[Call Starts Abruptly] Call for the Fourth Quarter of Fiscal Year 2024. At this time, all participants have been placed in a listen-only mode and the call will be open for questions following management’s prepared remarks. During our Q&A session, please limit yourself to one question and one follow-up. I would now like to turn the call over to David Clair, Bio-Techne's Vice President of Investor Relations.

Good morning, and thank you for joining us. On the call with me this morning are Kim Kelderman, President and Chief Executive Officer; and Jim Hippel, Chief Financial 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 2023 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 because 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 most comparable GAAP measures are available in the company's press release issued earlier this morning on the Investor Relations section of the Bio-Techne Corporation website at www.bio-techne.com. Separately, in the coming weeks, we will be participating in the Morgan Stanley, Wells Fargo and Baird conferences. We look forward to connecting with many of you at these upcoming events. I will now turn the call over to Kim.

Thank you, Dave, and good morning, everyone. Thank you for joining us for our fourth quarter conference call. I'm pleased to report that our fourth quarter results came in, in line with our initial expectations. Continued stabilization of our end markets, combined with excellent execution by the Bio-Techne team, led to a 1% year-over-year organic revenue growth. This quarter wraps up our fiscal 2024, where our core portfolio of research and diagnostic reagents, together with the four growth verticals that leverage this content, delivered a 1% growth is what has proven to be a challenging fiscal year. It's worth noting that these growth verticals have enabled Bio-Techne to consistently outperform our peer group during this unprecedented post-COVID pandemic period. During this period, we experienced a challenging funding environment for biotech and a significant R&D budget recalibration by large pharma and academia customers. Let me give you some examples of the business dynamics we've experienced throughout our fiscal year. First, proteomics analytical franchise, branded ProteinSimple. This business provides productivity tools for laboratories commonly used to expand laboratory capacity. However, these products are also well positioned for customers that are operating under constraint budgets and are looking to replace manual processes with simple and effective automation. Here, we saw mid single-digit growth for the fiscal year, led by Simple Plex and Simple Western platforms, bolstered by double-digit growth for instrument-related consumables across all platforms. Our cell and gene therapy vertical, which is led by our quality GMP protein products, also grew mid single-digits for the year and added more customers even while biotech funding had a multiyear low. In our spatial biology vertical, we saw solid growth in fiscal year 2024 despite the budget reset by our pharma customers. Our new spatial biology instrument COMET is seeing a robust adoption and will…

Thanks, Kim. I’ll start with some additional detail on our Q4 and fiscal 2024 financial performance and then give some thoughts on the financial outlook for the year ahead. Starting with the overall fourth quarter financial performance. Adjusted EPS was $0.49 compared to $0.55 in the prior year quarter, with foreign exchange having immaterial impact on EPS. GAAP EPS for the quarter was $0.25 compared to $0.47 in the prior year. Q4 revenue was $306.1 million, an increase of 2% year-over-year on a reported basis, a 1% increase on an organic basis. Acquisitions contributed 1% to reported growth. The full fiscal year 2024 revenue approached $1.2 billion and organic growth was comparable to what we saw in the fourth quarter. Looking at our organic growth by region and end market. In Q4, North America and Europe decreased low single digits year-over-year, while China decreased high single digits. APAC outside of China increased low double digits overall, with Japan and Australia both benefiting from growth in cell and gene therapy and regional expansion of our Asuragen portfolio, respectfully. While lower government funding and macro constraints continue to impact South Korea. By end market in Q4, excluding China, both biopharma and academia declined low single digits in the quarter. As Kim previously mentioned, we continue to see sequential global stability in our biopharma end market and academia faced tougher year-over-year comps this quarter. Below revenue on the P&L, total company adjusted gross margin was 71.1% in the quarter compared to 71.6% in the same quarter the prior year, driven by the impact of the Lunaphore acquisition and unfavorable product mix, partially offset by productivity initiatives. Adjusted SG&A in Q4 was 29.8% of revenue compared to 26.8% in the prior year, while R&D expense in Q4 was 7.8% of revenue consistent with the…

[Operator Instructions] We’ll take our first question from Puneet Souda with Leerink Partners. Your line is open.

