Q4 2022 Bio-Techne Corp Earnings Call
Please continue to standby your conference will begin momentarily we thank you for your patience.
[music].
Good morning, and welcome to biotech the earnings conference call for the fourth quarter of fiscal 2022 at this time all participants have been placed in a listen only mode and the call will be opened for questions. Following managements prepared remarks during our Q&A session. Please limit.
Yourself to one question and a follow up I would now like to turn the call over to David Clair Bio Tech News, Vice President Investor Relations and corporate development. Please go ahead.
Morning, and thank you for joining us on the call with me. This morning are Chuck <unk>, Chief Executive Officer, and Jim Hippel, Chief Financial Officer of Biotech me.
Before we begin let me briefly cover our safe Harbor statement.
Some of the comments made during this conference call maybe considered forward looking statements.
<unk> beliefs and expectations about the company's future results.
As well as the potential impact of the COVID-19 pandemic on our operations and financial results.
The company's 10-K for fiscal year 2021 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.
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.
It's reconciling these measures to most comparable GAAP measures are available in the company's press release issued earlier this morning.
<unk> Corporation website at Www bio dash technique Dot com.
Separately, we will be presenting at the Wells Fargo Baird and Morgan Stanley healthcare conferences in September .
We look forward to connecting with many of you at these upcoming conferences.
I will now turn the call over to Chuck.
Thanks, Dave and good morning, everyone. Thank you for joining us for our fourth quarter conference call.
We had a tremendous finish to our fiscal 2022 is our 14% organic growth for the fourth quarter capped a year, where we delivered 17% organic growth for the full fiscal year.
In our fiscal 2022, we surpassed an important milestone as we exceeded $1 billion actually $1 1 billion in revenue for the first time in our corporate history.
These strong results were delivered in the face of the most challenging comp the company has faced since I joined in 2013.
And the impact of a longer than expected COVID-19 related shutdown in China.
Really proud of that global teams strong execution this dynamic environment.
Some of the highlights in the quarter include continued strength in our biologic instrument portfolio, where we delivered over 30% growth for the seventh consecutive quarter ongoing traction with our cell and gene therapy workflow initiatives, a return to double digit growth in our spatial biology business as well as another consecutive record setting quarter for our extra Dx prostate tests.
We remain incredibly well positioned and underpenetrated in some of the fastest growing life science tools and diagnostics market and our portfolio of proteomics genomics and diagnostic products continue to deliver the.
The solutions necessary to drive scientific discoveries and ultimately improve health care.
Given the inflationary environment, we're all dealing with lets briefly discuss how we are successfully navigating these challenges.
As a reminder, approximately 80% of our revenue mix is consumables and encouragingly given their biological nature. These tend to have more modest raw material costs.
Approximately 10% of our sales our instrumentation, where we do have higher input cost, but still maintain gross margins in line with corporate averages.
We have been strategically implementing price increases throughout our portfolio to offset our exposure to rising rising costs, including labor and we will continue to pull this lever going forward.
Speaking of labor.
We made significant progress on our human capital initiatives in the quarter Encouragingly, we are seeing signs of an improving labor market and some of the headwinds we faced in recent quarters to attract and retain talent appear to be subsiding.
In fiscal 2022, we added over 400 individuals to the team and have grown to over 3000 biotech and team members.
These net head count additions were across the organization as we strengthen the commercial technical and corporate team at all levels.
We will continue to hire as we execute our strategic growth initiatives going forward and I'm very encouraged with the recent progress on this front.
Now, let's discuss the specifics of our performance this quarter, starting with our geographies and end markets.
From a global perspective, we experienced robust growth across geographies with the exception of China, Our North American revenue grew in the upper teens for both the quarter and our fiscal year in Europe . We finished on a very strong note as we grew in the mid teens for both the quarter and the fiscal year.
China first I'd like to recognize the relentless efforts of the team our China based team successfully petition to be one of the initial companies committed to return to work as our products were deemed to be critical to the country.
Once we're allowed back in our Shanghai based warehouse that serves as a distribution hub.
To all of our China based customers are dedicated team literally lived to the facility to ensure we were able to begin supplying the research community with proteomics reagents analytical tools and a spatial biology products.
These COVID-19 related lockdowns lasted longer than expected in several large cities.
