Good morning, and welcome to the Bio-Techne Earnings Conference Call for the Second Quarter of Fiscal Year 2017. At this time, all participants have been placed in a listen-only mode, and the call will be opened 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, sir.

Thank you and good morning. Thanks for joining us this morning. On the call with me is Chuck Kummeth, our Chief Executive Officer for 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 2016 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 earlier this morning on the Bio-Techne Corporation website at www.bio-techne.com. With that, I'll turn the call over to Chuck.

Thank you, Jim, and good morning, everyone. Thank you for joining us for our second quarter conference call. I'm happy to report that we are tracking to our fiscal 2017 performance goals. The company delivered 2% organic growth in the second quarter and so far has delivered 6% organic growth year-to-date. Our second quarter results were negatively impacted by the timing of OEM shipments within our Diagnostics division. Year-to-date, this division has grown 5%, and has growth and spread evenly throughout the first two quarters, Bio-Techne reporting 4% organic growth in Q2. Looking at our performance by our major regions and end markets, I would sum it as follows. Consistent with prior quarters, Europe and APAC continued to perform very well, while China continued to experience shipment delays to immuno-cell therapy customers as the local CFDA continues to work through regulations pertinent of the Baidu scandal in the country. Meanwhile, the US saw a bit of a slowdown with biopharma's growth cooling. Now some details on each of the regions. In Europe, high-single-digit growth was broad-based throughout the region but was focused on the biopharma end markets. The research activity cycle with our biopharma customers has been high for a number of quarters now and we are positioned to benefit by supplying them the top-quality reagents and innovative instruments that make their experiments successful and productive. To capture more of the growth opportunities in Europe, we continue to expand our geographical penetration by converting distribution to a direct sales model, just as we did with the acquisition of Space in Italy which gave us a direct sales model in Southern Europe. In the second half of fiscal 2017, we'll be looking to expand our direct sales model in Iberia and parts of Eastern Europe. As with Europe, many of the…

Thanks, Chuck. I will provide an overview of our Q2 financial performance for the total company and then provide some color on each of our three segments. Starting with the overall second quarter financial performance, adjusted EPS decreased 8% to $0.81. The impact of foreign exchange fluctuations represented a headwind to EPS of approximately $0.03. GAAP EPS for the quarter was $0.17, compared to $0.69 in the prior year. The biggest driver for the lower GAAP earnings are non-cash purchase accounting costs and contingent consideration revaluation associated with recent acquisitions. Q2 revenue reported was $131.8 million, an increase of 9% year-over-year, with organic revenue increasing 2%. Second quarter reported sales include the 9% growth contribution from acquisitions, partially offset by a 2% unfavorable foreign exchange headwind. By geography, the U.S. grew low-single digits, with growth comparable in both biopharma and academia. Europe grew in the high-single digits, with biopharma sales growth in the mid-teens and low-single-digit growth in academia. China's organic growth was in the mid-single digits in the second quarter, with double-digit growth in our Western brand, being offset by the impact of the Baidu scandal on our local China-for-China PrimeGene brand. After many quarters of decline, Japan appears to have bottomed out in Q2 with flat organic growth. Excluding Japan and China, the rest of APAC grew in the mid-teens organically in the second quarter. Note that all references made to growth rate by region and end markets exclude our OEM sales, which mostly occur in our Diagnostics segment. Moving on to the details of the P&L. Total company adjusted gross margin was an even 71% in Q2, increasing approximately 20 basis points from the prior year due to favorable mix. Foreign exchange had a nominal impact on adjusted gross margins year-over-year. Adjusted SG&A in Q2 was 25.7%…

Thank you. And we'll take our first question from Dan Leonard from Deutsche Bank. Sir, your line is open. Please go ahead.

Thank you. I was hoping you could elaborate a little bit more on what you call the cooling in biopharma. Was it broad-based? Were there a couple – it sounds like you might be flagging a couple of specific projects, but anything further you could offer would be helpful.

I think it's a combination of two things. One is, we definitely have some timing issues on some projects, some bigger things, affecting our numbers as we thought.

Sure.

The second thing is, we talked about our lower order sizes. Usually, we don't see them go down. In fact we usually see (19:01), call it, the usually end-of-year budget flush or whatever. But we didn't see that end-of-year budget spending that we usually see, and orders going down is something very atypical. And it was broad-based, so it's definitely something kind of marketing in the market more or less, so. We've done a very detailed thorough analysis of all our key accounts and bio (19:22) in particular, and we can definitely point to a lot of project timing, so knock on wood.

Okay. And then the improvement you're expecting in biopharma in Q3 and then presumably in Q4 as well, can you – like, how much of a bounce-back are you really expecting and do you have any leading indicators which would support that?