Hi, guys. Thanks for taking my questions. I’m just wondering if you can elaborate a bit on the RUO [ph] antibodies and cytokines in the quarter. How did that fare? And also, it seems that your instrumentation portfolio is still holding up while, your attached consumables are growing with that instrumentation portfolio. Maybe just help us understand the instrumentation dynamic a bit because when we look at the peers, the instrumentations have been weaker, but it just seems like there is a bit more demand. Maybe a part of that is Lunaphore. Just if you could help clarify the instrumentation as well on that end as well.

Puneet, good morning. Thanks for your question. Let me start with the instrument question that you asked. Yes, like most others, our instrumentation growth rates have been under pressure in the end markets, as we know them, specifically China and biopharma being constrained. But we’re also proud to mention that the consumables directly related to these instruments have been growing double digits now seven quarters in a row. So we are very confident that the installed base is getting utilized optimally and that we are filling up capacity that we have in the installed base. And there with funding coming back in, we are pretty certain that there will be a drive to get increased capacity in the field and there will drive our instrumentation numbers. Your question on the RUO antibodies, it’s been, obviously, the dynamics with the different end markets swinging a little bit in a bottoming out process and that makes it a lumpy business. Overall, we are looking carefully at all the different product lines. And we see some lumpiness quarter-over-quarter, but nothing that we are alerted about. And we feel overall that portfolio is nicely positioned.

Okay. Thanks. And then, Jim, just clarifying the comments on fiscal year 2025. Does this mean a mid- to high-single digit overall for 2025 and an exit rate in the fourth quarter of 2025 of low double digits? Just wanted to make sure I was clear on that for organic growth.

Well, I guess, as I said, I’ve given some guidance on how I think the year will progress based on a baseline market expectation – that baseline market expectations for a very gradual improvement in our end markets. I don’t think we see anything immediately that would suggest an improvement in our end markets in the very near term. But I think by the end of the year, we’re hoping that we start to see some uplift with biotech, given the increased funding that we saw, we’ve seen so far year-to-date that should turn to spending. And then continue to 2025, you have Chinese stimulus starting to kick in and the pharma budgets being reset. So that’s kind of a gradual progression of the growth rates as we see it. And that’s what I’ve outlined in my prepared comments. And how fast that progression happens or how slow it happens will depend on what the full year number ends up being.

Our next question comes from Jacob Johnson with Stephens. Your line is open.

Hey, thanks. Good morning. Maybe Jim, sticking on the guidance theme, I heard some headwinds on the margin side in the first half of the year due to incentive comp, et cetera. It sounds like maybe a little bit better in the back half of the year, but still we’re looking at operating margins in FY 2024 that are well below where you’ve been historically. I know some of that is related to acquisitions. I guess as we think about returning to growth in the back part of this year, how should we think about incremental margins as growth picks up again? And then I heard 35% plus. But at times, we’ve seen a 40% target longer term. Is there any reason you couldn’t get back to 40% over time with the caveat of M&A, it can always be dilutive to margins?

Yes. Thanks for the question, Jacob. So just to reiterate, from a margin perspective, we do have a significant headwind with the incentive compensation accrual restatements across the entire company. It’s about 100 basis points. So without that headwind, we would be talking about some incremental margin improvement this year. That being said, we do see a line of sight assuming the growth rates accelerate throughout the year, we do see line of sight to margin operating – adjusted operating margins being 100 basis points to 200 basis points higher than we ended this year, which would end us in the year somewhere in the mid-30s. My comment around 35% was actually greater than 35%. So it was really the message that we see this year as a year of recovery. That would set up very nicely to get back to our long-term growth objectives, which is north of 35% operating margin, up to 40%, of course. That’s the range we’ve always stated, and back on track to our long-term growth plan. So that was the main message behind that comment.

Got it. Makes sense. Thanks for that, Jim. And then, Kim, maybe Jim mentioned getting back to double-digit growth. Maybe just to revisit the 2023 Investor Day and the potential for growth well into the double digits. You talked about your four key growth franchises earlier and the traction there. And obviously, those are key to more robust levels of growth when the macro normalizes. I’m just curious, a year later after that Investor Day, are there any of those kind of four platforms where you’re more confident in the growth outlook? And then on the flip side, any of those pillars where maybe you have more restrained expectations?

