Q3 2024 Bio-Techne Corp Earnings Call
Unknown Executive: Good morning and welcome to the Bio-Techne Earnings Conference call for the third quarter of fiscal year 2025. At this time, all participants have been placed in listen-only mode, and the call will be open for questions following management's prepared remarks 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. Please go ahead.
Good morning, and welcome to the bio check the earnings conference call for the third quarter of fiscal year 'twenty 'twenty four.
This time, all participants have been placed in listen only mode and the call will be opened for questions. Following management's prepared remarks.
Speaker Change: 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 Chan Biotech lease Vice President Investor Relations. Please go ahead.
David Clair: 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.
David Clair: Good morning, and thank you for joining us on the call with me. This morning are Ken <unk>, President and Chief Executive Officer, and Jim Hippel, Chief Financial Officer of biotech team.
David Clair: 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 our Bio-Techne Corporation website at www.bio-techne.com.
David Clair: Before we begin let me briefly cover our safe Harbor statement.
Speaker Change: Some of the comments made during this conference call, maybe considered forward looking statements, including beliefs and expectations about the company's future results the.
Speaker Change: 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.
Speaker Change: The company does not undertake to update any forward looking statements.
Speaker Change: Does it have any new information or future events or developments.
Speaker Change: The 10-K as well as the company's other SEC filings are available on the company's website within its Investor Relations section.
Speaker Change: During the call non-GAAP financial measures may be used to provide information pertinent to ongoing business performance.
Speaker Change: 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 our biotech being corporation website at Www Dot bio dash technique Dot com.
David Clair: In the coming week, we'll be presenting at the Bank of America, Benchmark, Lyrinc, William Blair, Jeffries, and Scotiabank conferences. We look forward to connecting with many of you at these upcoming events. I will now turn the call over to Kim.
Speaker Change: Separately, we will be presenting at the bank of America benchmark Leerink, William Blair Jefferies and Scotiabank conferences in the coming weeks.
Speaker Change: We look forward to connecting with many of you at these upcoming events.
Speaker Change: I will now turn the call over to Kim.
Kim Kelderman: Thanks, Dave. And good morning, everyone.
Kim: Thank you, Dave and good morning, everyone. Thank you for joining us for our third quarter conference call.
Kim Kelderman: Thank you for joining us for our third quarter conference call. I'm pleased to report that our third quarter outperformed our initial expectations as several of the green shoots we discussed during our last earnings call continue to sprout and, combined with excellent execution by our Bio-Techne team, contributed to delivering 2% year-over-year organic revenue growth. We're looking forward to seeing these green shoots further develop as the headwinds we've faced, namely the biotech funding and the microeconomic challenges in China, continue to stabilize and eventually improve. Our team has demonstrated that our product portfolio can show relatively strong performance in the stabilizing but still challenging end market. And therefore, we are confident that we can perform extremely well when our end markets fully recover.
Kim: I am pleased to report that our third quarter outperformed our initial expectations and several of the Green shoots we've discussed during our last earnings call continue to sprout and combined with excellent execution by our biotech team contributed to delivering 2% year over year organic revenue growth.
Kim: We're looking forward to seeing these green shoots further develop as the headwinds we faced namely the biotech funding and macroeconomic challenges in China continue to stabilize and eventually improve.
Kim: Our team demonstrated that our product portfolio can show I don't think strong performance in the stabilizing but still challenging end markets and therefore, we are confident that we can perform extremely well when our end markets fully recover.
Kim Kelderman: Additionally, we deliver this quarter's growth while we continue to focus on profitability. A recent initiative to drive efficiencies across the organization while investing to position the business for the future is taking hold, and this is shown by our adjusted operating margin, increasing sequentially by 290 basis points to 33%.
Kim: Additionally, we delivered this quarter's growth, while we continue to focus on profitability.
Kim: The recent initiatives to drive efficiencies across the organization, while investing to position the business for future growth.
Kim: Taking hold.
Kim: And this shows by our adjusted operating margin increasing sequentially by 290 basis points to 33%.
Kim Kelderman: Our growth pillars within our portfolio continue to lead to our strong performance with a new quarterly record for our GMP reagents business, a Continued Increase in Adoption of XODX Prostate Tests, Robust utilization trends across our proteomic analytical tools portfolio, and strong demand for Comet, a fully automated spatial biology instrument. I will double-click on these highlights and encouraging trends later in the call.
Kim: Our growth pillars within our portfolio continued to lead to our strong performance with a new quarterly record for GMP reagents business.
Kim: Continued increase in adoption or exo Dx prostrate test.
Kim: Robust utilization trends across our proteomics analytical tools portfolio.
Kim: And strong demand for call it a fully automated special biology instrument.
Kim: I will double click on these highlights and encouraging trends later in the call.
Kim Kelderman: First, I'd like to bring to your attention Bio-Techne's recent recognition by SiteApp, a reagent search and data service company. Bio-Techne did not receive just one, but two awards. The first award I would like to mention is for being the ELISA Kid Supplier of the Year. This important designation is awarded to the ELISA kit manufacturer that receives the most citations throughout the year. Plantations are an important indicator of market adoption, particularly within academia.
Kim: First I'd like to bring to your attention the bio.
Kim: With techniques recent recognition by site at the agent search and data services company.
Kim: Bio technique did not receive just won two awards. The first award I would like to mention was received for being the Elisa kits supplier of the year.
Kim: This important designation is awarded to the Elisa kit manufacturer extra seats, the most citations throughout a year.
Kim: Plantations are an important indicator of market adoption, particularly but in academia.
Kim Kelderman: We are proud of our leading portfolio of ELISA kits stemming from a long history of innovation. DITAP also recognized Bio-Techne's RNA Scope HyPLEX-12 with the Innovation Award. That is acknowledging its role in enabling spatial detection of RNA in tissue. Our overall spatial biology efforts were also recognized as Bio-Techne was highly commended for Educational Initiative of the Year, which is related to our ongoing work to enhance spatial biology research and education. This recognition is representative of our company's vision to work together with our customers to unlock the possibilities of science. The second topic I want to highlight is related to artificial intelligence.
Kim: We are proud of our leading portfolio of Elisa kits stemming from our long history of innovation.
Kim: <unk> also recognized biotech nice RNA scope high Plex 12, with the Innovation Award.
Kim: That is acknowledging its role in enabling special detection of RNA in tissue.
Kim: Overall spatial biology efforts were also recognized as biotech NIE was highly commended for educational initiative of the year, which is related to our ongoing work to enhance pace you will be able to G research and education.
Kim: This recognition is representative of our company's vision to work together with our customers to unlock the possibilities upside.
Kim: The second topic I want to highlight is related to artificial intelligence.
Kim Kelderman: Given the significant potential that AI and machine learning bring to advancing science, I want to describe an example of one of the many ways our team is proactively and safely leveraging these important tools. As you already know, Bio-Techne is the global leader in research-use-only proteins. Researchers from around the world rely on our portfolio of highly bioactive proteins for many important laboratory work. Some examples of these workflows include cell growth and differentiation, antibody production and screening, as well as biomarkers and disease monitoring.
Kim: Given the significant potential of AI and machine learning bring to the advancing science I want to describe an example of one of the many ways. Our team is proactively and safely leveraging these important tools.
Kim: As you already know biotech me as the global leader in research use only podium please.
Kim: Researchers from around the world rely on our portfolio of highly bioactive proteins for many important level until he workflow.
Kim: Some examples of these workflows include cell growth and differentiation antibody production and screening as well as biomarkers and disease monitoring.
Kim Kelderman: We are leveraging AI capabilities to create new, patentable, hyperactive designer proteins and other reagents with new functionality. For over 40 years, Bio-Techne has been on the leading edge of protein development and bioactivity. Today, we are using the power of AI to increase that lead even further.
Kim: We are leveraging AI capabilities to create new patentable hyperactive designer proteins and other reagents with new functionalities.
Kim: For over 40 years biotech me has been on the leading edge of protein development and bio activity. Today, we are using the power of AI to increase that lead even further.
Kim Kelderman: Now let's get deeper into our quarterly results, starting with an overview of our end markets, followed by our geography. Biopharmaceutical and market performance, led by our cell and gene therapy growth vertical, improved sequentially with a low single-digit increase compared to the prior year quarter. Industry reports point to a recovery in biotech funding during the first calendar year of 2024, with estimates suggesting significantly higher funding levels compared to pre-COVID periods. However, this increase in funding comes after a December quarter that was at an eight-year low, so it may be too early to call this a new trend.
Kim: Now lets get deeper into our quarterly results starting with an overview of our end markets followed by Rodrigo geographies.
Kim Kelderman: But nonetheless, it's a green shoot that appears to be taking root and, if so, could blossom into meaningful revenue growth as we get into our fiscal year 2025. On the academic side, we delivered low single-digit revenue growth, even though we had a tough comparable with robust mid-teens performance in Europe last year. Within the U.S. and Europe, academic budgets remain stable, and their spatial biology and proteomic instrument growth pillars have outperformed in these end markets. Now I will discuss these three geographies.
Kim: Our Biopharma end market performance led by our cell and gene therapy growth vertical improved sequentially with a low single digit increase compared to the prior year quarter.
Kim: Industry reports point to recovery in biotech funding during the first calendar year of 'twenty 'twenty four with estimates.
Kim: Adjusting significantly higher funding levels compared to pre Covid periods. However, this increase in funding comes after a December quarter that was at an eight year low. So it may be too early to call. This a new trend, but nonetheless, it's a green shoot that appears to be taking route and if so could blossom into.
Kim: Meaningful revenue growth as we get into our fiscal year 2025.
Kim: On the academic side, we delivered low single digit revenue growth, even though we had a tough comparable from robust mid teens performance in Europe last year.
Kim: But in the U S and Europe academic budgets remain stable and their special biology, and proteomics instrument growth pillars outperformed in these end markets.
Kim: Now I will discuss the three geographies.
Kim Kelderman: North America improved sequentially with year-over-year growth in the low single digits. This improvement was led by a strong performance in cell and gene therapy. Europe declined mid-single digits as mid-teens growth in the prior year period created a challenging con for the geography.
Kim: North America improved sequentially with year over year growth in the low single digits.
Kim: This improvement was led by a strong performance in cell and gene therapy.
Kim: Europe declined mid single digits as mid teens growth in the prior year period created a challenging comp for the geography.
Kim Kelderman: However, on a multi-year CAGR basis, Europe has performed well, with mid-single-digit growth. Last but not least, I will discuss China, which saw revenue decline in the mid-single digits versus prior years. We mentioned in our last earnings call that we saw a stabilization of revenues in December and January, and we called for revenues in Q3 to be similar to Q2. And that was indeed in line with how the quarter played out, which is a confirmatory sign that the bottom may have been reached in China.
Kim: However, on a multi year kgs CAGR basis, Europe has performed well mid single digit growth.
Kim: Last but not least I will discuss China, which saw a revenue decline in the mid single digits versus prior year.
Kim: We mentioned in our last earnings call that we saw a stabilization of revenues in December and January and we called for revenues in Q3 to be similar to Q2.
Kim: And that was indeed in line with how the quarter played out which is the confirmatory signed at the bottom may have been reached in China.