They're all organic revenue in China declined low single digits for the quarter. These.
These important Chinese market started the reopening process in June and we saw a nice bounce back in revenue, especially in our research reagents business.
This strong June performance is encouraging and we look forward to returning to our historical growth trajectory in this geography.
Once again, our Biopharma end market remained very strong growing over 20% globally for both the quarter and the fiscal 2022.
Sales in our academic end market increased in the upper single digits for the quarter in the mid single digits for the fiscal year. We are seeing signs of continued improvement in our U S academic and market as research budget clarity and increased NIH outlays are benefiting spending on our research reagents proteomics analytical tools and spatial biology.
Solutions.
Now, let's discuss our growth platform, starting with our protein Sciences segment, where we grew organically by 16% for the quarter and 19% for the fiscal year during.
During the quarter, we advanced our cell and gene therapy initiatives as our reagents media technology and workforce solutions continue to deliver the necessary solutions to progress therapy development and clinical trials.
Before we get into the numbers I'd like to highlight an emerging cell therapy application called regenerative medicine. It is garnering significant investments in clinical trial activity, which in turn is driving growth in our technologies and products, enabling these workflows.
As background regenerative medicine or re gen med leverages stem cells or other derivatives to promote the repair response or disease dysfunctional or injured tissue <unk>.
Stem cells are unique as they can be induced to differentiate into any cell type for example, muscle heart pancreatic nerve and blood cells. This functionality has bond robust biopharma activity to use stem cells as a treatment and potential cure for many diseases and chronic conditions, including diabetes tissue repair spinal cord injury chronic wound.
Healing and others. This.
This increased activity is sparking demand across our portfolio of cell therapy products and technologies, including reagents assays media instruments and spatial biology products.
Our portfolio of GMP proteins includes 19 cytokines, including 11 that are only available from biotech names that are key to scaling. These re gen med activities.
This interest in region Med is also acting as a significant tailwind for our matrix products. As these provide structural support for sales and play an important role in establishing tissue organization by influencing cell adhesion proliferation migration and differentiation.
Our portfolio of matrix products increased over 110% in the quarter and are quickly becoming significant tributary to a burgeoning cell and gene therapy business.
Specifically for our GMP protein business during the quarter, we transitioned two additional GMP proteins to our state of the art.
GMP protein dedicated manufacturing facility. Following these latest launches we are now manufacturing five GMP proteins and this new facility at the scale and capacity necessary to meet current and forecasted demand.
Overall, our portfolio of cell and gene therapy products technologies and solutions increased over 50% for fiscal 2022.
Now, let's discuss performance of our research reagent portfolio, including our broad catalog of <unk> proteins and antibodies.
Once again, our brand reputation targeted new product introductions marketing strategy and execution drove above market growth as our research reagents increased low teens for the quarter and mid teens for fiscal 2022.
During the fiscal year, we added approximately 1000, new R&D systems branded proteins antibodies and small molecules, including research reagents strengthening our core portfolio in immunology.
Oncology and targeted protein degradation.
Shifting to our proteomics analytical tools, where the team delivered mid teens growth for the quarter and high teens growth for the fiscal year. Once again, our biologics platform <unk> led the way increasing our F 35% in the quarter. This marks the seventh consecutive quarter of above 30% growth for this platform as we continue to see strong demand.
And from protein Therapeutics gene therapy, and <unk> customers.
We recently dramatically improve mariza speed with the launch of the turbo. The STS cartridge. This new cartridge delivers a 400% throughput increase compared to legacy cartridges, enabling higher speed and high resolution analysis of protein size and parity across all stages of bioprocess development as well as regulated areas, including quality control.
Separately, a multi company study published in the journal of Electrophoresis showed excellent comparability of Murray's to its predecessor instrument Ice's III.
As background, we launched <unk> in 2016, as the next generation system and our ice instrument portfolio.
Multiple biopharma companies have requested comparability data between <unk> and <unk> prior to upgrading and we anticipate this study will help these customers eventually transition to <unk>, which offers ease of use and increased functionality compared to the legacy system.
Our simple western portfolio of automated western blot solution continues to gain share as the ease of use reproducibility and speed compared to manual methods resonates with both biopharma and academic end users.
This growing awareness and utilization of simple western is evident when looking at the number of publications, citing simple western data.