No. I think it'll happen when it happens. We talked about the same thing a couple of years ago with Germany, if you remember, and we had a similar kind of situation and it bounced back very strong. It's been strong ever since. I will point out too, you'll notice our numbers were a good solid mid-single-digit growth in our antibodies and decent numbers in our proteins, a little bit lower due to things we just talked about. But a lot of projects are worked around our ELISA kits. Our ELISA kits are a little bit off and that's one of the bigger reasons where you can speak of project timing.

Okay. Thank you.

So they're a little more lumpier than the run rate buying of antibodies and proteins, so it's more evident.

Okay. Thanks, Chuck.

Okay. And we'll take our next question from Puneet Souda from Leerink Partners. Your line is open. Please go ahead.

Yeah. Hi, Chuck, Jim. Thanks for taking my question. Just, overall, if you could elaborate a bit on the PrimeGene situation? How long do you think that will take to turn around? What's the regulatory requirements? Could you educate us a little bit there? It seems like a number of other players have benefited from this, given their regulatory products that they already had approved in the market, but seems to be hurting you a little bit. So, just educate us a little bit when this can recover back.

Yeah. In terms of companies like us in China, we're pretty narrow compared to most, right? We don't have much in the instrument business growing there. It's very small. We're just getting off the ground there with all that, getting off the ground with ACD. So we're left to our reagents, our core business, which is seeing a 20-plus percent growth going on for a year or two years now. PrimeGene, as you know, we bought as an asset with our China-for-China strategy with a brand outside of R&D Systems. We do sell R&D Systems brand into this segment as well, but to the large degree mostly it's hospitals, it's clinical setting in China, which do a lot of their own research and sell a lot of their own therapies, okay, buy from PrimeGene, they buy locally. And there are other local competitors other than us that also would be seeing this (21:55) but there's nothing public, nothing you would really see. So, that's kind of gist of it. We're probably two quarters in with two quarters to go. It's definitely material to PrimeGene and it's big enough where it affects our numbers overall for China. We still had growth, but without that if you go back and normalize what we are doing with PrimeGene, in some cases a couple of years ago growing as much as 50% in growth. You'll see a much different situation at this point right now for our overall numbers. So it will come back. We'll wait and watch and we'll see where we're at and we'll see checking in hospital-by-hospital, which are lots of and which we're doing. And some of them are getting their certification. Clearly, people are looking for and there's demand for these solutions, and so there's pressure I think to get things done. It won't be like the other crackdowns they've done that are a little longer-term in China. So we're expecting another two quarters or so in which we hope you'll see kind of back to normal. And we're expecting a 20%-plus growth again with PrimeGene and, obviously, a year from now a couple of easy comps.

Got it. Okay. Thanks for that. And just on the Diagnostics segment, one quick one on that. Just trying to understand, as you've done work with Astute and as you're trying to grow further into that segment, help us understand a little bit the regulatory risk and the reimbursement risk and how you're thinking about those? It seems to me that strategy-wise you're thinking a little bit more aggressively in the Diagnostics segment.

Well, the strategy is simple dealing with the risk, we're not doing it, they are, so. They're our strategic partner and they've done it before. This is the team that was the core of Biosite (23:39) years ago. So they've done this before. They've created the hockey-stick growth that we're predicting with this company. They have screened hundreds of our reagents. They've worked with us for actually a long time. They've been a really good customer for a few years now. And so we just got very close, and given what we want to do with immunotherapeutics and with our reagents and our global strategy, it just made sense to get closer. They found success. They are buying multiple reagents from us that have turned into biomarkers, but there's IP around and it's a big issue. I mean, acute kidney injury is a massive problem for cost in the U.S. and we haven't looked outside yet. And it's already approved. And so it's selling and ramping quickly. And then we're not talking yet about what's left in the pipeline. They're busy already on new things that they've found in our freezers and we have other indications coming out over the coming years. So we hope this is a great foray for us to get in a profitable area of diagnostics, not the low-end side of things, where there are good reimbursements well-covered under the DRG and we expect the new things that we do will be out as well. And then we'll hopefully go outside the U.S. at some point as well. But it's actually very good. And again, we're really leaning on their regulatory experience, their clinical and their overall cash position to drive this, which we think is very strong, so.

Okay, guys. Thanks so much for the questions.

And we'll take our next question from Katherine Schoen from Robert W. Baird. Please go ahead.

Hey, guys. Thanks for the questions. Curious how the quarter came in relative to your expectations as you kind of look segment-by-segment. Was there a big surprise there or was it pretty much in line with what you guys have been thinking?