Thank you, Jacob. It’s a good question. It is quite, I must say, quite comforting that we look at these four growth verticals very carefully because those are also areas where investment dollars flow in and our activity level is very high. And then we continuously look at our programs there, but also the competitive landscape. And you take that all together, and we’re still very committed to each and every one of those. We’ve – yes, we feel that we have really differentiated position with wonderful symbiosis between those four growth verticals and the core reagents, where each of these growth verticals pulls through. Our core reagents is very high margins, and we have very differentiated positions in the market. So we’re still very confident about it. The difference that you could – you would ask is like, so what is the difference between now and 1.5 years ago, and that’s obviously that the end markets have slowed since and that the question is not so much, will we get to the numbers at that time projected. But the question is, when do you get to those numbers? And that timeframe is slightly delayed. So in five-year forecast, you always think about a couple of mediocre years, a couple of good years, a couple of bad years. Unfortunately, now we had a couple of lackluster years behind us. So hopefully, those are the system, and we’re still on track. But it could well be that takes a little longer. And then you would have to think about delaying the $2 billion mark. But whether we get there is not the question, and we’re really confident with our platforms.

Our next question comes from Dan Arias with Stifel. Your line is open.

Hey, good morning, guys. Thanks for the questions here. Jim, just looking at the model, can you maybe true us up on where GMP reagent revenue finished for the year? And then what you think a good starting point on growth might be for this year, new products, I believe, but still recovering customer spending. So what do you think that translates to for 2025, just given the importance there to the growth algorithm?

Yes. Thanks for the question, Dan. GMP – overall GMP revenue growth for fiscal year 2024 did grow. We were – we did have growth overall for the year, even though it was choppy, which is a positive sign and a very tough year. And so we expect those growth rates to increase obviously an improving market. So that’s essentially what’s been baked into the forward guidance.

Okay. But is there any way you can kind of like give us a number to work for – work with as a jumping off point?

Well, I’d say this, we grew roughly mid-single digit for the year – for the full year in 2024.

Okay. And then maybe just as a follow-up on the outlook and the growth that the company is capable of here. One of the things that you usually talk about when it comes to forecasting is this idea that Bio-Techne has historically and consistently been 500 basis points to 1,000 basis points above peers on organic. To what extent do you think that logic applies in 2025, if we just think about the assumptions on market growth that are implied there?

I mean, we’re sticking with that guidance, right? And I think this quarter is yet another testament to it. By our calculations, our peer group in total shrink roughly about 4% this quarter and we grew 1%. And so kind of back to Puneet’s question in terms of that getting back to double-digit growth, we are absolutely confident. When the market gets back to mid-single-digit growth, we will be at double digit. And so trying to predict when that full market recovery happens is difficult to do. But I think we’re trying to conserve in a slower pace of recovery that 2025 as a calendar year will be a year of recovery and it might take that full calendar year to get there, which is why we’re being a bit conservative on the fiscal basis ends in June. We’ve been hearing from our peers also that bio production is looking to recover here perhaps a bit sooner, which might be the first bit of jolt that the industry needs to kind of get going into. So again, I think there’s a lot of positive signs. We call them green shoots last quarter. I think they’re still green shoot this quarter. They just haven’t quite sprouted yet. I also point out that we have some company specific activity that will help our growth rate as well. We had obviously Lunaphore, Comet launch that's happening, give us multiomic capabilities, so that should be an upside for growth. And then we have our real instrument that Kim talked about in our ProteinSimple franchise, which has already gained a lot of interest with customers since we announced that future release. So between our company-specific activities and the market improving, we're feeling pretty good about next year, but we're just being very conservative around the pace of market recovery, as I think everyone else is in our peer side.

Next question is from Dan Leonard with UBS. Your line is open.

Thank you. I have a question on your RUO reagent product line. Is there anything you could do to accelerate growth there independent of market improvement?