As of the end of the quarter there were over 600 cumulative publications, citing our simple western technology, representing an increase of 12% during the first half of calendar 2022.
We view publications as a leading indicator for the growing acceptance of this technology and believe we are positioned for continued growth going forward.
Our simple western business increased in the mid teens for the quarter and in the high teens for the fiscal year.
We continued to experience strong demand for our simple plex automated immunoassay platform Ella from cell and gene therapy customers as our recent assay editions for AAV characterization.
<unk> hundred 93 wholesale proteins and <unk> drive adoption in both process development and QC release in fact, we increased the number of CGT customers selling gene therapy that is leveraging alloy and their workflow by over 65% during the fiscal year.
And anticipate growing interest from additional accounts as we continue to expand our relevant menu offering.
During the quarter, we announced the latest addition to our family of instruments and consumables with the acquisition of <unk>, a leading cell sorting of dispensing company with two instruments currently on the market and MSS proprietary instruments and consumables address several high growth markets, including cell and gene therapy cell engineering cell line development single cell.
Genomics antibody discovery synthetic biology, and rare cell isolation while.
While an MSL business is relatively small today. It is growing quickly and we are excited to have this technology and talented team under the biotech Ambarella. We closed this acquisition on July one and.
And initial integration work is progressing nicely.
Lastly, our immunoassay Kid business finished the year on a very strong note as this business grew low double digits for both the quarter and the fiscal year. In addition to healthy demand for our Elisa kit, we are increasingly being recognized as the partner of choice for developing luminaire SaaS base for our partners to run his lab designated tests or <unk>.
For example, we recently announced an agreement as the exclusive manufacturer of <unk> Biosciences, I'm curious bladder cancer diagnostic panel.
This luminance based multiplex panel combines biotech these high quality reagents and over 40 years of industry, leading immunoassay experience with non agents diagnostic experience to create a powerful solution to advanced bladder cancer treatment strategies.
Next let's discuss our diagnostics and genomics segment, where we grew revenue organically by 8% in the quarter and 10% for the full fiscal year.
Our spatial biology business branded ACD remains the largest global spatial biology business as our highly sensitive biomarker identification technology with single cell detection resolution and quantification capabilities continues to enable the transition from discovery to translation research space.
Spatial biology return of double digit growth in the quarter has been improving academic market and the impact of our fortified leadership in North American commercial teams offset a challenging year over year comp and the impact of the China shutdown.
During the quarter, we achieved a significant milestone.
For our spatial biology business as our market leading portfolio across 40000 unique RNA scope in situ hybridization probes and over 400 species.
We also announced the launch of our the IBD marked RNA scope.
<unk> probe high risk HPV assay for use in patients with head and neck cancer to aid in the identification of high risk human Papilloma virus HPV for use on the automated Leica Biosystems bond three stayner.
With our sales territories occupied leadership team in place to drive this business forward and expectations for the U S. Academic market to continue to improve we are expecting steady improvement in our space rheology and growth rate in the coming quarters.
Moving on to our molecular diagnostics division, let's start with the significant progress of our <unk> diagnostics business delivered in the quarter. The XO Dx prostate or Etsy tests continued to benefit from increasing traffic. The physician office for initial her follow up visit which in turn drove improving diagnostic testing volumes, including PSA tests, which are the <unk>.
The requisite for our <unk> test.
This improving physician office environment, combined with our digital and traditional marketing initiatives drove almost 70% year over year extra Dx prostate test volume growth as testing levels broker quarterly volume record for the second quarter in a row.
The <unk> diagnostics team had a strong presence at the American Urological Association or <unk> conference in May, including the presentation of <unk> as well as six <unk> scientific presentations.
This was also a great form to highlight our ongoing partnership with foreign Baltimore Orioles player Iron Man Cal Ripken Junior who remains an ambassador and advocate for the extra Dx prostate tests, which was a part of <unk> own prostate cancer journey.
Separately, our Medicare administrative contractor National government services held a public meeting following our request for reconsideration of our local coverage decision also known as LCD.
As a reminder, we have made significant progress getting the existing LCD to align with the national comprehensive cancer network or <unk> guidelines, although a few key differences remain most importantly, the current LCD as it does not reimburse for repeat usage of our extra dx prostate tests or for patients.