Kim Kelderman: With the deceleration of revenue in China seemingly behind us, we also saw some green shoots in the region with China's State Council's introduction of a broad economic stimulus plan. This plan is focused on upgrading equipment across several industries to support innovation. While the specifics of this $70 billion lending program remain fluid, we anticipate that this will be a multi-year program that will eventually have a positive impact on our instrument business. Improving healthcare remains a priority for the Chinese government, and our portfolios of bioactive reagents, proteomic analysis, and spatial biology technologies will remain important tools for the modernization of healthcare in China.
Kim: With the deceleration of revenue in China seemingly behind US. We also saw some green shoots in the region with China's state Council's introduction of a broad economic stimulus plan.
Kim: This plan is focused on upgrading equipment across several industry to support innovation.
Kim: While the specifics of the $70 billion lending program remain fluid. We anticipate that this will be a multiyear program that will eventually have a positive impact on our insulin business.
Kim: Improving health care remains a priority for the Chinese government and our portfolios of bioactive reagents, Proteomic analysis and spatial biology technologies.
Kim: The main important tools for the modernization of health care in China.
Kim Kelderman: Now let's discuss our segments and their growth pillars, starting with our Protein Sciences segment, where revenue declined 1% year-over-year on an organic basis. This is a sequential improvement from our second quarter and reflects the stabilization of the biopharmaceutical and Chinese end markets. Our protein sciences segment is where we have the most exposure to these end markets and stands to benefit the most from the green shoots taking root. Utilization of our protein-simple branded portfolio of proteomic analytical tools remained very strong as consumables used on those instruments continued their long streak of double-digit growth. This growth was broad-based and was further enhanced by the growing installed base and expanding applications of these productivity tools.
Kim: Now, let's discuss our segments and their growth pillars, starting with our protein Sciences segment, where revenue declined 1% year over year on organic basis.
Kim: This is a sequential improvement from our second quarter and reflects the stabilizing of the Biopharma and Chinese end markets.
Kim: Our protein Sciences segment is where we have the most exposure to these end markets and stands to benefit the most from the green shoots taking root.
Kim: Utilization of our protein simple branded portfolio of quote genomic analytical tools remain very strong as consumables used on those instruments continued its long streak of double digit growth.
Kim: This growth was broad based and was further enhanced by the growing installed base and expanding applications of these productivity tools.
Kim Kelderman: Examples of newer applications are fractionation on Maurice Flax, as well as QA and QC applications for gene therapies across our platforms, such as Maurice, Simple Western, and SimplePlex. The Simple Western platform of Automated Western Blot Solutions continues to gain share, as demonstrated by the low double-digit growth for this quarter. The platform performance, when it comes to ease of use, speed, and reproducibility, compares very well to manual methods, which resonates with both our biopharma and academic end-users.
Kim: Examples of new applications, our fractionation on Mohit flex as well as QA and QC applications for gene therapies across our platforms, such as Murray's simple western and simple plex.
Kim: Our simple western platform.
Kim: Of automated western blot solution continues to gain share as demonstrated by the low double digit growth for this quarter.
Kim: The platform performance if it comes to ease of use speed and reproducibility compares very well to manual methods, which has an eight with both our biopharma and academic end users.
Kim Kelderman: Customers continue to expand the simple Western use case and workflows, as we can see from increased utilization in gene therapy potency alleys and quantitative immunoassay applications. We are encouraged by the uptake of this novel instrument, and given its low mid-teens market penetration and its expanded use cases, we see a long runway for adoption of this technology. Now, let's discuss the promising opportunity for a multiplex ELISA instrument, branded ELLA, as a clinical diagnostic platform.
Kim: Customers continue to expand the simple western use cases and workflows as we can see from increased utilization in gene therapy potency release, and quantitative immunoassay application.
Kim: We are encouraged with the uptake of this novel instrument and given its low mid teens market penetration and its expanded use cases, we see a long runway for adoption of this technology.
Kim: Now, let's discuss the promising opportunity for our multiplex Elisa instrument branded Ela as a clinical diagnostic platform.
Kim Kelderman: Following the recent ISO 13485 certification, we are now ready to pursue clinical diagnostic opportunities on the ELLA platform. This opens up a large potential end market for this highly sensitive, fast, and easy-to-use multiplexing immunoassay instrument. The recently announced partnership with NovoModX is a great example of this opportunity. Their biomarker pathfinder, or BMP kit, utilizes ELLA, its consumables, as well as Biotechnica reagents as the basis for their point-of-care optomic test. Novomod X will initially launch the BMP kit in India but has the potential to deploy this test more globally in the future.
Kim: Following the recent ISO 13, 485 certification, we are now ready to pursue clinical diagnostic opportunities on the <unk> platform.
Kim: This opens up a large potential end market, but it's highly sensitive fast and easy to use multiplexing immunoassay instrument.
Kim: Recently announced partnership with Novo Mol Dx is a great example of this opportunity.
Kim: They're biomarker pathfinder or BNP kit utilizes a lot it's consumables as well as bio techniques the agent as the basis for our point of care Ophthalmic test.
Kim: Nova Mol Dx will initially lounge, the BNP kit in India.
Kim: So it has potential to block deployed is that more globally in the future.
Kim Kelderman: Moving on to the performance of the next growth pillar within protein sciences, which is Cell and Gene Therapy. This novel portfolio of reagents, media, analytical, and workflow solutions enables our customers to further their therapeutic development, progress through clinical trials, and to make continued inroads toward the commercialization of these next-generation therapies. Collectively, our portfolio of cell and gene therapy products and services increased over 30% in the quarter. GMP reagents, including GMP proteins and small molecules, remain a cornerstone of our cell therapy offer.
Kim: Moving on to the performance of the next growth pillar within protein Sciences.
Kim: Cell and gene therapy.
Kim: This novel portfolio of reagents media analytical and workflow solutions enables our customers to further their therapeutic development.
Kim: Paul gets who clinical trials and to make continued inroads towards the commercialization of these next generation therapies.
Kim: Collectively our portfolio of cell and gene therapy products and services increased over 30% in the quarter.
Kim: GMP reagents, including GMP proteins, and small molecules remain a cornerstone of our cell therapy offering with.
Kim Kelderman: We experienced continued traction during the quarter, especially in regenerative medicine applications. In the current quarter, we will be strengthening our GMP reagent portfolio with the launch of GMP antibodies, which are designed for cell selection and activation in cell therapy workflows. Overall, our portfolio of GMP reagents grew over 40%, which resulted in a record revenue quarter.
Kim: We experienced continued traction during the quarter, especially in regenerative medicine applications in.
Kim: In the current quarter, we will be strengthening our GMP reagent portfolio with the launch of GMP antibodies, which are designed for cell selection and activation in cell therapy workflows.
Kim: Overall, our portfolio of GMP reagents grew over 40%, which resulted in a record revenue quarter.
Kim Kelderman: Now let's shift to our Diagnostics and Genomics segment, which reported 10% organic growth for the quarter. Starting with our Spatial Biology Growth Pillar, which includes both our ACD business as well as our Lunafor acquisition, the single-molecule sensitivity, unrivaled specificity, and subcellular resolution offered by the RNA-scope-ish technology is driving utilization in cancer, neuroscience, immunology, cell and gene therapy, and regenerative medicine applications.
Kim: Now, let's shift to our diagnostics and genomics segment, which reported 10% organic growth for the quarter.
Kim: Working with our special virology growth pillar, which includes both our ACD business as well as our lunar for acquisition the single molecule sensitivity unrivalled specificity and sub cellular resolution offered by the RNA scope ish technology is driving utilization in cancer neuroscience.
Kim: Immunology cell and gene therapy, and regenerative medicine applications.
Kim Kelderman: This broad utilization has enabled Ernie's scope to become the most referenced spatial biology technology in the industry, as the number of our customers' publications recently surpassed 10,000. Importantly, over 50% of these publications were released in the last three years, as increasing global awareness and expanded market adoption further solidify ACD's leadership in spatial biology applications. Jumping to a LUNAFOR platform, demand for our fully automated, high-throughput, hyperplex spatial biology platform called Comet once again outpaced our manufacturing capacity in the quarter.
Kim: This broad utilization has enabled Ernest cope to become the most referenced special rheology technology in the industry as the number of our customers publication recently surpassed 10000 <unk>.
Kim: Importantly over 50% of these publications were released in the last three years as increasing global awareness and expanded market adoption further solidify acd's leadership and spatial biology application.
Kim: Jumping to our lunar for platform.
Kim: For our fully automated high through throughput Hyperflex special real as your platform called comment once again outpaced our manufacturing capacity in the quarter.
Kim Kelderman: However, a cross-divisional project to rapidly scale up LUNAFOR's instrument production capacity is on track to meet current and future platform demand. We also remain on track to launch ACD's RNA-scope HyPLEX-Pro on the comet at the end of our current fiscal year.
Kim: However, the cross divisional project to rapidly scale up Luna force instrument production capacity is on track to meet current and future platform demand.
Kim: We also remain on track to lounge, Acd's RNA scope high Plex pro on the comment at the end of our current fiscal year.
Kim Kelderman: This will enable a novel, highly differentiated, multi-omic spatial biology platform capable of visualizing up to 12 RNA and 24 protein biomarkers simultaneously in one tissue cell. Moving on to our fourth and final growth pillar, which is the liquid biopsy-based molecular diagnostics business. Our XOD-X prostate test provides valuable information on whether a man with a gray zone PSA score should proceed with an invasive, potentially dangerous, prostate biopsy or not.
Kim: This will enable a novel highly differentiated multi omics spatial biology platform capable officialize ing up to 12, RNA and 24 protein biomarker simultaneously in one tissue sample.
Kim: Moving on to our fourth and final growth pillar, which is the liquid biopsy based molecular diagnostics business.
Kim: Our <unk> Dx prostate test provides valuable information on whether a man with a gray zone PSA score should proceed with an invasive potentially dangerous costly biopsy or not.
Kim Kelderman: With over 25% volume growth in Q3, the value of this test continues to resonate with both patients and physicians. I'd also like to highlight the continued traction we are experiencing with our Surgeon Carrier Screening and Oncology Kit business. A surgeon's ability to solve complex molecular diagnostic challenges continues to resonate with our clinical laboratory partners, and growth for this business approached 30% during Q3. Additionally, we continue to execute on-technology synergies within our Molecular Diagnostics Division.
Kim: With over 25% volume growth in Q3, the value of this test continues to resonate with both patients and physicians.
Kim: I'd also like to highlight the continued continued traction we are experiencing with our surgeon carrier screening and oncology business.
Kim: <unk> ability to solve complex molecular diagnostic challenges continues to resonate with our clinical laboratory partners as accruals for each business approached 30% during Q3.
Kim: Also we continue to execute on technology synergies within our molecular diagnostics Division, we are developing exosomes based single gene mutation test for monitoring various cancer markers.
Kim Kelderman: We are developing exosome-based single-gene mutation tests for monitoring various cancer markers. These kits leverage our Exosome DX technology and will be distributed through our Surgeon Laboratory channel. We expect this first monitoring test to be launched in the upcoming quarter.
Kim: Kits leverage our Exosomes CX technology and will be distributed through our assure Jim Laboratory channel.
Kim: We expect this first month of the monitoring test to be launched in the upcoming quarter.
Kim Kelderman: Before I hand the call over to Jim to walk you through the financials in more detail, I would summarize the key takeaways for Q3 as such. The biopharma end markets, as well as the Chinese region, stabilized relative to the previous quarter, and there are early indications that these markets will improve in the back half of the calendar year. Growth pillars, which are comprised of cell and gene therapy. Proteomic Analysis Solutions, Spatial Biology Technology, and our Liquid Biopsy Platform all continue to outperform the market with their superior portfolio positioning and the excellent execution of our team.