Yes. Thanks for the question. The linkage to the growth platform is key there. Some of the RUO reagents fit nicely in pull-through. As you know, that we are now having enabled, for example, the Comet instruments to utilize our Bio-Techne antibodies that sit in the RUO reagent. And those mechanisms will start pulling through the core. Of course, the core goes to market itself, but that is the lackluster end market. Now we can also think about how do you get through that better than others, and that's by continuing to improve and solidify our marketplace as well. So the marketplace, making sure that it's easy to transact with Bio-Techne, making sure that our website is in great shape, combine that with the vertical platforms putting through those reagents, is the secret sauce there. And fortunately, in parts of the portfolio that is already working, because some of the RUO product lines are already in the black. Thanks for the question.

Got it. Appreciate that. And Kim, correct me if I'm wrong, but it seems like your spatial portfolio is less subject to macro headwinds. So could you size that portfolio in aggregate at this point? And how fast do you think it grows in 2025?

Yes. So fortunately, we've seen some resilience in that portfolio. But I wouldn't say it's immune, right. So there are still larger pharma customers that would have a run rate of $1 million or more if it comes to quarterly usage of some of our reagents. And there is shuffling going on in an end market in which sometimes the programs get closed or sometimes locations get consolidated. Now overall, I don't think that will have a long-term effect on the need of special biology. I'm very confident that we'll be there. But the shuffling in the interim could result in some lumpiness. Overall, the run rate of that business is now at $120 million. And we see double-digit growth in the coming years, especially because we're nicely combining an instrument, top-notch instrument in the market that can pull through our RNA scope reagents as well as our antibodies. And right now, that instrument is running according to just short of 50,000 a quarter. And once we got all our reagents linked to it, we feel that, that pull-through could double and there we've become our highest pull-through instruments. So I'm very confident this is going to be a very positive product line for us and a positive effect on our company.

Our next question comes from Tom DeBourcy with Nephron Research. Your line is open.

Hi, thanks. This is Jack Meehan on for Tom. I was wondering if you could elaborate on what you're seeing as it relates to China stimulus, how that – what parts of the portfolio are exposed to that? And maybe just how it impacted the current quarter and confidence that steps up in the second half of the fiscal year? Thanks.

Yes. Thanks, Jack. As you know, the funding program is trickling through the different systems and regional governments. It's certainly on its way, is what we hear. Customers are certainly interested in receiving the benefits and also interested in spending the money already. And as you know, it's highly tailored to instrumentation only. And I think we're really well positioned to benefit from it. A couple of data points. First of all, our instrumentation is pretty unique and creates efficiencies and improve the data that you get out of it. So there's a fantastic value proposition there. Secondly, about a year ago, a similar funding concept was put in place, and we truly benefited. That's why our current Q4, the one we're reporting on right now, had relatively high comparables year-over-year because of that funding. And that worked out very well for us. This program is put in place for three years. So we feel that the moment these funds become available, we will benefit short-term. And then, I feel it will be a positive driver for the coming years ahead, which is, of course, better than just one quick jolt that then falls flat again. So I'm happy with that concept. Now in the meantime, out of our four product lines, we have the Ella, Ella product line and that one has already been growing very nicely in China. And as I mentioned at the beginning of the earnings call, we have seen the consumables on all four of our platforms continue to grow double-digits in the market as well and indicating that there is a very healthy usage of our instruments. So overall, I'm pretty confident that this will be a positive driver for the company. But like everybody else, the timing and when it trickles through is a little bit more vague, but I think the – if it's more important than the when, and I'm pretty certain that if is going to take place.

Sounds good, thank you.

Our next question comes from Matt Larew with William Blair. Your line is open.

Hi, good morning. I wanted to start on Lunaphore. Obviously, for some – a few quarters now, you reported that demand is outstripping capacity. And I know you brought manufacturing in-house and are attempting to scale that up. So could you just maybe speak to where you're at from sort of fixing the manufacturing there from a backlog perspective? And how those two statements maybe filter in to what you think you can deliver from Lunaphore in fiscal 2025?