Who previously had a negative prostate biopsy if successful the reconsidered LCD would removing <unk>, enabling the use of our <unk> prostate tests as a surveillance tool.
We are encouraged following.
Following the opening meeting and are looking forward to the issuance of the final LCD.
Continuing to molecular diagnostics assures and had a great quarter as demand for its portfolio of genetic carrier screening kits.
Their diagnostic controls as well as the initial traction in Europe drove growth of over 25% in the quarter.
In addition to the ongoing geographic expansion assures and has a rich product pipeline positioning the business for continued growth going forward.
Finally, our diagnostics reagents business continued its trend of steady growth in the quarter. The return of patients to the Doctor's office, the sparking demand for hematology and clinical chemistry test, which is driving demand for our clinical controls and reagents, improving patient office visit trends, a full pipeline and opportunities for additional gains share gains.
Within our OEM partners set the stage for sustainable growth in our diagnostic reagents business going forward.
Most of you probably saw the press release issued this morning announcing the planned leadership transition coming in two years.
Following the conclusion of our fiscal 2024 I plan to retire as the CEO of biotech me and intend to continue to serve as a member of the board of directors.
During my tenure the board and I have built an incredibly strong bench of talented results driven leaders that could serve as potential internal replacements over the same timeframe biotech me has grown into a leading life science tools and diagnostics company and I have no doubt that our accelerating organic growth profile and sector, leading profitability will attract extremely high caliber external candidates.
As well.
The board search for a potential replacement has already begun and we will update you when there is news to share.
One thing is certain with the team now over 3000 strong and a product portfolio directly aimed at some of the hottest areas of scientific research and diagnostics biotech thing is positioned to continue to execute our strategic plan. During the next two years under my leadership and beyond with that I'll pass the call over to Jim.
Thank you Chuck I will provide an overview of our Q4 and fiscal 2022 financial performance with total company.
To provide some additional details on the performance of each of our segments and then give some thoughts on the fiscal year ahead.
Starting with the overall fourth quarter financial performance adjusted EPS was $2 <unk> versus $1 88, one year ago, the increase of 9% over last year.
Foreign exchange negatively impacted adjusted EPS by <unk>, 10, or minus 5% in the quarter.
GAAP EPS for the quarter was $1 51 compared to 37% from the prior year.
The biggest driver for the increase in GAAP EPS was unrealized losses on our investment in <unk> in the prior year.
Q4 revenue was $288 2 million, an increase of 11% year over year on a reported basis and 14% on an organic basis.
Foreign exchange translation had an unfavorable impact of 3% to revenue growth.
For the full fiscal year 2022 revenue was $1 1 billion, an increase of 19% on a reported basis and 17% on an organic basis.
Foreign exchange translation had an unfavorable impact of 1% and acquisitions had a favorable impact of 3%.
Moving onto the details of the P&L total company adjusted gross margin was 73, 2% in the quarter compared to 72, 7% in the prior year. The increase was driven primarily by favorable business mix and productivity gains partially offset by the impact of foreign exchange.
Adjusted SG&A in Q4 was 27, 8% of revenue compared to 25, 9% in the prior year, while R&D expense in Q4 was eight 1% of revenue compared to 8% in the prior year the.
The increase in SG&A was due to progress we've made in the quarter building the teams to position the company for growth going forward, including adding commercial and technical talent.
Both negative foreign exchange rates and the acquisition of MSL will likely have a negative impact on our full year adjusted operating margin for fiscal year 'twenty three.
As much as 150 basis points.
The impact on year over year margin will be more severe in Q1 and gradually become less of a headwind as the year progresses.
By the time, we reached the end of fiscal year 'twenty three we expect our core margin improvement to offset these headwinds and finished the fourth quarter of fiscal year 'twenty three with approximately 100 basis points of year over year margin expansion.
Entering fiscal year 'twenty four right on track to achieve 40% adjusted operating margin by our target of fiscal year 'twenty six.
That concludes my prepared comments and with that I'll turn the call back for the operator to open the line for questions.
Thank you.
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Our first question comes from Puneet <unk> with.
The Securities. Please proceed.
Yeah, Hi, Thanks Chuck.
Chuck Jim Thanks for taking the question so.
First of all congrats on a solid print here despite the China challenges so maybe Chuck.
Given the transition I think it's I mean first of all it's fair to say that you have done a phenomenal job or portfolio transformation and the top line growth.