Kim: Before I hand, the call over to Jim to walk you through the financials in more detail I would summarize the key takeaways for Q3 as such.
Kim: Bio pharma end markets as well as the China region stabilized relative to the previous quarter and there are early indications that these markets will improve in the back half of the calendar year.
James T. Hippel: Our growth pillars, which are comprised of cell and gene therapy.
James T. Hippel: <unk> analysis solution, <unk> technology, and our liquid biopsy platform all continued to outperform the market with their superior portfolio positioning and by the excellent execution of our team.
Kim Kelderman: These growth pillars, enabled by our leading portfolio of proteomic reagents and assets, remain incredibly well positioned to enable our customers to improve the quality of life by catalyzing advances in science and medicine for years to come.
James T. Hippel: These growth pillars and enabled by our leading portfolio of proteomics reagents and assays.
James T. Hippel: Main incredibly well positioned to enable our customers to improve the quality of life by capitalizing advances in science and medicine for years to come.
James T. Hippel: With that, I'll turn the call over to Jim. Jim?
Kim: Did that all.
Kim: I'll turn the call over to Jim Jim.
James T. Hippel: Thank you Kim.
James T. Hippel: I'll start with some additional detail on our Q3 financial performance and then give some thoughts on the financial outlook for the remainder of the fiscal year. Starting with the overall third quarter financial performance, adjusted EPS was $0.48 compared to $0.53 in the prior year quarter, with foreign exchange having an immaterial impact on EPS. Gap EPS for the quarter was $0.31 compared to $0.43 in the prior year. Q3 revenue was $303.4 million, an increase of 2% year-over-year on an organic basis and a 3% increase on a reported basis. Acquisitions contributed 1% to the reported growth.
James T. Hippel: I'll start with some additional detail on our Q3 financial performance and then give some thoughts on our financial outlook for the remainder of the fiscal year.
James T. Hippel: Starting with the overall third quarter financial performance adjusted EPS was <unk> 48, compared to <unk> 53 in the prior year quarter with foreign exchange, having an immaterial impact on EPS.
James T. Hippel: GAAP EPS for the quarter was 31 <unk> compared to <unk> 43 in the prior year.
James T. Hippel: Q3 revenue was $303 4 million, an increase of 2% year over year on an organic basis, and a 3% increase on a reported basis.
James T. Hippel: <unk> contributed 1% to reported growth.
James T. Hippel: Looking at our organic growth by region and end market in Q3, North America increased low single digits year over year, while Europe and China decreased mid-single digits. As Kim mentioned, we noticed an improvement in demand from our biopharma customers, which benefited growth in both our North American and European regions. Overall, Europe had a challenging year-over-year comp as both academic and biopharma increased mid-teens last year.
James T. Hippel: Looking at our organic growth by region and end market in Q3, North America increased low single digits year over year, while Europe, and China decreased mid single digits.
James T. Hippel: As Kim mentioned, we noticed an improvement in demand from our biopharma customers, which benefited growth in both our north American and European regions.
James T. Hippel: Overall, Europe had challenging year over year comp is both academic and Biopharma increased mid teens last year.
James T. Hippel: APAC, outside of China, decreased by low single digits overall, with government funding and macro constraints in Japan and South Korea, partially offset by growth in India. For China, the soft government funding environment continued to impact the region, although the stabilization we experienced in our run rate business in December continued in Q3. This stabilization led to year-over-year growth in our core reagents business, as well as our spatial biology business in the region. It appears as though the worst of the Chinese slowdown is behind us at this point, and over the long term, we remain confident that China will still be the fastest growing major region in the world for life science tools. However, the path back to accelerated growth will take longer than previous down cycles.
James T. Hippel: APAC outside of China decreased low single digits overall with government funding and macro constraints in Japan, and South Korea, partially offset by growth in India.
James T. Hippel: For China, the soft government funding environment continue to impact the region, although the stabilization we experienced in our run rate business in December continued in Q3.
James T. Hippel: This stabilization led to year over year growth in our core reagents as well as our spatial biology business in the region.
James T. Hippel: It appears as though the worst of the China slowdown is behind US at this point and over the long term, we remain confident that China will still be the fastest growing major region in the world for life Science tools.
James T. Hippel: However, the path back to accelerated growth, we think will take longer than previous down cycles.
James T. Hippel: By end-market and Q3 excluding China, biopharma grew low single digits in the quarter while academic was relatively flat with the challenging double-digit growth comps in Europe. Below revenue on the P&L, total company adjusted gross margin was 71.9% in the quarter, a significant improvement from Q2, but lower than the 72.6% in the same quarter of the prior year. The year-over-year decrease was primarily driven by the impact of the Lunar 4 acquisition in this fiscal year.
James T. Hippel: By end market in Q3, excluding China Biopharma grew low single digits in the quarter, while academic was relatively flat with a challenging double digit growth comps in Europe.
James T. Hippel: Below revenue on the P&L total company adjusted gross margin was 71, 9% in the quarter a significant improvement from Q2, but lower than the 72, 6% in the same quarter of the prior year.
James T. Hippel: The year over year decrease was primarily driven by the impact of the window for acquisition in this fiscal year.
James T. Hippel: Adjusted SG&A in Q3 was 30.3% of revenue, compared to 27.9% in the prior year, while R&D expense in Q3 was 8.5% of revenue, compared to 7.7% in the prior year. The increase in SG&A and R&D was driven primarily by the LUNO4 acquisition. Our strategic pricing strategy continues to offset the dollar impact of inflation on operating income, with pricing also largely offsetting the inflationary impact on our operating margin in Q3. Adjusted operating margin for Q3 was 33%, a decrease of 400 basis points from the prior year period but an increase of 290 basis points sequentially.
James T. Hippel: Adjusted SG&A in Q3 was 33% of revenue compared to 27, 9% in the prior year, while R&D expense in Q3 was eight 5% of revenue compared to seven 7% in the prior year.
James T. Hippel: The increase in SG&A and R&D was driven primarily by the window for acquisition.
James T. Hippel: Our strategic pricing strategy continues to offset the dollar impact of inflation to operating income with pricing also largely offsetting the inflationary impact on our operating margin in Q3.
James T. Hippel: Adjusted operating margin for Q3 was 33% a decrease of 400 basis points from the prior year period, but an increase of 290 basis points sequentially.
James T. Hippel: Excluding the Lunafor acquisition, which closed at the beginning of Q1, adjusted operating margin was 160 basis points lower than the prior year due to the impact of unfavorable volume leverage and, to a lesser extent, strategic investments to position the business for future growth. Looking at our numbers below operating income, net interest expense in Q3 was $3.1 million, increasing $2.9 million compared to the prior year period due to higher debt levels associated with our acquisition of Lunafore earlier this year. Our bank debt on the balance sheet as of the end of Q3 stood at $389 million, a decrease of $58 million compared to last quarter.
James T. Hippel: Excluding the <unk> acquisition, which closed at the beginning of Q1 adjusted operating margin was 160 basis points lower than the prior year due to the impact of unfavorable volume leverage and to a lesser extent strategic investments to position the business for future growth.
James T. Hippel: Looking at our numbers below operating income net interest expense in Q3 was $3 1 million, increasing $2 9 million compared to the prior year period due to higher debt levels associated with our acquisition of women for earlier this year.
James T. Hippel: Our bank debt on the balance sheet as of the end of Q3 stood at 389 million a decrease of $58 million compared to last quarter.
James T. Hippel: Other adjusted net operating income was $1.6 million in the quarter, an increase of $1.5 million compared to the prior year, primarily reflecting our 20% share of Wilson-Wilson adjusted net income and the afforded exchange impact related to our cash pooling arrangement. Moving further down the P&L, our adjusted effective tax rate in Q3 was 22%, flat sequentially but up 100 basis points compared to the prior year due to geographic mix. Returning to cash flow and return on capital, $81 million of cash was generated from operations in the quarter, and our net investment in capital expenditures was $16.4 million.
James T. Hippel: Other adjusted Nonoperating income was $1 6 million in the quarter, an increase of $1 5 million compared to the prior year, primarily reflecting our 20% share of Wilson Wolf adjusted net income and therefore exchange impacts related to our cash pooling arrangements.
James T. Hippel: Moving further down the P&L, our adjusted effective tax rate in Q3 was 22%.
James T. Hippel: Flat sequentially, but up 100 basis points compared to the prior year due to geographic mix.
James T. Hippel: Turning to cash flow and return of capital 81 million of cash was generated from operations in the quarter and our net investment in capital expenditures was $16 4 million.
James T. Hippel: Also, during Q3, we returned capital to shareholders by way of $12.5 million in dividends. We finished the quarter with 160.5 million average diluted shares outstanding. Our balance sheet finished Q3 in a strong position with approximately $140 million cash on hand, and our total leverage ratio was below 1x EBITDA. Going forward, M&A remains a top priority for capital allocation.
James T. Hippel: Also during Q3, we returned capital to shareholders by way of $12 5 million in dividends.
James T. Hippel: We finished the quarter with $160 5 million average diluted shares outstanding.
James T. Hippel: Our balance sheet finished Q3 in a strong position with approximately 140 million cash on hand, and our total leverage ratio was below one times EBITDA.
James T. Hippel: Going forward M&A remains a top priority for capital allocation.
James T. Hippel: Now I'll discuss the performance of our reporting segments, starting with Protein Science. Q3 reported sales were $214.6 million, with reported revenue decreasing 2% compared to the prior year period. As we discussed last quarter, following a strategic review of our portfolio, we have decided to divest the fetal bovine serum, or FBS, business. FBS is an approximately $10 million annual revenue business with an operating margin profile and long-term growth rate below the company average. The exclusion of FBS unfavorably impacted reported segment revenue growth by 1%. Thus, Organic Revenue decreased by 1%.
James T. Hippel: Now I'll discuss the performance of our reporting segments, starting with protein Sciences.
James T. Hippel: Three reported sales were $214 6 million with reported revenue decreased 2% compared to the prior year period.
James T. Hippel: As we discussed last quarter following a strategic review of our portfolio, we have decided decided to divest the fetal bovine serum or Fps business.
James T. Hippel: F. B S is approximately $10 million annual revenue business with an operating margin profile and long term growth rate below the company average.
James T. Hippel: The exclusion of FBS unfavorably impacted reporting segment revenue growth by 1%.
James T. Hippel: Thus organic revenue decreased 1%.
James T. Hippel: As a reminder, it is our protein sciences segment that has the most exposure to the China geographic region, as well as to biotech and more. Operating margin for the Protein Sciences segment was 44.2%, a decrease of 90 basis points compared to the prior year quarter, as unfavorable volume and product mix were partially offset by cost management and structural alignment initiatives. On a sequential basis, Protein Science's segment operating margin increased 390 basis points as a result of these cost initiatives and improved volume leverage.
James T. Hippel: As a reminder, it is our protein sciences segment that has the most exposure to the China geographic region as well as to the biotech end market.
James T. Hippel: Operating margin for the protein Sciences segment was 44, 2% a decrease of 90 basis points compared the prior year quarter as unfavorable volume and product mix were partially offset by cost management and structural alignment initiatives.
James T. Hippel: On a sequential basis protein Sciences segment operating margin increased 390 basis points as a result of these cost initiatives and improved volume leverage.