Yes. Thank you for the question. First of all, we were delighted that we saw a healthy demand above our capacity. That of course, always a good starting point, painful nonetheless. So our teams have worked really hard in cranking up the capacity. And yes, I think, that's ongoing now for a little over two quarters. And I'm very pleased to see the progress there. And yes, we've mentioned it that it was still a consideration in Q4, our last fiscal quarter that we are now reporting on. But that in Q1 fiscal year 2025, this problem should be going away. So the lines of capacity and demand are going to be crossing any week or any month right now. And from there, we should not be held back by the capacity constraints anymore and just be able to focus on increasing demand. So it's looking very promising from that point of view. You might not hear about that topic anymore.

Okay. That's good to hear. And then, Jim, just thinking about margins next year. Obviously, you gave the first half – second half guidance. But I think just kind of do a quick math on the top line and what it implies for margins, that spending next year action, some of the resets you described, is going to be quite a bit less year-over-year growth than in recent years. You referenced some productivity programs. So maybe I just want to get a sense for where you're targeting from an efficiency perspective and kind of what the balance is between try to pull costs out to get margins back in line relative to allocate investment for some of the future growth opportunities?

Yes. I mean the reality is that we've been working on productive initiatives throughout this down cycle. So it's definitely throughout fiscal 2023, 2024 and have more projects in the fiscal year 2025 as well. And it's a delicate balance of making sure we adjust the structure inside of our business relative to our volumes, while maintaining and fueling the growth pillars, the growth verticals in our company that are allowing us to outperform, our competition and will propel us in the double-digit growth once the market gets back to the normal growth rates. And so it's a delicate balance, but I think we've been pretty successful in these initiatives that we're doing. And we have a line of sight to do that yet again this year and basically offset any new investments we're making in those growth pillars in particular to keep them moving forward to our five-year plan objectives. So it's an ongoing process for our company.

Our next question comes from Patrick Donnelly with Citi. Your line is open. And Patrick Donnelly, your line is open. We’ll take the next question from Catherine Schulte with Baird. Your line is open.

Hey guys, thanks for the questions. Maybe first, just on the outlook for the first half of low single digit organic growth, does that hold for the first quarter as well? And then any color on how we should think about protein sciences, specifically in the first half versus the back half.

Yes, I’ll take that. Thank you, Catherine. Again, it’s a gradual, it’s a very gradual increase that we’re talking about fueled based off of market projections, right? And I said in my opening comments that somewhere between low and mid-single digit growth in the first half, which would suggest some level of progression in both our end markets and our absolute performance in the first half of our fiscal year 2025, I’ll make sure that that’s clear. With regards to where that improvement comes from, I think Kim mentioned this in his opening comments as well. Largely it’s going to come from our protein science. That’s the segment that’s a part of our business has most been severely impacted by China, by the biotech funding issues, by the slowdown in big pharma. That’s all hitting dead center into our Protein Sciences segment. So as those end markets recover, our Protein Sciences segment will be the recovers the fastest and the most, which will improve our mix over time throughout the year and ultimately improve our margins throughout the year, which is another basis for why we believe the second half margins will be significantly better than the first half.

Okay, got it. And then maybe for China, any thoughts on kind of how that trended throughout the quarter? It sounded like stabilization was what you guys were seeing, but any differences as you worked your way throughout the quarter and then what are you expecting for the first quarter for China?

I would just say as for China, that it was basically a repeat of Q3. It really was in terms of, you look at the absolute dollars, the growth rates, our reagents continue to be double digit like they were last quarter, which is a great time for recovery. But instruments continue to be down and we’re not projecting any major pickup on instruments until we get into our first quarter of 2025 – I’m sorry, first quarter – first calendar 2025 when the stimulus kicks in for China. So we see China continue to be stable, but then really pick up its growth rates in the back half of our fiscal year.

Our next question comes from Justin Bowers with Deutsche Bank. Your line is open. Justin Bowers, your line is open.

Pardon to mute there. Can you talk – can you talk – good morning. Can you talk about the biopharma end market and how that performed across the different geographies? And then any notable pockets of outperformance or underperformance across the different growth pillars?