Well, it's certainly a little more disappointing than we'd like. That's why you see us making all the comments. Well, if we normalize Diagnostics that's forever lumpy and 20% quarter last quarter which put us over 10% organic growth, well, it's 5% to 6% grower. So, if we put that in and say it was a level run rate business, which is not, where it would be at? It'd only be a mid-single-digit growth as a company, kind of where we need to be as a minimum. I think some of the softness in biopharma due to the timing and mainly due to projects around ELISA kits in particular, it was unfortunate. It will bounce back. I think we're okay there. Antibodies, I mean, I'd be more worried if we saw antibodies crumbling or something. But antibodies are strong, stronger than ever. We're doing great. So the website is working. We're growing in every region. And then also Europe, Europe is just kind of steady as she go. It's been as good as last quarter and we see better looking forward and with an acceleration in our instrument businesses, which are getting bigger and bigger and getting more critical mass over in these areas where we've staffed up a little bit, we have some great leadership now in Europe around Protein Platforms division and doing the same now in Asia. And then lastly, Japan, I mean, it's been over two years since I can tell you we were at a flat in Japan. We've been negative and strong negatives. So we're hoping that's coming back strong. So, overall, a kind of a mix bag. Would have likely seen a 4%, 5% overall net, but we didn't get that. But I think, as Jim commented on earlier, year-to-date we're right where…

Yes. That makes sense. And then one follow-up. For academic customers here in the U.S., low-single digit seems about in line with what you guys usually do. Have you seen any changes in spending or sentiment since the election, or does it seem like it's still business as usual?

It's kind of business as usual. I would say there's a little bit of a softness (28:35) on biopharma for the end of the year. We'll call it Trump policy, I guess, whatever. But for the most part, I mean, we expected maybe a little worse there. It's kind of steady as she goes. I attribute that to really our strong teams. We've got a great commercial engine going out. The website is really good. Fisher had a better quarter than the previous one. So those all play to, I think, a better ending on the academic side.

Great. Thank you.

And we'll take our next question from Amanda Murphy from William Blair. Your line is open. Please go ahead. Aurko Joshi - William Blair & Co. LLC: Hi. It's Aurko in for Amanda. Just a quick follow-up question on ACD. Now that you're about two quarters in, you certainly are happy with it. I guess what are some of the things that you would think need to improve? And how do you expect the table of dilution to look over the next couple of quarters? And the second question is, can you walk us through a bit more on how pricing pressure for growth (29:31) would impact your business?

Well, the first question, and you're not coming in real clear, but I'm hearing you asked about ACD, if we see things that we can improve or the dilution going forward? Aurko Joshi - William Blair & Co. LLC: Yes, both of those.

Well, I think we have an earn-out with them and it goes this calendar year. And at over 50% growth, our strategy in the short term is to stay out of their way. They're doing fantastic. We are working on commercially working together both in Asia as well as Europe. The teams are getting closer to starting a cross-sell, starting to do things that are really a no risk to the earn-out potential fee. But for the most part, they're doing great. They actually were ahead of plan on top and bottom line this quarter. And we're involved, obviously, since we bought them. But we're commercially trying to stay out of their way more or less in terms of how they want to run their business for the next project (30:29) while they're working on their earn-out. On the dilution now, I'll pass it off to Jim here.

Yeah. Well, I'd say on the dilution aspect of it is that we would expect kind of same level of dilution at least in the near-term that we saw most recently this quarter. But as we start to close out the fiscal year, that dilution will become less and less, and we believe in fiscal year 2018 that we still have a trajectory to be profitable. You got to keep in mind that despite – with their fast growth, where some of that new growth is coming from now is in the diagnostics space. Up until now they've been really focused on the research-only. But with them now expanding that market in the diagnostic pathology, we continue to invest in the commercial resources to capture that market. Aurko Joshi - William Blair & Co. LLC: Got it.

And remember, those solutions that are already approved and right done (31:14), they're moving forward and selling. It's going very, very well, so. I also mentioned the publication count for ACD technology, this RNA in-situ hybridization, is now well over 600. It's screening. So the adoption pickup, which is something you want to watch, and this is so far looking very, very favorable. So the open question is, how long can they last at 50% growth and we're thinking for many, many quarters yet. So, that's the goal. Aurko Joshi - William Blair & Co. LLC: Got it. And then the other question, which is a quick follow-up from an earlier comment, is how would you talk about how pricing pressure would impact your business in the drug space?

Well, we're pretty far down the food chain in terms of pricing on drugs. I guess, overall, I'm pretty hopeful. I think this administration I think is going to be the right thing hopefully. And I think corporate tax rates and tax holidays and things that are going to help overall, investment and spending I think, all of the things that everyone else kind of believes I think in our industry. So I don't foresee any real reaction or issue with us in terms of drug pricing. We're very much still heavily on the research side as a company. Aurko Joshi - William Blair & Co. LLC: Got it. Thank you.

And we'll take our next question from Matt Hewitt of Craig-Hallum Capital Group. Your line is open. Please go ahead.