James T. Hippel: Turning to the Diagnostics and Genomics segment, Q3 sales were $87.5 million, with reported growth increasing 16% compared to the same quarter last year. Organic Revenue Growth List was 10%, with the Luna 4 acquisition having a 6% impact. Growth was solid across the entire segment, with our Molecular Diagnostics Division leading the way. Moving on to the Diagnostics and Genomics Segment Operating Margin, at 9.3%, the segment's operating margin decreased compared to the prior year's 15.2%, due primarily to the impact of the Lunar 4 acquisition.
James T. Hippel: Turning to the diagnostics and genomics segment Q3 sales were $87 5 million with reported growth, increasing 16% compared to the same quarter last year.
James T. Hippel: Organic revenue growth by segment was 10% with the <unk> acquisition, having a 6% impact.
James T. Hippel: Growth was solid across the entire segment with our molecular diagnostics division, leading the way.
James T. Hippel: Moving on to the diagnostics and genomics segment operating margin at nine 3% the segment's operating margin decreased compared to the prior year's 15, 2% due primarily to the impact of the <unk> acquisition.
James T. Hippel: However, Q3 operating margins improved 330 basis points sequentially from Q2 due to improving volume leverage and favorable product mix. As we close out our fiscal year, we expect our Q4 to look similar to our Q3 that just ended, with markets remaining stable, namely the biotech and market in the China region. Our growth pillars should continue to drive outperformance relative to the overall market with incremental sequential improvement in revenue. With the expectation of incremental revenue in Q4, together with our cost management actions, we should also see incremental improvement in our adjusted operating margins in Q4 relative to Q3.
James T. Hippel: However, Q3 operating margin improved 330 basis points sequentially from Q2, due to improving volume leverage and favorable product mix.
James T. Hippel: As we close out our fiscal year, we expect our Q4 to look similar to our Q3 that just ended with markets remained stable, namely the biotech end market in the China region.
James T. Hippel: Our growth pillars should continue to drive outperformance relative to the overall market with incremental sequential improvement in revenue.
James T. Hippel: With the expectation of incremental revenue in Q4, together with our cost management actions. We should also see incremental improvement in our adjusted operating margins in Q4 relative to Q3.
James T. Hippel: However, we are also facing tougher year-over-year revenue growth comps in Q4 than we did in Q3, especially in China, where we grew in the mid-teens in Q4 of last fiscal year. While these more difficult comps may be headwinds to our organic growth in Q4 relative to Q3, we are pleased that the trajectory of the business is improving. As we progress to the end of our fiscal year, we will be monitoring very closely what impact the recent increases in biotech funding, as well as the longer-term stimulus announced recently by the Chinese government, may have on our Fiscal 25 Outlook and Operating Plan.
James T. Hippel: However, we are also facing tougher year over year revenue growth comps in Q4 than we did in Q3, especially in China, where we grew in the mid teens in Q4 of last fiscal year.
James T. Hippel: While these more difficult comps may be headwinds to our organic growth in Q4 relative to Q3, we are pleased with the trajectory of the business is improving.
James T. Hippel: As we progress to the end of our fiscal year, we will be monitoring very closely what impact the recent increases in biotech funding as well as the longer term stimulus announced recently by the Chinese government may have on our fiscal 'twenty five outlook and operating plan.
James T. Hippel: At our next earnings call, we look forward to updating you on the progress of these green shoots taking root. That concludes my prepared comments, and with that, I'll turn the call back over to the operator to open the line for questions.
James T. Hippel: At our next earnings call, we look forward to updating you on the progress of these green shoots taking root.
Speaker Change: That concludes my prepared comments and with that I'll turn the call back over to the operator to open the line for questions.
Speaker Change: Thank you.
Unknown Executive: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is busy. You may press star 2 if you would like to remove your questions from. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. The first question comes from the line of Puneet Souda with Learing Partners. Please go ahead.
Speaker Change: We will now be conducting a question and answer session.
Speaker Change: I would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue.
Speaker Change: Start to if you would like to move your questions from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: The first question comes from the line of Puneet <unk> with Leerink partners. Please go ahead.
Puneet Souda: Yeah, hi Kim, Jim, thanks for taking my questions. So, you know, first of all, look, congrats on the quarter. And, you know, it's really good to see some recovery here in the core business. But based on what you're seeing today, I know it's still a bit nascent, but I'm wondering if, Jim, we can start to get to potentially, you know, sort of high single-digit, if not 10%, plus organic growth and fiscal year 25, as you turn the chapter here for the next year.
puneet: Yeah, Hi.
puneet: Jim Thanks for taking my questions.
puneet: So.
puneet: First of all congrats on the quarter.
puneet: Good to see some recovery here in the core business, but based on what Youre seeing today I know, it's still a bit nascent but I'm wondering.
Speaker Change: I'm wondering if Jim if we can start to get to potentially sort of high single digit if not 10% plus organic growth in fiscal year 'twenty five as well as <unk>.
Puneet Souda: And, you know, comps do get easier as well. So just wondering, when you look at the accounts, what would you like to see in order to potentially see a line of sight to that high single-digit or, you know, maybe 10% plus?
Speaker Change: Turn to the chapter here for the next year.
Speaker Change: And comps do get easier as well. So just wondering when you look at the accounts what would you like to see in order to to potentially see a line of sight to that high single digit or maybe 10% plus.
James T. Hippel: Yeah, Puneet, thanks for the question. You know, like we said before, you look at our track record, both during, you know, the COVID era upswing, but also during the last, you know, almost a couple years of what we call the COVID hangover. You know, our organic growth rates have been consistently between 500 to 1000 basis points higher than the overall market when you combine them. And this quarter appears to be no different.
Speaker Change: Yeah. Thanks for the question.
Speaker Change: As we said before you look at our track record.
Speaker Change: During.
Speaker Change: The Covid era upswing, but also during the last couple of years of what we call the Covid hangover.
Speaker Change: Our organic growth rate has been consistently between 501000 basis points there than the overall market when you combine it and this quarter it appears to be no different.
Speaker Change: And so that gives us confidence in our portfolio positioning gives us confidence in our team's execution and bottom line is that when the market returns back to its historical growth rates of mid single digit we expect that that gap in our performance relative to market to be at least the same if not better. So the real question is when the markets get back to me.
James T. Hippel: And so, you know, that gives us confidence in our portfolio position gives us confidence in our team's execution. And the bottom line is that when the market returns to its historical growth rates of mid single-digit, we expect that gap in our performance relative to the market to be at least the same, if not better. So, you know, the real question is, when do the markets get back to mid single-digit growth? And when they do, we believe it will be, you know, it's not high single-digit growth, but it will be well in the double digit kind of growth territory. And now that's an open question.
Speaker Change: Single digit growth and when they do we believe it will be.
Speaker Change: It's not high single digit will be well into double digit kind of growth territory and now that's an open question and.
Speaker Change: The analysts and our peers and we all we all debate that but the good news is that the there's green shoots.
James T. Hippel: And, you know, the analysts and our peers, we all we all debate that. But the good news is that there are green shoots ahead of us as opposed to perceived headwinds. And so that's exactly why we'll be monitoring that very closely here, as we prepare our own operating plans to prepare for that. But I'm not gonna sit here and try to predict exactly when the markets come back to their, their kind of normal rate. But you know, the sentiment definitely can be improving, and at least from the analyst reports that are out there, the dollars seem to be behind it as well.
Speaker Change: Ahead of us as opposed to perceived headwinds and so that's exactly exactly why we'll be monitoring that very closely here as we prepare our own operating plans to prepare for that but.
Speaker Change: Like I said I'm trying to predict exactly when the markets come back to their kind of normal rate, but yet you know the Senate it definitely can be improving and at least from the analyst reports that are out there the dollars seem to be behind it as well.
Kim Kelderman: Okay, that's helpful. And then maybe Kim, you know, when you look at the biopharma customers, just wondering, I mean, obviously, there's some excitement with funding in the first quarter. As you look at the early stage customers, as you have those conversations, wondering how much of those dollars could potentially go to the, you know, discovery stage where you're more strong or worse in the developmental stages of therapeutics. And then on the cell and gene therapy side, could you elaborate a bit more on the 40% growth that you're seeing in GMP? How sustainable is that, given the sort of environment we're in currently?
Speaker Change: Okay. That's helpful and then maybe Kim you know.
Kim: When you look at the Biopharma customers.
Kim: Just wondering I mean, obviously, there's some excitement with funding in the first quarter.
Kim: As you look at the early stage customers did you add that conversations I'm wondering how much of those dollars could potentially come to the.
Kim: The discovery stage, where youre more stronger worst of the developmental stages of therapeutics and then on the cell and gene therapy side could you elaborate a bit more on the 40% growth that youre seeing in GMP.
Kim: How sustainable is that just given the sort of the environment we're in correctly.
Kim Kelderman: Yeah, thank you, Puneet. Regarding pharma and early funding, like you and I discussed earlier this quarter, I do believe that funding would be We also do know, like we mentioned earlier, that there are a couple of months now that we have seen good funding for the pharma and bio-pharma areas. And we do know that there's usually two quarters or so of a delay before that funding flows into the business. But I think that overall, this looks very good right now.
Speaker Change: Yes, Thank you puneet regarding pharma and the early funding.
Speaker Change: You and I have discussed in our earlier this quarter.
Speaker Change: Do believe that funding.
Speaker Change: Funding would be.
Speaker Change: Scene to flow through earliest for the consumables part right. So we do believe that Capex.
Speaker Change: Larger investments will will have a little bit longer of a lead time before the funding flow through.
Speaker Change: We also do know like like we mentioned earlier that there is.
Speaker Change: A couple of months that we now have seen.
Speaker Change: Good funding for the pharma biopharma areas.
Speaker Change: And we do know that there is usually a.
Speaker Change: Two quarters or so of a delay before that funding.
Speaker Change: Those into the business.
Speaker Change: I think that overall they said it looks very good right now, but as I also mentioned those are only trends for three months and we had some disastrous months at the end of the calendar year. So yeah. Good indication it looks like a green shoot looks like things are going up but it is early.
Kim Kelderman: But as I also mentioned, those are only trends for three months, and we had some disastrous months at the end of the calendar year. So yeah, good indication. It looks like a green shoot. It looks like things are going up, but it's early days.
Kim Kelderman: And therefore, we want to be careful with that prognosis. Cell and gene therapy has been outpacing our overall company growth for a long time. I think it's a very, very strong product line, as are all four of our verticals. And I think that we are having a great, great opportunity there. We have the best reagents for [inaudible] earlier stage companies, and that will give us a better foundation because if more of these 400 customers or so that we have start ordering earlier in their pipelines, that will give us a more stable foundation to continue to put But for now, we are, of course, very encouraged by our progress in cell and gene therapy and are very glad to see that there is some momentum building in that end market.
Speaker Change: Day in and therefore, we want to be careful with that prognosis.
Speaker Change: The cell and gene therapy. It has been outpacing our overall company growth for for a long time I think it's a very.
Speaker Change: Very strong product line.
Speaker Change: Are all four of our verticals.
Speaker Change: And I think that we are having a great great opportunity there we have the best reagents to it too.
Speaker Change: <unk> in that space and as you know we have a real good opportunity to consolidate all of our reagents into the <unk> for our cell and gene therapy space.
Speaker Change: So we're very bullish on it we do know that some of these quarters can be a very can be a little bit lumpy because of the larger orders from the from the companies that are further in their pipeline and that really can make a quarter swing. However, we saw really strong growth in the earlier stage companies.
