Hewitt with Craig-Hallum Capital Group.

Good morning, gentlemen. Congratulations on the strong quarter.

Thank you.

A couple of questions for me. First, regarding the academic market here domestically NIH funding. I think with the 6% increase this year, I think there was a lot of expectations that it was going to take a year before you really started to see the benefit from that increase, paying salary increases and all of that. But it appears that you’re actually starting to see some benefit already. Is that the case? And what does that mean or imply for next year with the additional increase?

We went through the math on this a few quarters ago, what we were going to get from this. And we came to the conclusion we’d probably achieve about a 1% gain because we’d have a tailwind from the NIH funding. The amounts that trickle down through all that, that actually hit the reagents budgets, okay? So, I think there is some help. You’ve heard a lot of our peers have talked about they think the second half of this calendar year is going to see more of a funding hit. I think we’re in the reagents side, we’re seeing some [Indiscernible]. I tease my commercial folks who are they’ve got their chests puffed up pretty hard this last quarters with such strong growth. But they’re getting some help for sure. They’re probably at least in that 1% range is probably NIH funding, and just a better attitude. We’re going the other direction. They’re not cutting anymore, they’re starting to figure out where to add, right?

Okay, great. And then maybe a little bit of a strategic question, but with the acquisition of Advanced Cell Diagnostics, this is your first move into genomics. Do you envision essentially building out a fourth reporting segment, where this will be the building block of that division? Or was this just an opportunity to expand a little bit more for that existing segment?

A couple of things. First of all, when you think of our core business, we really are a picks and shovels provider to areas like cancer research, stem cell, and we’re known for quality. So we’re the selection of choice by, especially biotech pharma. And coming back hard in the academic side. We see ACD is the same thing. To say that we’re right in the sweet spot of genomic ACD is probably a reach. It’s really a picks and shovels Company as well, in genomics. Certainly GM aided in 9,000 probes is products. But we like it because it’s reagents. It’s a kit business, it’s just like our business, and it gets us into that area where we know how to provide picks and shovels. On the clinical control side, same thing, diagnostics. We’re not a full-fledged diagnostics Company, but we supply the upstream reagents, chemistries, kits to the big guys, every one of the big guys that make true diagnostics that are, they go through the pain and agony of the qualifications and regulatory, and we haven’t had to do that. We’re drifting in that direction. We’ve been very clear we would like to get into some of that, maybe in China and some things. We’re very opportunistic, but we’re not going to go full into it. You look at this last quarter on diagnostics: there’s not many doing so well in diagnostics; it’s been a rough quarter. It’s an area you’ve got to be careful, we think. Same thing for genomics. We like the reagents, the support side of the business to start with, and we’ll see. Now with that business, growth beyond $100 million or so, I’ve been very clear, we’d like to continue to build out our regional subsidiary model. We have three divisions today, work on three regions. Five or six divisions would be great, and could be diagnostics, could be genomics, could be media. These are all areas that are very strong adjacencies to what we do today. And as we build critical mass, we’ll make new divisions and in the reported segments. To start with, we won’t be doing that with ACD. They have an 18-month earn out, so there’s, we’ll provide upside help, but they have to be a little bit autonomous for 18 months and then we’ll see how they do. If they get big enough, maybe. More likely an initial, initially they’ll be part of biotech division, but it is too early to call that one.

Okay, great. Thank you.

It is research only, right? So, anyway.

And there are no further questions at this time. I would like to turn the call back over to Chuck Kummeth for any additional or closing remarks.

Alright. Well, our strongest quarter in years, we have certainly enjoyed seeing 10%. We’re definitely focused on our margins and we’re focused on synergy. We have got more to bake in here. We’re working hard on it, you can be sure of that. Thank you all for joining the call and we will see you hopefully soon. And if not, in New York. Okay? Bye.

That will conclude today’s call. We thank you for your participation.