<unk> growth, which is in.
In mid teens in a $1 1 billion.
On the operating profile that is reflecting a 40% op margins. So thats just great to see across the life science tools industry. So I mean, I wish you wanted to retiring but maybe just walk us through sort of what went into the decision and maybe talk to us about the overall organization today I mean, you have a target of <unk>.
$2 billion by FY 'twenty six.
Pivoting more into cell and gene therapy. So potentially there is a lot to be excited about but how are you thinking about the overall organization and what needs to happen in order to deliver that target by FY 'twenty six.
I think mainly it keeps doing we're doing so we had a hell of a year, 17% growth we.
We will be giving our usual.
Mild range guidance here for the coming year.
It starts with double digit for sure.
As you know by the end of our cycle 2026, we're going to be at a 17% for sure right we need to be there to hit the $2 billion.
More confident ever doing that the team is.
Over the last almost 10 years I've been here, we've been building it.
With the retirement of Dave answer last year, we picked up well guys who has.
Extremely strong domain knowledge in all the hot areas that we're getting into the cell and gene therapy in particular so.
Debenture set of course, Jim here Jim.
10 years younger than me so.
<unk> got a long runway to go here with some solid candidates internally.
As well as the board will do their fiduciary duty and they'll look externally as well they've already.
Talked about that and we're doing a two year glide path here. So there is nothing overnight until that time I'm out of here and I intend to be on the board going forward.
From them will be close to our 2 billion hopefully anyway. So.
More I'm more worried about and thinking about that the personnel in place of me.
When I'm done with my 10 year, it'll be a 500%.
Growth buybacks from when I started in personal replace me has to have that kind of runway. So we can take it from $1 5 billion or more to between seven five and $10 billion in.
The pons oriented as you know were low in share in all the markets. We serve the we've seen no problem with making this a.
Fantastic company going forward and an even stronger leader in the life science tools and diagnostics markets.
That's great.
And then.
Just wanted to check on Wilson Wolf.
Nearing a run rate of your potential target timeline for acquisition, maybe just update us with the business there and with that maybe Jim you can also talk sort of what what sort of leverage ratio. Once you have that deal closed and sort of how should we think about the leverage ratio and your cash position how does that.
Change any M&A prospects for you or as you look at.
Targets out there given the current valuations.
Well, we've never been in a stronger position for for cash and for our debt levels. So we're definitely hunting.
We fully expect to consummate the first tranche of our deal before end of their calendar year here that takes a 20% sulfur to $150 million less the the upfront option that we gave him so.
They are on track to growth is steady.
700 to 800 customers the facto standard nothing is.
Competing that.
And we have also a $100 million of sulfur.
For example, sell as well and.
Jim can talk about our leverage going forward, but we're certainly going to.
Get a little more cash and but we're sitting in a great spot to do it and as I've mentioned before this is going to be an excellent year for M&A, it's already taken off pretty strong as you look at our peers across the World Harrison, Yes, I'll just add I mean, we've got powder is not an issue.
We're setting a pretty much net debt zero as of as of the end of June 30th.
We just did the <unk> acquisition and assuming we do Wilson Wolf here by the end of the calendar year.
Together with the operating cash flow, we generate in the meantime, we'll still probably be at or less a one times turn.
As we said before were very comfortable going up to north of three.
For the right deal so.
Powder will not be the issue.
Our next question comes from Jacob Johnson with Stephens. Please proceed.
Hey, thanks.
Morning, and Chuck I'll add my congrats on.
All you've accomplished over the last couple of years and on the retirement announcement, though I think you're still stuck with us for another seven quarters.
Farhan.
Yeah.
Chad.
But.
On the Biopharma end market. Jim mentioned, you guys are keeping an eye on Monday can you just talk about are you seeing any signs of a slowdown from activity in our end market doesn't sound like it is biopharma was strong, but just any thoughts there and then as we think about your portfolio. If we continue to seek financing to be sluggish.
Talk about how you how you view that may be impacting some of your key segments.
Yes sure.
When we finished the quarter very strong and as we've mentioned in the past we haven't seen too much degradation in any of our markets.
We finished in the U S biopharma around 30% growth.
And academia keeps trickling north nowhere near high single digit growth for the quarter in the U S better than that in Europe again teens, but.