Speaker Change: And that will give us a better foundation because.
Speaker Change: If more.
Speaker Change: More of these 400 customers are so that we have started ordering earlier in their pipelines that will give us a more stable foundation to to continue to put up great numbers.
Speaker Change: But for now we're of course very encouraged with our play in cell and gene therapy and are very glad to see that there is some momentum.
Speaker Change: Building in that end market.
Speaker Change: Thank you Mr. Sato, please rejoin the queue for more questions.
Unknown Executive: Thank you. Mr. Souda, please rejoin the queue for more questions. The next question comes from the line of Jacob Johnson with Stephening, please go ahead.
Speaker Change: Next question comes from the line of Jacob Johnson with Stephens, Inc. Please go ahead.
Unknown Executive: Good morning. This is Mack on behalf of Jacob.
Jacob K. Johnson: Hi, Good morning. This is back on for Jacob just a few quick ones for me I appreciate the.
Jacob K. Johnson: The commentary around Biopharma in China.
Jacob K. Johnson: There's been some muted commentary from most of your peers recently, but also the prospect around the stimulus that you mentioned earlier, so I'm curious as to what you're watching for the second of our improved backdrop in that country at this point in time.
Jacob K. Johnson: Yeah.
Unknown Executive: Just a few quick ones for me. I appreciate the commentary around biopharma in China. There's been some muted commentary from most of your peers recently, but also the prospect around the stimulus that you mentioned earlier. So I'm curious as to what you're watching for to signal an improved backdrop in that country at this point in time.
Speaker Change: Yeah. Thanks Mac.
Kim Kelderman: Yeah, thanks, Mac. As you know, we are big believers in the situation in China improving over time and that this will be as good as it used to be a true growth driver for the business. As you know, we also had three real tough quarters in China right now. And that's mainly based on the lack of funding. We do hear there are also some green shoots of funding efforts.
Speaker Change: As you know we are we are big believers of of that situation in China, improving over time and that this will be a yeah as as it used to be a true growth driver for that for the business.
Speaker Change: As you know we also had a three real tough quarters in China, right now and Thats, mainly pace by the lack of funding.
Kim Kelderman: And yeah, we're keeping an eye on the floor there, that the momentum will continue to build, specifically for instrumentation. We know that the $70 billion funding that's laid out, or the loan that the government is laying out is aimed at improving and innovating the instrumentation base. And we think we can benefit from that. That's a fun name.
Speaker Change: We do hear it there also some green shoots of funding efforts and.
Speaker Change: Yes, we are keeping our eye to the Florida there that the.
Speaker Change: That the momentum will continue to build.
Speaker Change: Specifically for instrumentation, we know that the $70 billion funding that's laid out.
Speaker Change: Or alone that the government is playing out.
Speaker Change: As a as.
Speaker Change: Is aimed at improving and innovating the instrumentation base and.
Speaker Change: And we think we can you can benefit from that.
Speaker Change: That's funding.
Kim Kelderman: And in the meantime, we hear positivity from our sales force. They talk to their customers, and customers are getting more interested in hearing the benefits our automation brings. And our automation brings consistency. It's very efficient, and it's got fast results. So that value proposition fits really, really well with the new funding potentially flowing into China.
Speaker Change: And in meantime, we hear positive.
Speaker Change: [noise] positivity from our sales force they talk to their customers and the customers are getting more interested about hearing at the.
Speaker Change: The benefits are automation brings in our automation brings.
Speaker Change: Consistency is very efficient and it's got fast results.
Speaker Change: So that value proposition fits really really well with the with the new funding potentially flowing through into China.
Speaker Change: Yeah.
Kim Kelderman: And then, just quickly, is there anything that you think you need to change or could change to better capitalize on opportunities in the current environment, or as it relates to your go-to-market strategy, or do you think re-acceleration and growth largely depend on the macro environment?
Speaker Change: And then just quickly is there anything that you think you need to change or could change to better capitalize on opportunities in the current environment or as it relates to your go to market strategy or do you think a reacceleration.
Speaker Change: Elevation in growth largely depends on the macro environment.
Kim Kelderman: Yeah, I think it's the letter. Then it's clear that we have So we have a very efficient sales force in China. We have always done really well in the region. We feel we have the right coverage, direct versus indirect. And I think that we've got the right product positioning. In addition to that, we are, as you know, investing in China for our China GMP plans, which will also come in line over the coming quarters. And with that, I think we have the right portfolio, the right value proposition, as well as the right channels to go to market. So I'm very happy with the situation that we currently have there.
Speaker Change: Yes, I think it's the latter.
Speaker Change: It's clear that we have.
Unknown Executive: Thank you. Mr. Johnson, please rejoin the queue for more questions. The next question comes from the line of Patrick Donnelly with Citi, please go ahead.
Speaker Change: We have a very efficient sales for us in China, we have we've always done really well in the in the region. We feel we have the right coverage.
Speaker Change: Direct versus indirect and.
Speaker Change: I think that we've got the right product positioning.
Speaker Change: In addition to that we are as you know.
Speaker Change: Investing in China for China, G&P plan, which will also come in line over the coming quarters and with that I think we have the right portfolio the right value proposition as well as the right go to market channels. So I am very happy with the situation that we currently have there.
Speaker Change: Yeah.
Speaker Change: Thank you Mr. Johnson, please rejoin the queue for more questions.
Speaker Change: Next question comes from the line of Patrick Donnelly with Citi. Please go ahead.
Unknown Executive: Hey, guys, thanks for taking the questions. Maybe just one for you, Jim, just on the guidance piece.
Patrick Bernard Donnelly: Hey, guys. Thanks for taking the questions.
Patrick Bernard Donnelly: Maybe just one for you Jim just on the guidance piece can you talk about the margin side. It sounds like you know up sequentially, maybe in that mid <unk> range for <unk> is that the right number to build off of as we think about next year and then I just wanted to clarify on the aggregate side is it the dollars are up sequentially in <unk> and the growth rate.
Speaker Change: Similar to this 2% organic I just want to make sure I have that right.
Unknown Executive: Can you talk about, you know, the margin side? It sounds like, you know, up sequentially, maybe in that mid-30s range for 4Q. Is that the right number to build off of as we think about next year? And then, on the revenue side, are the dollars up sequentially in 4Q and the growth rate is similar to this 2% organic? I just want to make sure I had that right.
James T. Hippel: Yeah sure. Thanks, Patrick So first on the margin question.
James T. Hippel: You talked about a couple of quarters now that our goal is to try to get back to mid <unk> type EBITDA margin by the time, we exit this.
James T. Hippel: Yeah, sure. Thanks, Patrick. So first on the margin question, you know, we've talked about for a couple quarters now that our goal was to get back to mid-30s type margin by time we exit this fiscal year. It's not a slam dunk to do that. We still have a ways to go to get from 33 to that point, but it's not out of reach at this point.
Speaker Change: This fiscal year.
Speaker Change: It's not a slam dunk to do that we still got a ways to go to get from 33 to that point, but it's not out of reach at this point. So I think you know.
Speaker Change: Honestly, where the consensus has this right now feels about right for for Q4, which gives us a nice launching pad into fiscal year 'twenty five it's really going to depend on.
Speaker Change: On the revenue, where the markets are and what I've already talked about our expectation of growth above and beyond the market growth. So as you saw from Q2 to Q3 the amount of margin expansion. We had on the increased increase volume and much of that is seasonal.
James T. Hippel: So I think, you know, honestly, where the consensus has us right now feels about right for Q4, which gives us a nice launching pad, you know, into fiscal year 25. And it's really going to depend on revenue where the markets are, and what we know. We've already talked about our expectation of growth above and beyond market growth. So as you saw, from Q2 to Q3, the amount of margin expansion we had on the increased volume increased, and much of that is seasonal.
James T. Hippel: You know, we have amazing pull through amazing gross margins on our products. So when you get that volume, it contributes tremendously to the bottom line. And of course, we continue to invest because we're investing for the long term; we have these amazing growth pillars that we have to continue to kind of feed those beasts so they can reach their full potential five years, 10 years down the road. So we'll be balancing that as we go through our operating plan this year.
Speaker Change: We have amazing pull through amazing gross margins in our products. So when you get that volume it contributes tremendously to the bottom line and of course, we continue to invest because we're investing for the long term. We got these amazing growth pillars that we have to continue to kind of feed the beast.
Speaker Change: So they can they can reach their full potential five years 10 years down the road. So we'll be balancing that as we go through our operating plan. This year and I look forward to providing some more insight to that next call.
James T. Hippel: And I look forward to providing some more insight into that next. With regard to the revenue question, to have more clarity on that, as I mentioned, we do believe that revenues will be slightly higher in Q4 than Q3, but the organic growth percentage year-over-year might be a bit challenged, mainly because of the tough competition we have in China. If you think about China last year, we had mid-teens growth versus where it's running right now. Being 8 to 10 percent of our business, that's a point and a half of headwind just in itself.
Speaker Change: With regards to the revenue question to be clear that wont have clarity on that.
Speaker Change: As I mentioned, we do believe that revenues will be slightly higher in Q4 than Q3.
Speaker Change: But the organic growth percentage year over year might be a bit challenged namely because of the tough comp we have in China. If you think about China last year, we had mid teens growth and versus where it's running right now.
Speaker Change: 8%, 10% of our business, that's up a point and a half of a headwind just in itself. So.
Speaker Change: That's kind of where we're at right now in terms of the range of organic growth.
Kim Kelderman: Okay, understood. And then Kim, maybe just last week, you guys announced the expanded Fisher agreement into Europe. Can you talk about the opportunity there? You know, how impactful that could be as we work our way into 25 for you guys? I'm just trying to wrap my head around that.
Speaker Change: Okay understood and then.
Speaker Change: Kim maybe just on I think it was last week, you guys announced expanded Fisher agreement into Europe can you just talk about the opportunity there.
Kim: Impactful that could be as we work our way into 'twenty five for you guys.
Kim: I'm just trying to wrap my head around the run out are great.
Kim Kelderman: Yeah, thank you, Patrick. Thermo Fisher Scientific has, you know, a ton of capabilities, but one of the big ones is the Fisher Scientific channels. And that channel provides great reach and ease of use for transactions for customers. As you might know, we've had a distribution agreement, a very similar one, in the U.S. since 2014, so for about 10 years now.
Kim: Yes, Thank you Patrick.
Speaker Change:
Speaker Change: Thermo Fisher scientific as.
Speaker Change: Tunnel capabilities, there, but one of the big ones is the Fisher scientific channel.
Speaker Change: And that channel provides great reach and ease of use for transactions for our customers.
Speaker Change: As you might know we have had a distribution agreement very similar one in the U S. Since 2014, so for about 10 years now.
Kim Kelderman: We're very comfortable and used to collaborating with the Fisher Channel. I can expect a similar trend and a similar setup in Europe, where our European customers can benefit from the commercial footprint, the reach, and also the ease of transactions that come with dealing with the Fisher Scientific Channel. And, of course, this convenience and this reach are very important for us as well. Therefore, we hope that we can serve our customers better.
Speaker Change: Very very comfortable and used to collaborating with the Fisher channel.
Speaker Change:
Speaker Change: I can expect a similar trend in a similar setup in Europe, where our European customers can benefit from the.
Speaker Change: The commercial footprint the reach and also the ease of transactions that come with dealing with the Fisher scientific channel.