Hi. This is Charlie on for Matt. Thanks for taking our questions. First, can you discuss how the cross-selling efforts are going? We talked a lot about it last quarter. I don't know if we talked about it too much here.

Yeah. I think it's still going to be lopsided more towards instruments and a little towards consumables. It just so happens that you have highly trained professionals selling assays, consumables, so that maybe Masters or Ph.D. people, they know a lot how the solutions work, how to use the instruments, so they really can hand-off leads that will actually work. It isn't quite the same in this side when you've got FAS as your instrument experts that I think it's in the field (33:20) understanding a lot about assays and the reagents. So it's a little bit lopsided. That's why you really focus on this. I think it's still early. But we're seeing really good benefits, especially in Europe. I think some of the strong results in Europe is coming from just exactly that. The teams are smaller and more closer together, in some cases sharing in leadership. And it's working quite well. So we're not, like, trying to merge divisions like within like a Danaher or (33:44) company. This is still a pretty little company. We're not talking large teams. We have probably 150 or so people globally commercially now, about 50 or so in Europe, less than that in U.S. because of the Fisher situation. And it's not hard to get them working together and playing together. So I'm very bullish on it actually. I think we have yet to see big benefits in Asia. I think that's still coming. And as we build out teams in more and more cities in China, we build out the assets there, it's going to be really good. And I wouldn't even count ACD out of that. There's going to be a lot of ACD to come too in the coming years, so.

Okay. Thank you. That's helpful. And then the 21st Century Cures Act, are we seeing any dollars starting to flow out of that or is that still kind of in the works?

I hear it's still in the works, so. I would say we've not seen anything yet.

Okay. Thank you. That's it for me.

And we'll take our final question from Paul Knight with Janney Montgomery Scott. Your line is open. Please go ahead.

Hello. Good morning. This is actually Carolina Ibanez-Ventoso on for Paul Knight. I was wondering if you could be a little bit more specific on the initial activities that can be attributed to the outstanding performance of ACD.

The performance of ACD but what kind of performance?

The initial activities in this franchise that has led to the outstanding performance of them.

Okay. As I mentioned earlier, 600 publications is an awful lot for a young technology company. It's really growing. It's virtually a little bit everywhere. It's in a lot of clinical settings as well. There is a research side as well as a diagnostics side, right? And so with like all signed up and selling solutions, that leverages their large sales force. This group also has a fairly decent size sales force, 20 reps, 30 reps, in that range, and we're just starting to build it out in Europe, as I mentioned. So there is a commercial model to this where, even though it's a reagent type of solution, it won't get to the 50-plus-percent op margins we see with our protein business because there is commercial sales that are needed. You need to sell the solutions. It is all about the take-up of pathologists moving from an IHC solution to just more of a genomic version, okay? And it's going really well. So we test it. We talk about it. We're measuring. And what is that to addressable market? We think it's a $1 billion-plus. There is a lot of pathology out there. The take-up is pretty fast and the results are outstanding. Another thing I'll let you know is there's a lot of smaller labs, a lot of places doing IHC, and doctors and pathologists, and they're adding a leverage and outsource a lot of the current research or the experiments or the tests that they want done. They may, in many cases, be waiting a week or two weeks for results. That's without automation. With automation, it could be even worse. This is a solution that works on current automation. You get the results very quickly. You as a pathologist can even work on a scope, on a slide in your office, and get results. It works that well. So, that is also helping pick things real quickly. There's a lot of adoption because it's just based after solutions that are very accurate. And there is roughly 30% of all I would say IHC solutions are missing the antibodies they need to be fully specific. So you don't know for sure what you're finding, what you're looking for.

Yeah.

So there's just this gap in the antibody portfolio that fills in, at least we're starting, right, a good 30% of gas still is (37:22) part of the market.

Okay. Thanks. That was helpful. And could you also elaborate more on your partnership with Astute Medical? They have NephroCheck, which is already a commercial product, but what additional products do they have under development and which are some areas that they are focused on? Just curious on that.

There's a second solution that's very closely tied to the NephroCheck, it's called Nephroclear which is in clinical right now. But it's working. We're looking at different solutions for different, I guess, reagents we have. We have a pipeline we can't talk about.

Okay. I understand. Thank you.

There's more than one. There's at least two we're looking at right now.

Thank you.

And I should point out too that it took – it was 150-plus different reagent screenings that this team, which is really good at this stuff and done it before, that they found what they are looking for with really good specificity.

Great.

And with no further questions in the queue, I'd like to turn it back over to Mr. Kummeth for any additional or closing remarks.

All right. Well, thanks everyone for attending. And definitely we're on our path this year, and we look forward to next quarter and with even hopefully terrific results. So, talk to you then. Thank you.

Ladies and gentlemen, that does conclude today's conference. Thank you all for your participation and have a wonderful day.