Looking forward, it's kind of hard to answer because looking now from July one on July is kind of soft for us anyway is for everyone and.
It kind of gets its different year on year I do think that this is a year, where a lot of people are tired and traveling and taking off for the first time. So I think we're seeing some of that.
But we'll see right now.
See strong continued momentum in Biopharma in your Pacific mortgage asking about biotech.
We will see but.
<unk>.
I think most of our markets are still doing fine that you've seen our peers can't make the same kinds of statements but.
But it's hard to really make a statement going into July and August .
And some of our areas, especially like <unk>.
The softest time of the year for them anyway, and so things like that but.
But we'll know more in about a month or so and we're.
We're not too concerned yet I mean things are.
But kind of like we usually see about this time of year.
I would add there Jacob is keeping in mind that our core business as reagents and relatively low dollar instrumentation that adds the productivity. So.
If there is any kind of slowdown in biotech usually it's the high capital expenditure items that we will see it first and.
As long as we continue to do their experiments that are going to still need our reagents and our value add low cost instrumentation. So the risk I think is lower for us.
Yeah.
Okay.
Our next question comes from Dan Arias with Stifel. Please proceed.
Hello.
Good morning, guys. Thanks for the questions Chuck maybe on ACD could see a return to double digit growth. There I have you at right around 10% growth for the year, but long term CAGR that you outlined at the analyst day is mid 20 so.
For that portfolio, how do you think fiscal 'twenty three growth fits into the trajectory there and then relatedly, Jim how much of the higher or Chuck for that matter how much of the hiring that you have.
<unk> highlighted is necessary for that business have you been able to complete at this point.
Yeah.
Okay, Great and then I was hoping we could talk a little more about that the named Lasalle acquisition.
What our growth rates and margin there and how do you expect those to trend over the next few years.
Yes. This is a fantastic asset we've been talking to this team for four years.
Kind of we're really we're waiting until they had their two laser system in the market now there is someone like hotcakes you can talk about growth rates, it's a three digit number.
It's a really good number.
They are definitely already and.
And instrument counts that are that are significant.
And as you know this is a kind of a best in class solution for cell isolation and cell sorting, which affect a lot of markets not just cell and gene therapy, but a lot of different applications.
And at ticket it picks away it flow cytometry, as well and and they have they have ideas on the drawing board about us going really dead.
Dead Center at that market as well, so a fantastic team smart people good IP.
<unk> off and running in China as a matter of fact.
Retention is fantastic.
Integration is ongoing and started in the end.
Again, we've been friendly as for years. So I think we kind of came into this.
Kind of hit the ground running in terms of integration. It's a strong application based on strong science and IP and it's just kind of fits kind of our thesis for the kind of instruments that we pick up.
We've been excited to get this and when waiting and we're thrilled to have that team on board and Youll see this be a major platform for us in the coming years.
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Our next question comes from Alex Nowak with Craig Hallum Capital Group. Please proceed.
Great. Good morning, everyone I'm, just hoping we could speak to the expectations for the overall growth branch in the new fiscal year as we talked about that in the Q&A session. We've got a couple of cross brands, We've got China kind of coming back online maybe not full strike. It's recovering maybe more questionable funding environment for life science projects. If I just look at this high growth cell gene therapy.
So just how you're thinking about growth throughout this year the cadence throughout this year.
Yeah. So.
The plan. This year is kind of like last year will start out a little softer and very strong just like we did comps are so this is still a tough comp for us in Q1, and then they get they get in a little better for us going forward, but.
No not that much better. This is this is an aggressive business and we're a double digit player now we expect to continue.
Alex we don't give real guidance, we don't give quarterly but we do think that our range of this coming year is something you know something probably 11% 12 ish percent to up to mid teens in that range and we'll keep you posted as we do better but as you mentioned with China is still being a little softer as we go forward to fully turns on which is really more like Q2.
In other situations you know out there, we'll see but we have other things that are counteracting. These possible slowing were excellent lighting up you guys aren't asking about lightning XO, but it wasn't a tremendous quarter with 70% test growth, 40% organic growth and over 7000 tests.
We are just killing it.
And it's their time and it's going to be taken off we're going to an accrual methodology pretty soon here as well if not this coming quarter.
It's time that the reconsideration is going to really.