Speaker Change: And of course this convenience than this reach is very important for us as well.
Speaker Change: And therefore, we can we hope that we can serve our customers better nonetheless.
Kim Kelderman: Nonetheless, of course, Bio-Techne will maintain and grow our direct channels, as we have done in the USA as well, and we will make sure that we fine-tune and work really well together with the Fisher Channel and collaborate to eventually optimize our customers' convenience and the reach we have as a company.
Speaker Change: Nonetheless of course, better technique, we will maintain and grow our direct channels as we have done in the USA as well and we will make sure that we are fine tune and work really well together with the Fisher channel and collaborate to eventually optimize our customers' convenience and the reach we have as a company.
Unknown Executive: Thank you. Mr. Donnelly, please rejoin the queue for more questions. The next question comes from the line of Justin Bowers with Deutsche Bank.
Speaker Change: Thank you.
Speaker Change: Donnelley, please rejoin the queue for more questions.
Speaker Change: Next question comes from the line of Justin bullish.
Deutsche Bank: Deutsche Bank. Please go ahead.
Unknown Executive: Hi, good morning. I just want to pivot back to the selling GM market and the strength there. Can you talk about sort of what you're seeing in that customer cohort and whether the durability of that growth over the next couple of quarters will be supported by existing programs and customers, or do you need to see sort of new customer activity, or is that just sort of like a green field for you on the go forward?
Justin D. Bowers: Hi, Good morning, just wanted to pivot back to the LNG end market and the strength. There can you can you talk about.
Justin D. Bowers: Sort of what youre seeing in that customer cohort and.
Justin D. Bowers: Is is the durability of that growth over the next couple of quarters supported by.
Justin D. Bowers: Existing programs and customers or or do you need to see.
Justin D. Bowers: Sort of new customer activity or is that is that just sort of like green Greenfield for you on a go forward.
Justin D. Bowers: Yeah.
Kim Kelderman: Thank you, Justin, for the question. You know, as I mentioned earlier, I think our cell and gene therapy business is just very strong because of the different products we sell into it, right? As you know, we have a 20% stake in Wilson-Wolf, and Wilson-Wolf has this G-Rex, which is a container that makes it really easy and efficient to grow T-cells. But to grow these T-cells, you would need our core products. So we have our GMP proteins, cytokines, and chemokines to make sure that you can fine-tune the growth of these T-cells, and these are all very high-value ingredients in the cell and gene therapy market.
Speaker Change: Yeah. Thank you Justin for the question.
Justin D. Bowers: As I mentioned earlier, I think our cell and gene therapy play is very strong because of the.
Justin D. Bowers: Different.
Justin D. Bowers: The products, we sell into it right as you know.
Justin D. Bowers: We have a 20% stake in <unk>.
Justin D. Bowers: And Wilson Wolf and thus.
Justin D. Bowers: Wilson Wolf has this <unk>, which is a.
Justin D. Bowers: Container that makes it really easy and efficient to grow to grow T cells.
Justin D. Bowers: To grow these T cells, you would need our core products. So we have our GMP proteins cytokines chemo kinds too to make sure that you can fine tune the growth of these T cells and these are all very high value ingredients to the cell and gene therapy market.
Kim Kelderman: We do know that, for example, G-Rex is in about half, let's say 45% of all the clinical trials. We know that we are obviously very keen on making sure that all our ingredients are being used in that setup just as well, so we create a pull-through. We've seen fantastic growth in our GMP proteins, and they are now on a, you know, pacing at an annualized revenue of about $60 million. And yeah, we're very proud that we had a record quarter.
Justin D. Bowers: Do know that for example, the <unk> and about half, let's say, 45% of all the clinical trials that are going on in this space.
Speaker Change: We know that.
Justin D. Bowers: We are obviously very keen on making sure that all of our ingredients are being used in that setup, just as well so we create a pull through.
Justin D. Bowers: We've seen fantastic growth in our GMP proteins that are now on a pacing at annualized revenue of about $60 million.
Justin D. Bowers: And yeah, we're very proud that we had a record quarter as I mentioned earlier.
Kim Kelderman: As I mentioned earlier, it can be a little lumpy because there are the larger customers that are at the back end of their clinical trials where volumes go higher, and that will create some variation of results quarter over quarter. But overall, we have seen consistent, very high growth within this space, and we know that more and more companies are entering the race because cell and gene therapy has been shown to be able to cure diseases we previously not have been able to find any solutions for. So we are very excited about this space.
Justin D. Bowers: Can be a little lumpy because they are the larger larger customers that are in the back end of their of their clinic.
Justin D. Bowers: Clinical's, where volume has to go higher.
Justin D. Bowers: And that will create some variation of results quarter over quarter, but overall, we have seen consistent very high growth within this space and we know that more and more companies are entering the <unk> because the cell and gene therapy has been shown to be able to cure diseases. We have previous previously.
Justin D. Bowers: Not have been able to to find any solutions for so we are very excited about this space.
Kim Kelderman: Okay, so it sounds like increased pull through and scaling up. And then on Wilson-Molfe, what are the trends like there? Is that still stable, or is it starting to grow again? Any commentary there would be helpful.
Speaker Change: Okay. So it sounds like increased pull through.
Speaker Change: And in scaling up and then.
Justin D. Bowers: Most of the Moorefield.
Speaker Change: What are the trends like there.
Speaker Change:
Speaker Change: Is that is that still stable or has it started to grow again any commentary there would be helpful.
Kim Kelderman: Yeah, Wilson Wolf, as I mentioned, participate in 45% of all the clinicals. There are several of these companies that we collaborate with that have now reached the finish line and are commercializing, which is very good indication, and we're over half of those. And then last but not least, overall, the company started growing again in double digits. It's sitting this quarter in around 14%, and it has a fantastic run rate and, as you can imagine, really, really high margins, at north of 72%, and yeah, we're very, very happy to see that Wilson-Wolff is having such traction in this important market, specifically because we know that Bio-Techne will definitely benefit from it with our reagent, but also over time, we will own the company, and we will then have the direct benefit as well.
Speaker Change: Yeah, Wilson Wolf as I mentioned participate and 45% of all the clinical.
Speaker Change: They are there are several of these.
Speaker Change: These companies that we collaborated with that have now reached the finish line and are commercializing, which is very good indication and where over half of those and then last but not least overall the company started growing again in double digits.
Speaker Change: It's hitting this quarter in around 14% and it has a fantastic run rate and as you can imagine really really high margins.
Speaker Change: North of 72% and yes, we're very very happy to see that Wilson Wolf is having such a traction in this important market specifically, because we know that biotech me will definitely benefit from it with our agents, but also over time, we will own the company and we will.
Speaker Change: Then half of that benefit as well.
Unknown Executive: Thank you. Mr. Bowers, please rejoin the queue for more questions. The next question comes from the line of Dan Arias with Stifel, please.
Speaker Change: Thank you Mr. Bolus, please rejoin the queue for more questions.
Speaker Change: Next question comes from the line of Dan obvious with Stifel. Please go ahead.
Unknown Executive: Good morning, guys. Thanks. Kim, on the spatial business, what do you see as the timeline for getting production on Tomet where it needs to be in order to meet demand? And then, as you're firming up the manufacturing plan, and you're getting ready to pair ACD and Lunafor, can you just maybe refresh the view on what you think the spatial portfolio should grow at going forward?
Daniel Louis Leonard: Hey, good morning, guys. Thanks, Kim on the special business, what do you see as the timeline for getting production on Tom It where it needs to be in order to meet demand and then as you are firming up the manufacturing plan and Youre getting rid of pair ACD alluded for can you just maybe.
Speaker Change: Refresh the view on what you think the special portfolio should grow at going forward.
Kim Kelderman: Yeah, thank you, Dan. The production constraints are really, really, Spacing the output right now, we are really happy, first and foremost, that we see the demand that we really like, and then actually exceed expectations. So that's the most important fundamental. We do believe that during this quarter, the quarter we're currently in, we will get very close to what our order book is, but the real status quo, where we can produce as many comments as those get ordered, will be in our first fiscal year quarter, so the third calendar quarter, and then we will continue to reel in the backlog in the first half of our fiscal year.
Speaker Change: Yes, Thank you Dan.
Speaker Change: The production constraints.
Speaker Change: Really.
Speaker Change: Facing the output right now.
Speaker Change: We are really happy first and foremost that we see the demand that we really like right in and actually exceeding expectations.
Speaker Change: That's the most important fundamental.
Speaker Change: We do believe that during this quarter to quarter. We're currently in.
Speaker Change: That we will get very close to what our order book is but the real status quo, where we can produce as many.
Speaker Change: The comments is that get ordered will be in our first fiscal year quarter. So the third calendar quarter and then we will continue to to two real in the backlog.
Speaker Change: In the first half of our fiscal year.
Kim Kelderman: You asked about my enthusiasm and space. It's huge. Obviously, it's a very fast growing market, and you've got used to ACD being a real winner in the reagent space, with all the benefits that we know about it. And then Comet, it's early days, but if we compare the system to other peer systems in the field, we know that Comet is the only instrument that has full workflow automation, right? So there's no manual interference or manual steps in the workflow.
You asked about my enthusiasm and special is huge obviously, it's a very fast growing market.
Speaker Change: You've been you've gotten used to ACD being.
Kim Kelderman: A.
Speaker Change: A real.
Speaker Change: When they're in the reagent space with all the benefits that we know about it and then.
Speaker Change: Comment it's early days, but if we compare the system.
Speaker Change: Two two other peer systems in the field, we know that comment is the only instrument that has a full workflow automation.
Speaker Change: So there is no manual interference or at manual steps in the workflow.
Speaker Change: The comment you can use any antibodies that you've used.
Kim Kelderman: With Comet, you can use any antibodies that you've used to utilize in your workflow. We have 50,000 RNA targets. It's a truly multi-omics machine, so you can see your protein and your RNA targets simultaneously on the same slide. As you know, Bio-Techne has 400,000 antibodies, so there's plenty of choice to pick from in order to boost our pull-through on the instrument. And as you know, we can run four slides in parallel, and there we have the highest throughput in the market.
Speaker Change: To utilize in your workflow.
Kim Kelderman: We have 50000 RNA targets, it's a truly multi omics machine. So you can see your protein and your RNA targets simultaneously in the same slide.
Speaker Change: As you know biotech has 400000 antibodies so there's plenty of choice to.
To pick from in order to boost our pull through on the instrument and as you know we can run four slides in parallel and there we have the highest throughput.
Speaker Change: In the market so I am extremely.
Kim Kelderman: So I'm extremely pleased with our positioning from a reagent as well as from an automation point of view, and we will continue to work to make our reagents, our antibodies, as well as the system seamlessly working together from sample preparation all the way to image analysis to eventually make it most convenient for our customers to perform their spatial biology tests.
Kim Kelderman: Im pleased with our positioning from a reagent as well as from our automation point of view and we will continue to work to make our reagents, our antibodies as well as the system seamlessly working together from from sample population all the way to image analysis to eventually make it most convenient for our customers.
Speaker Change: Two to perform their specialty allergy tests.
Unknown Executive: Okay, and then Jim, just maybe to round out your comments related to the finish of the fiscal year here. You touched on margins.
Okay, and then Jim just maybe to round out your comments related to the finish to the fiscal year here you touched on margins I just wanted to ask about the top line it sounds like you're expecting similar conditions.