Yes, I mean, biopharma taking China out of the mix, which we report biopharma, it’s really excluding China. Anyway, we mentioned that it was low single digit growth and was very consistent globally, both in Europe and in the U.S. And yes, low single digit decline growth. But more importantly, the sequential performance of biopharma was consistent in Q4 as it was in Q3. So try not to get too caught up in growth rates because they can get a bit wonky, but really focused on the momentum of the business going forward and because 80% of our business is consumables that book and ship in the same day. It really is all about the momentum. And we’re encouraged that the momentum overall, even within biopharma has at least stabilized. So I think we’ve been saying this, there was no change in our message from the past two quarters where we felt like the December quarter was a bit of a bottom, and that we’re kind of in this bottoming process until the markets start to fully recover. And as I mentioned in my opening comments, there’s reasons to believe from a macro perspective that it will recover sooner than later, but it will probably be a gradual process going forward.

Thanks, Jim. A quick follow up on Lunaphore. In terms of linking the reagents to the instruments there, is that like a multi quarter or a multi-year process? Can you talk about that, that process and phasing a little bit?

Yes. Thanks for the question. No, the initiation of linking the RNAscope HiPlex to the box is actually happening this quarter and is going to roll out throughout this quarter. The antibodies you could be using right now, so that’s also already in place. Will we broaden that portfolio and add different tools to it? Yes, and that will be, I would just stay filling out of the toolbox over the coming quarters and years. But to start to get going and to do your experiments across most diseases, most species, fully automated multiomics, that’s possible as we speak in the coming months.

We’ll take our final question from Sung Ji Nam with Scotiabank. Your line is open.

Hi. Thanks for taking my questions. Just on the academic end market. I know it’s relatively small. But is the expectation there also for the – for that segment to gradually recover throughout fiscal year 2025 given comps get easier? If you could maybe highlight some of the key puts and takes for that end market.

Yes. I would just say from an academic perspective, it’s even throughout the pandemic, both during the pandemic and post-pandemic. I think as we track our peer’s performance, we’re not that different in that. It has been an overly dynamic environment for academic. It’s been pretty much a low single-digit to mid-single-digit kind of growth in our space. And there’s – we had some lumpiness in our comps this quarter. But that’s kind of what we’re predicting going forward, call it, low single-digit market growth in academia. And that’s what – that’s basically what we’ve experienced for the past several years, and we see that kind of – that not changing much going forward. And I’m sure you follow as much as I do. There’s different bills in Congress right now that would suggest that it will reconcile somewhere in that range and the way going forward from an NIH perspective.

I think what is a positive driver for our company is that much of the NIH funding, but also the Horizon funding in Europe has been focused on infectious diseases and technologies and sciences related to infectious diseases initiated through because of the pandemic. But there is a more normalization if it comes to doing your studies and your sciences around neurology as well as immuno-oncology, and those are areas we are stronger and better positioned in. So overall, we feel that the mix coming out of those funds will be in our advantage.

Got you. And then just on molecular diagnostics, also a small business for you guys, relatively speaking. But you saw a very strong growth throughout 2024. And just kind of curious if this is more of a function – more of a function of you taking share? Or is it just the underlying market growing faster than expected? And then kind of could this kind of level of growth momentum could that continue into 2025 as well? Thank you.

I think it’s a mixture, and thanks for the question. There are certainly just fundamental improvements where we feel that we are taking share. There’s also, of course, some dynamics that we should not count on going forward all the time, because we don’t know exactly. Remember that we had a couple of quarters of inventory adjustments. And then, we knew that with the destocking that we were going through a couple of quarters that were lackluster. And then we call the end of that in December and that we would be free and clear of that in the new calendar year. And that became true. But I do believe that some of the inventories also got normalized and that there is a little extra momentum there that won’t repeat. Overall, though, I think there is some real underlying strength in that these end markets are healthy, and we are taking market share.

It appears we have no further questions. I’ll turn the program back to the speakers for any additional or closing remarks.

Yes, I will go ahead with closing statements. Thank you very much for joining the call today and for all the insightful questions. I’m extremely proud of the Bio-Techne team’s accomplishments and all the results that we have been able to deliver in the quarter and in the fiscal year even under the current market conditions. Our differentiated portfolio address some of the highest growth markets in life sciences and is positioned to deliver best-in-class performance for all of our stakeholders going forward. So thank you very much and to the next earnings call.

This does conclude today’s program. Thank you for your participation, and you may disconnect your lines at any time.