Allow us to double the Tam for US we've got 75000 tests that have occurred out there in the past that are all waiting for a reoccurring.
And so theres a lot upside there, we just talked about spatial specials back in the groove.
It's already at a $100 million business in that range. So it's material.
And as long as our core stays where it is in proteomics is still strong biopharma at 30% kind of growth rates in <unk>.
We see an amazing and double digit year ahead of us in and.
And we're not going to get more bullish the mid teens at this point, but we never do so.
Okay understood. That's helpful and then going back to the ammo side I think in hindsight here correct me it was just.
Clearly lightning itself separation system I think that's critical for soldier Paragon as you outline for other areas too.
But now as you survey the Celgene therapy space, just what other tools, what other products out there could be useful to kind of tuck in Quebec, and combined with the rest of the portfolio.
Well, we're getting pretty darn close to a complete closed workflow there's not much left that we need.
I would say cryopreservation would be one area.
There are some more some more cell analysis type tools and I can say.
Calm like QC areas and stuff for the process that might makes sense, obviously, we need to capitalize on on scale ready and with with getting Wilson Wolf under the tent here that will take care of our bioreactor needs, but it may not be the only one.
There may be a place for bags out there and there are certainly as the going upstream into the bio processing side of all this which we really haven't done yet, but as we grow we're going to probably nationally trend that direction.
Starting first with our proteins and all of the things we'll be doing in bulk for customers right.
And I think then the instrumentation, we're counting on the Q out of Fresenius Kabi without with.
Our scale ready JV and if it.
If that if.
If that doesn't work long term, we will have to either acquire that or do something different but we've been obviously have to have an instrument for leukapheresis to make the system complete and right now they've been a fantastic partner.
They are.
I wouldn't say as strong as Wilson Wolf is stronger than US right now on proteins, there they've been out there while.
They've got a lot of traction with that platform and.
But we think we are ready to explode this thing as a market creates.
Creates itself, which is really the limiting factor right now is when does this market really come into being and its.
It's it's coming more every year so.
Our next question comes from Patrick Donnelly with Citi. Please proceed.
Hey, guys. Thanks for taking my questions.
Jim maybe one for you on the guidance.
Just on the margin side, you were talking about kind of that exit rate of a 100 bps expansion in <unk> can you just talk about how we should think about the ramp throughout the year and then just the key levers both directions between pricing.
Fly chain inflation some of the XO Chuck mentioned the accrual side.
Maybe just talk about the moving pieces, there and how we should think about margins throughout 'twenty three.
Sure. So as I mentioned, roughly 150 basis point, all for the full year kind of decline.
Driven almost entirely by FX and the and the <unk> acquisition.
And if we can exit the year with a 100 basis points of expansion that would suggest that we're going to have worse than 100 basis points contraction in the early part of the year.
Does the FX headwinds are more severe when you look in the first half of the year than they are in the back half of the year as well as the.
As Chuck mentioned in his opening comments.
<unk> had a very successful quarter in Q4 with regards to getting.
Staff back up and holding onto our key people and that will have a carryover impact, particularly in the first half of the year, where we were way behind in our investments last year. So a combination of of that carryover impact of getting fully staffed in addition to the FX will be more severe in the back half of the year, but then as our.
<unk> productivity improves throughout the year, that's where we expect to get back to it.
Expansion before we exit the year hopefully that helps.
Yes, that's helpful.
Chuck maybe just a quick one on kind of the capital allocation strategy given the announcement this morning and congrats on the two years.
And the next two years any is there any reason you guys wouldn't do deals because you are leaving or what's kind of the way to think about kind of in between period on the capital allocation side.
Not quite the contrary this is it's going to be a good year for shopping.
We're out there hunting pretty hard.
And we're in the middle of some right now we always are.
And we'll see what happens, but over thinking two years I mean.
The kind of cash flow, we have our our EBITDA two years out is going to be well north of 500, probably 600 ish and.
We're going to have plenty to work with as Jim mentioned earlier the powder is strong so.
I think we're looking for bigger deals and this.
This may be a good year to pick up a lot of tuck in mom and Pops that are we're thinking IPO and they can't now and stuff. So we're looking around those angles too but.
We are open to any and all ideas I guess anything that makes sense for shareholders and makes our company a stronger company.