Unknown Executive: I just wanted to ask about the top line. Sounds like you're expecting similar conditions, but you have the slightly tougher comp overall, China notably hard. Does that translate to some modest growth in 4Q? What's the outlook there? Yeah, we're absolutely, we absolutely are hell-bent on more...
Unknown Executive: The slightly tougher comp overall, China, notably hard does that translate to some modest growth in <unk>, what's the outlook there.
Unknown Executive: Yeah, we absolutely are hell-bent on staying in the black, for sure.
Jim: Yeah, we're absolutely we absolutely are hell bent on wanting to stay in the black for sure. So.
Unknown Executive: In terms of growth.
Speaker Change: Thank you.
Unknown Executive: Mr. Arias, please rejoin the queue for more questions. The next question comes from the line of Matt Larew with the Brilliant Player. Please go ahead.
Speaker Change: Mr. <unk>, please rejoin the queue for more questions.
Next question comes from the line of Matt Summerville.
Matt Summerville: With William Blair. Please go ahead.
Unknown Executive: Hi, good morning. I wanted to follow up on Lunafor.
Matthew Richard Larew: Hi, Good morning, I wanted to follow up on lunar four and the.
Matthew Richard Larew: The investments you're making today to scale up manufacturing would you say that generally there within the bounds of what you expected.
Matthew Richard Larew: To make it just perhaps they're pulled forward or.
Unknown Executive: The investments you're making today to scale up manufacturing, would you say that, generally, they're within the bounds of what you expected to make? Just perhaps they're pulled forward, or I guess the flip side of that would be, do you have different or, you know, worse expectations about the long-term margin potential? So just trying to get a sense for whether this is scaled up to meet accelerated demand or perhaps something you will discover once you get the deal.
Unknown Attendee: I guess the flip side of that would be do you have different or.
Unknown Executive: Worse expectations about the long term margin potential so just trying to get a sense for whether this is a scale up to meet accelerated demand or perhaps something you discovered once you get the deal.
Kim Kelderman: That's a very good question, Matt. No, fortunately, it's not something we discovered. It's truly an outpacing of orders versus our initial projections, and we had had lofty projections, but the traction in the market is just overwhelming. And that means that we have to increase our in-house capacity, which, of course, is something that we're very used to doing. We have a fantastic operations team in Switzerland that gets supported by operations teams from the U.S. just as well and from across other businesses, such as the protein simple business, very much used to producing high volume instrumentation.
Speaker Change: It was a very good question, Matt no. Fortunately, it's not something we discovered it's truly a an outpacing of the orders versus our initial projections and we had lofty projections, but the traction in the market is just overwhelming and.
Unknown Attendee: That means that we have to increase our in house capacity, which of course is something that we're very used to do.
Unknown Attendee: We have a fantastic operations team in Switzerland that gets supported by operations teams from.
Kim Kelderman: From the U S just as well as from across other businesses such as the protein simple business very much used to producing high volume instrumentation. So I'm very confident we.
Kim Kelderman: So I'm very confident we can increase that capacity. But, as you can imagine, the pull-through also hits some of the vendors. So also there, we have to make sure that we help out with the upscaling of certain critical parts that the vendors are having to get used to these new volumes. So, overall, we just have to move up, beef up the capacity. It's a great thing. By now, it's it's a good problem to have, and we're very confident that we can resolve this. And there is no other underlying constraint or issue that we are aware of.
We can we can increase that capacity, but as you can imagine the pull the pull through also hit some of the vendors. So also there we have to to make sure that we help out with.
Kim Kelderman: The upscaling of certain critical parts that the vendors are.
Kim Kelderman: We are having to get used to these.
Kim Kelderman: These new volumes right. So so overall, we just have to beef up the capacity, it's a great thing.
Speaker Change: Bye now.
Kim Kelderman: It's.
Kim Kelderman: Good problem to have and we're very confident that we can resolve this and there's no other underlying constrained or issue that we.
Kim Kelderman: There are that we are aware of.
Kim Kelderman: Okay, great to hear. The next question is about scale ready, and the components of that. So your own GMP protein business, the partnership, and Wilson Wolf. Just curious, now that it's been out there for a little while, what kind of feedback you've been getting. If there's any way to, you know, talk about how that's translated to win rates? Is that a driver of some of the pickup in GMP proteins?
Speaker Change: Okay, great to hear.
Speaker Change: The next question is about.
Unknown Attendee: Scale ready.
Kim Kelderman: And the components of that so you're out and you can't be trucking business partnership and Wilson Wolf just curious now that it's been out there for a little while what kind of feedback you've been getting and if there's any way to go.
Kim Kelderman: Talk about how that's translated to win rates is that a driver of.
Unknown Attendee: Some of the pickup in GMP proteins.
Kim Kelderman: And, you know, obviously, Wilson Wolf has been the market-leading technology. But, I think there probably is some looming competition out there, beyond just integration, to offer a more, you know, full and automated solution, like you're trying to do at scale. Are there also additional areas for platform improvement, you know, with GRX or that broader suite as well?
Kim Kelderman: And you have seen Wilson Wolf has been the market leading technology.
Kim Kelderman: There probably is some looming competition out there beyond just integration to offer a more full and automated solution like a triangle discount ready are there also additional areas for platform improvement.
Unknown Attendee: With T Rex or that broader suite as well.
Kim Kelderman: Yeah, thank you for the question. I just have to say that when I talk to our customers in the cell and gene therapy space, Skilled Ready has a really good reputation. So it's truly a brand now in that particular space, and, of course, it has a full solution for cell and gene therapy customers. And that's why I believe that you see such traction in not only the volume of the G-Racks and the revenue associated with it, but also in the pull-through of our proteins. The Kilbray team is really efficient in bringing it to market and educating our customers about the benefit of the solution we have.
Speaker Change: Yeah. Thank you for your question.
Kim Kelderman: I just have to say that when I talk to our customers in the southern gene therapy space skilled ready has a real good reputation. So it's truly a brand now in that particular space.
Kim Kelderman: And of course, it has a a full solution for cell and gene therapy customers and Thats why I believe that you see such traction in not only the volume of the <unk> and the revenue associated with it but also in the pull through of our proteins.
Kim Kelderman: Cytokines and Chemokines that that we that we our customers end up using in in.
Unknown Attendee: In that setup, it's a complete solution, it's scalable and it's.
Kim Kelderman: Relatively easy to implement compared to some of the competitive workflows and.
Kim Kelderman: Yeah, I think thats as a chicken or egg rates skill ready is doing really well because that's a fantastic solution and the other way around the customers do get to enjoy the solution because the skilled team is is really efficient and bringing it to market and educating our customers about the benefit of the solution we have.
Unknown Executive: Thank you. Mr. Leroux, please rejoin the queue for more questions. The next question comes from the line of Catherine Schulte. [inaudible] Hey guys, thanks for the questions. Organic growth came in about four points better than what you guided. You talked about...
Speaker Change: Thank you Mr. Luo, please rejoin the queue for more questions.
Unknown Executive: Thank you. Please rejoin the queue for more questions. The next question comes from the line of...
Catherine Walden Ramsey Schulte: Our next question comes from the line of Catherine Chunky.
Speaker Change: Please go ahead.
Catherine Walden Ramsey Schulte: Hey, guys. Thanks for the questions.
Catherine Walden Ramsey Schulte: Looking at gross came in about four points better than what you'd guided you talked about China stabilizing but that sounded like it played out as expected. So can you just talk through what drove that upside versus your expectations was it really broad based or is there a particular product category or end market that surprised you.
James T. Hippel: Yeah, hi Catherine. This is Jim.
Unknown Executive: Yes, Hi, Katherine this is Jim thanks, Thanks for the question yes.
Jim: Generally speaking the broad based market performed as we expected.
Jim: As you mentioned, China overall was as we expected as well I think there is if you look within the protein sciences, it get back to our growth pillars, and how how resilient. They are they are even in this down cycle. We've been in so our two points I'll call out would be one with Celgene therapy. So we always said that win.
James T. Hippel: Thanks. Thanks for the question. Yeah, I mean, you know, I think, generally speaking, the broad-based market performed as we expected. As you mentioned, China overall was as we expected as well. I think there is, if you look within the protein sciences, it gets back to our growth pillars and how resilient they are even in this down cycle we've been in. So two points I'd call out would be cell and gene therapy.
Jim: Biotech funding came back we believe that cell and gene therapy will be one of the first places you'd see it in I'm not seeing a direct correlation there, but definitely a positive sign and that was a bit as a surprise for us how quickly cell and gene therapy rebounded for us here in the third quarter and again, we saw the same thing over as Kim mentioned in Wilson Wolf as well so that was a very encouraging it was not.
James T. Hippel: So we always said that when biotech funding came back, we believed that cell and gene therapy would be one of the first places you'd see it. And I'm not saying there's a direct correlation there, but definitely a positive sign. And it was a bit of a surprise for us how quickly cell and gene therapy rebounded for us here in the third quarter. And again, we saw the same thing, as Kim mentioned, in Wilson-Wolf as well.
Kim Kelderman: Necessarily in our in our outlook a quarter ago.
James T. Hippel: Other growth pillar within protein sciences with within our instrument proteomics instrument portfolio.
James T. Hippel: So that was very encouraging, but it was not necessarily in our outlook a quarter ago. The other growth pillar within protein sciences, within our instrument, our proteomics instrument portfolio, and even more specifically Simple Western. Simple Western performed extremely well and actually grew double-digit in instruments as well as consumables. So, also, a very good sign because we always figured that when the instrument market came back, that would be the first part of our portfolio that we would see, given its very broad base of applications.
James T. Hippel: And even more specifically simple western.
James T. Hippel: Simple western performed extremely well and actually grew double digit and instruments as well as consumables. So also a very good sign because we always figured that when the instrument market came back that would be the first part of our portfolio that we would see it given its.
James T. Hippel: It's very broad base of applications. It's.
James T. Hippel: Also very used widely intelligent therapy, and it's where the most underpenetrated of our of our three platforms. So that was not necessary in our outlook a quarter ago. It was very nice to see that come back. So strong here this quarter and then if I turn it over to our diagnostics and genomics business. There. He was what I'd call out the surge in business.
James T. Hippel: It's also used widely in cell and gene therapy, and it's the most underpenetrated of our three platforms. So that was not necessarily in our outlook for this quarter, and it was very nice to see that come back so strong here this quarter. And then if I turn over to our diagnostics and genomics business, there I'd call out the surgeon business. As we talked about the growth rates there, we're pretty much nearing our epi test with exosomes.
James T. Hippel: And so, one of the highest growth rates we've seen with the surgeons since we've owned the company. And they have some new product launches out there that are performing extremely well, and we think that momentum will continue. So that was also very nice.
James T. Hippel: As we talked about the growth rates, there were pretty much nearing our RFP tests with Exosomes and so very one of the highest growth rate we've seen with the surgeon since we've owned the company and they've got some new product launches out there, they're performing extremely well and we think that momentum will continue so that was up that was also very nice to see.
Speaker Change: Okay, great. Thank you and then was there any contribution from the European Fisher Gil in the quarter or will there be any in the fiscal fourth quarter, just given the timing of when you sign I'm just curious if there's any stocking related to that partnership.
Kim Kelderman: Catherine, thank you for the question. No, there were no such influences in this past quarter, and don't expect them in the next quarter either, specifically because the setup is that Fisher will bring in the leads, and we will ship directly from our warehouse. So you will not see any of those dynamics, if that makes sense.
James T. Hippel: Catherine Thank you for the question no there were no such such influences in this past quarter and don't expect them in the next quarter either specifically because.
Kim Kelderman: To set up is that Fisher will bring in the leads and we will ship directly from our warehouse. So so you will not see any of those those dynamics if that makes sense.
Unknown Executive: Thank you. Ms. Schulte, please rejoin the queue for more questions. The next question comes from the line of Son Jee Nam with Scotiabank. Please go ahead.
Speaker Change: Thank you Michelle please rejoin the queue for more questions. Next question comes from the line of songs genome.
Speaker Change: <unk> Bank. Please go ahead.
Unknown Executive: Hi, thanks for taking the questions and congratulations on the quarter. Maybe just on the academic and market perspective, at this juncture. Just kind of curious if you guys have visibility into that market, especially in the US and Europe. Obviously, you're seeing continued stable growth there, but, you know, potentially more difficult comps ahead. So just kind of curious what your outlook might be for the coming quarters.
Speaker Change: Hi, Thanks for taking the questions and congratulations on the quarter.
Unknown Executive: Maybe just on the academic end market perspective.
Unknown Executive: At this juncture or just kind of curious if you guys have visibility.
Unknown Executive: You know into that market, especially in the U S and Europe, obviously, youre seeing continued stable growth there but.
Unknown Executive: Okay potentially more it gets called.
Unknown Executive: And I had just kind of curious what your outlook might be for the coming quarters.
Kim Kelderman: Yeah, I think that the academic markets have, you know, we've, we did pretty well in there. And overall, I must say, we see a relatively stable environment, right, with horizon funding in Europe, as well as in the US. So it's a stable market, of course, with the lull in the biotech industry. Some of our innovative sales reps have found their way into some of the academic accounts as well, and have started refocusing there.
Speaker Change: Yeah, I think that.
Unknown Executive: The academic markets have.
Kim Kelderman: We've done pretty well in there and overall I must say, we see a relatively stable environment right with the horizon funding in Europe as well as in the U S.
Kim Kelderman: So it's a stable market of course with the lull in the biotech industry some of our.
Kim Kelderman: Innovative sales reps have found their way into.
Kim Kelderman: Some of the economic accounts as well and they have started refocusing there so there's a nice.
Kim Kelderman: So there's a nice bump up for us by just having the right focus and the connections further developing between the customers in academia, as well as the sales rep. So at the end of the day, I think this is, this is not something that is just for one quarter or two quarters. I think as long as the academic funding stays as it is or gets better, we will continue to see a benefit from that end market, and we will continue to be good, or even better at serving it. So that's what I expect for the coming quarters.
Kim Kelderman: A nice bump up for us by just having the right focus and and the connections further developing between the customers in academic as well as the sales rep. So at the end of the day I think this is this is not a something that is just for one quarter or two quarters I think as long as the.
Kim Kelderman: The academic funding stays as it is or gets better we will continue to see a benefit from from that end market and we will continue to be to be good or even better at serving it. So.
Kim Kelderman: And that's what I expect for the coming quarters.
Unknown Executive: Gotcha. And then I also have a follow-up on Luna 4 and Spatial Bio. Just kind of curious, it may be early, but are you seeing competitive wind on Luna 4 currently, and just for the spatial bio addressable market in general? Just kind of curious, you know, what's driving the, you know, other than your performance there, just from an end market standpoint, is there disproportional funding going towards your addressable markets in the current environment, do you think, or just kind of any additional color would be great. Thank you. Yeah, thanks for your question.
Speaker Change: Gotcha, and then I also have a follow up on unit four in space of IL or just kind of curious I. It may be early but are you seeing competitive on.
Speaker Change: You know when I'm doing it for currently and it gets treated with IL addressable market again, you all.
Unknown Executive: Just kind of curious whats driving the.
Unknown Executive: Other than your your performance there from an end market standpoint.
Speaker Change: Eric it's proportional funding going towards your addressable market in the current environment, you think or just any additional color would be great. Thank you.
Kim Kelderman: Yeah, thanks for your question around the spatial biology end markets. I do believe that this end market is under less pressure than other end markets. It's just such an important tool for determining which biomarker you're going after. It's just a new way of doing your research and validating your results. So it's here to stay, and that market will continue to grow significantly, and we believe that it will grow double digits for the foreseeable future. Yes, we see competitive wins, as I mentioned earlier when Dan asked the question.
Speaker Change: Yeah. Thanks for your question around the spatial biology and markets I do believe that end market is.
Kim Kelderman: <unk> is under less pressure than other end markets is just such an important tool.
Kim Kelderman: Into determining which which biomarker you're going after it's a it's just a new way of doing your research and validating your results. So it's here to stay in that market will continue to to grow.
Kim Kelderman: Significantly and we believe that it will grow double digits for the foreseeable future.
Kim Kelderman: Yes, we see competitive wins as I mentioned earlier when asked the question.
Kim Kelderman: There are tremendous benefits from a Comet automation system over other systems that are in the market. Our reagents, and our antibodies are also in the lead and very, very unique in that market. So that combination is just very strong.
Kim Kelderman: There are tremendous.
Kim Kelderman: Tremendous benefits.
Kim Kelderman: From a comet automation system over other systems that are in the market.
Kim Kelderman: Our reagents our antibodies are also.
Kim Kelderman: In the lead and very.
Kim Kelderman: Very unique in that market. So that combination is just very strong and if I look at some of the trends in the market. Yes, we have been able to sell comments into accounts that have experience of other systems, but an even stronger signal is the moment, we found that customers.
Unknown Executive: And if I look at some of the trends in the market, yes, we have been able to sell Comets into accounts that have experience with other systems. But an even stronger signal is the moment we found that customers want a second Comet, right? And now we have several larger pharma companies that have ordered a third one. So that means it's not only a good value proposition at the moment you buy it, but it's still a really good value proposition the moment you use it. And that gives them real firsthand experience, and that gives me confidence that that workflow is indeed a really strong value proposition compared to the other solutions in the market. Next question.
Unknown Executive: The second comment right and then now we have several larger pharma companies that have ordered a third one so that means it's not only a good value proposition at the moment you buy it but it's still a really good value proposition in a moment you use it and that gives us gives them real firsthand experience and that gives me confidence.
Unknown Executive: That workflow is indeed.
Unknown Executive: A real strong value proposition compared to the other solutions in the market.
Speaker Change: Thank you Mr <unk>.
Speaker Change: Please rejoin the queue for more questions.
Unknown Executive: Thank you. Mr. President, please rejoin the queue for more questions. Next question comes from the line of Paul Knight. E-Bank Capital. Hi again, thanks for the time and Jim as well on the protein simple business. Could you kind of highlight
Unknown Executive: Question comes from the line of Paul Knight with Keybanc capital markets. Please go ahead.
Paul Richard Knight: Ken Thanks for the time and Jim as well.
Paul Richard Knight: Protein simple business could you kind of highlight one of the fastest growing portions of the product line, how largest protein simple now as well and just a refresh there would be great.
James T. Hippel: Yeah, Paul, this is Jim. Thanks for the question. Good to hear from you. You know, we're not giving sides so much on the unbiased product line anymore. We try to avoid that from a competitive perspective. But as I highlighted in an answer to an earlier question, the Simple Western platform specifically was a highlight of that portfolio this quarter, with double-digit growth overall and double-digit growth in both instrument placements as well as consumables.
Paul Richard Knight: Yeah, I apologize Jim Thanks for the question and good to hear from you.
James T. Hippel: Given the.
James T. Hippel: So much on the byproduct line anymore, we try to avoid that from a competitive perspective, but as I highlighted earlier.
James T. Hippel: To the earlier question.
James T. Hippel: <unk>.
James T. Hippel: Yes.
James T. Hippel: Western platform, specifically was a highlight that portfolio this quarter with double digit growth overall and double digit growth in both instrument placements as well as consumables.
James T. Hippel: That being said, our entire instrument portfolio has been very resilient through this downturn. Despite struggles with instrument placements over the last several quarters, consumables on all three platforms continue to offset that to keep those product lines in a very stable state overall.
James T. Hippel: That being said our entire age of our portfolio has been very resilient through this.
James T. Hippel: Through this downturn.
James T. Hippel: Despite struggles with the instrument placements last several quarters the consumables in all three platforms continue to offset that to keep those product lines and a stable state overall, so we're very very pleased with hub with how that those are.
James T. Hippel: So we're very, very pleased with how our instrument portfolio has performed and gives us that kind of great confidence that as the markets normalize, we'll see accelerated growth in that portfolio once again. And then you mentioned in the past potential revenue, the GMP facility, or maybe expressed it as capacity and dollar revenue. Where are you?
James T. Hippel: Our instrument portfolio has performed and gives us great confidence that when the market normal asthma markets normalize we will see accelerated growth in that portfolio once again.
James T. Hippel: And then you mentioned in the past potential revenue the GMP facility or maybe expressed in his capacity and dollar revenue.
James T. Hippel: What's your thinking now on capacity of your GMP business? Capacity is no longer an issue. We're probably going to stop talking about it because I think we have capacity that could last us a decade or more, to be honest with you. At least as it pertains to our GMP proteins for the CAR-T, for the immunotherapy market, we still have some capacity that we need to build out for our regenerative medicine side of our GMP protein business. But as it pertains to what that facility was specifically built for, which is the immunotherapy side of the cell therapy market, capacity will not be an issue for a decade or more to come.
James T. Hippel: Where are you thinking now on capacity.
James T. Hippel: Of your G&P business.
James T. Hippel: Capacity and that capacity is no longer an issue.
James T. Hippel: Probably stop talking about it because I think we have.
James T. Hippel: Capacity collapses, a decade or more to be honest with you and at least as it pertains to our and as it pertains to our GMP proteins for the car T for the immunotherapy.
James T. Hippel: We still have some capacity that we need to build out for our regenerative medicine side of our of our GMP protein business, but as it pertains to what that facility was specifically built for which is the immunotherapy side of cell therapy market.
James T. Hippel: Capacity will not be an issue for a decade or more to come.
Kim Kelderman: Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I would now like to turn the floor over to Kim Kelderman for closing remarks.
James T. Hippel: Thank you ladies and gentlemen, we have reached the end of our question and answer session I would now like to turn the floor over to Kim gentlemen for closing comments.
Kim Kelderman: Thank you and thank you everybody for joining the call today and for the insightful questions. I'm extremely proud of the Bio-Techne team's accomplishments in this dynamic environment, and I'm also proud of the results we've been able to deliver this quarter. Our differentiated portfolio addresses some of the highest growth markets in life sciences and is positioned to deliver best-in-class performance for all our stakeholders going forward. Thank you very much for joining us on this call. Thank you.
Kim Kelderman: Yes, Thank you and thank you everybody for joining the call today and for the insightful questions I'm extremely.
Unknown Executive: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Kim Kelderman: We are proud of the biotech team's accomplishments in this dynamic environment and I'm also proud of the results we've been able to deliver in this quarter.
Unknown Executive: Our differentiated portfolio addresses some of the highest growth markets in life Sciences and is positioned to deliver best in class performance for all our stakeholders going forward. Thank you very much for joining the call.
Unknown Executive: Yeah.
Unknown Executive: Thank you.
Unknown Executive: Concludes today's teleconference. You may disconnect your lines at this time, thank you for your participation.
Unknown Executive: Yeah.
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