We're five divisions across two segments I've always said that once we are at a $5 billion kind of revenue rate. This would be an attendant vision company all synergistically connected.
<unk> 10 divisions and in the science being all life Sciences. So we see no change in our thesis and we've never been more bullish about our capital allocation and is primarily M&A don't look at US is thinking about major buybacks or dividend increases its M&A first.
Our next question comes from Paul Knight with Keybanc. Please proceed.
Hi, Chuck congratulations on the.
Change it sounds like it'll be a while so that's fabulous for you.
The protein simple was one of the earlier acquisitions you did.
Looking back on it and looking forward what are you.
Your thoughts on protein simple in terms of share.
Sure they have today and runway ahead on that particular business.
You, obviously very instrumental in getting kind of back in growing and transforming that part of the market.
Yes sure.
Well, it's going back six seven years now but.
We did that deal pretty quickly with it was on the eve of an IPO and we snatched it in.
It was the <unk>.
$50 million business back, then not making money and today, its a $250 million business, making over 30% margins.
Dan is an instrument business, it's got great IP.
We have other things we can add to the platform, we think and we have runway across all three major platforms as we've talked about a lot I mean everything from the.
The <unk> platform, which we are competing within a year of 500 10-K process <unk> 45, a brand new facility a manufacturer can more than triple the output. So that'll be a sleeper that'll be pretty much point of care diagnostics in five years as well as a discovery. It's in now which is crazy growth.
Simple western is still an amazing platform with way more ahead of it then is behind of it and in biologics just keeps surprising us I mean seven quarters in a roll over a 30% growth.
Protein purity capsid testing.
<unk> share taking this thing has got lots of runway as well more than we ever thought.
So I look at it.
And I leave in two years, there and move on to the other import positions and stuff and thinking about here.
B.
400 ish kind of million dollar business unit and there is no reason why this can't be a $1 billion units someday.
And it will have other other.
Other instruments will add to the platform over time too I'm sure that so.
If it was spun out right now obviously it would be it would be really valuable. So I think we paid 300 million for it. So it's been an amazing return and probably the biggest chunk of our overall.
Our overall value creation over the last.
Nine five years I've been here, which is roughly $2 billion I think today, we are in the 15 billion ish range, where 'twenty, but we're all.
Well, we're all seeing a little setback there but.
But.
We're very positive because we see as the market finally.
I guess bottoms with conviction that there is the fed's done et cetera, et cetera, there'll be a floater quality first and you don't find better quality of an asset than ours.
Yes, and my last question Chuck would be like on <unk> diagnostics.
That seems to be gaining traction would you be an acquirer of diagnostic assets in the future or what are your thoughts on the Dx.
Sector.
Yes.
As you recall, we've been very.
Very bold in our statements about what we want to be and we don't want to be in diagnostics across the board. We don't really don't want to be in infectious diseases and these these low end things that hard to make money in lots of competition no barriers to entry, but but.
We're a company that's focused on.
<unk> curing cancer Research center, as well as neuroscience and diagnostics that fit in the <unk> because they leverage our assay expertise 40 years' worth of experience, that's where we want to flow.
The Assurant team really came on and helped us immensely this.
This team is amazing and they've just littered up there. It was the right idea to put this business unit in charge of professionals that have over a decade of experience in diagnostics.
And I'm not going to say, we won't pick up other assets, but if we do they are probably going to be.
Closely related and in areas, where there are good returns and that need for heavy difficult science, which usually means going after solid tumor or something you know in oncology the difficult areas.
And we will see.
There is lots of opportunity here and.
Well never say never right now we're kind of focused on it's a new division with with emerging of <unk> with <unk>.
And the growth has been wonderful and it's lighting up its accelerating and so we're going to ride that horse here for a while and we'll see what happens but.
We are.
We're still focused on making that a major major platform for the company and I've told you guys more than once you look out five to 10 years. This is one of the few things we can see in our coming it should be $1 billion of Martha.
Okay.
Mr comment there are no further questions at this time, please continue with your presentation or closing remarks.
While we're on the hour.
Anyway, thanks for the questions and it was a great quarter in the end to a great year, the best ever for Us and we hope to give you an even better on this coming year. So talk to you soon thank you.
That does conclude your conference call for today, we thank you for your participation and ask that you. Please disconnect. Your line have a great day everyone.
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