Bio-Techne Q2 2026 Bio-Techne Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q2 2026 Bio-Techne Corp Earnings Call
Speaker #1: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time throughout the call today, please press star zero, and a member of our team will be happy to help you.
Speaker #1: Good morning, and welcome to the BIO-TECHNE earnings conference call for the second quarter of fiscal year 2026. 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.
Speaker #1: 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, Investor
Speaker #1: Relations. Good morning and thank you for joining
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 Hipple, 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 2025 identifies certain factors that could cause the company's actual results to differ materially from those projected in the forward-looking statements made during this call. The company does not undertake to update any forward-looking statements because of any new information or future events or developments. The 10-K, as well as the company's other SEC filings, are available on the company's website within its investor relations section.
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 Hipple, 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 2025 identifies certain factors that could cause the company's actual results to differ materially from those projected in the forward-looking statements made during this call. The company does not undertake to update any forward-looking statements because of any new information or future events or developments. The 10-K, as well as the company's other SEC filings, are available on the company's website within its investor relations section.
Speaker #2: 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.
Speaker #2: 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 2025 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 #2: 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.
Speaker #2: During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to most comparable GAAP measures are available in the company's press release issued earlier this morning on the Investor Relations section of the BIO-TECHNE Corporation website, at coming weeks, we will be participating in the Cowan and Luring Healthcare conferences.
David Clair: During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to most comparable GAAP measures are available in the company's press release issued earlier this morning on the investor relations section of the Bio-Techne Corporation website at www.bio-techne.com. Separately, in the coming weeks, we will be participating in the Cowen and Leerink Healthcare Conferences. We look forward to connecting with many of you at these upcoming events. I will now turn the call over to Kim.
David Clair: During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to most comparable GAAP measures are available in the company's press release issued earlier this morning on the investor relations section of the Bio-Techne Corporation website at www.bio-techne.com. Separately, in the coming weeks, we will be participating in the Cowen and Leerink Healthcare Conferences. We look forward to connecting with many of you at these upcoming events. I will now turn the call over to Kim.
Speaker #2: We look forward to connecting with many of you at these upcoming events. I will now turn the call over to Kim.
Speaker #3: Thank you, Dave. And good morning, everyone. Welcome to BIO-TECHNE's second quarter earnings call of fiscal 2026. Our second quarter performance was largely in line with our expectations.
Kim Kelderman: Thank you, Dave, and good morning, everyone. Welcome to Bio-Techne's second quarter earnings call of fiscal 2026. Our second quarter performance was largely in line with our expectations. Continued strength from our large pharma customers was offset by a soft, yet improving biotech end market, and a soft but stable US academic end market. As anticipated, order timing impact from two of our largest cell therapy customers receiving FDA Fast Track designations also created a temporary headwind. Taken together, these factors resulted in flat organic revenue growth for the quarter. Overall, these end-market dynamics, combined with solid execution across the organization, drove sequential year-over-year organic revenue growth improvement in most of our product categories. I would like to mention the following highlights. Our core reagents and assays, proteomic analysis instruments, and diagnostic kits all grew modestly more in Q2 than during Q1.
Kim Kelderman: Thank you, Dave, and good morning, everyone. Welcome to Bio-Techne's second quarter earnings call of fiscal 2026. Our second quarter performance was largely in line with our expectations. Continued strength from our large pharma customers was offset by a soft, yet improving biotech end market, and a soft but stable US academic end market. As anticipated, order timing impact from two of our largest cell therapy customers receiving FDA Fast Track designations also created a temporary headwind. Taken together, these factors resulted in flat organic revenue growth for the quarter. Overall, these end-market dynamics, combined with solid execution across the organization, drove sequential year-over-year organic revenue growth improvement in most of our product categories. I would like to mention the following highlights. Our core reagents and assays, proteomic analysis instruments, and diagnostic kits all grew modestly more in Q2 than during Q1.
Speaker #3: Continued strength from our large pharma customers was offset by a soft, yet improving BIO-TECHNE market
Speaker #1: soft and a US stable but market academic and . As anticipated . Order Is , timing , cell impact from two of our largest therapy customers receiving FDA Track Fast designations .
Speaker #1: created a Also dedicated order largest timing from two of our cell therapy customers receiving FDA Fast Track impact Also headwind temporary and taken created a these designations .
Speaker #1: together , factors resulted in flat revenue growth for organic the Overall , market . these quarter dynamics combined with solid execution the across drove organization , over year sequential year growth organic revenue .
Speaker #1: our product in most of categories Improvement . I would like to mention the highlights following quarry agents and A assays . analysis Proteomic instruments and kits .
Kim Kelderman: Cell therapy, excluding our 2 largest FDA Fast Track customers, delivered strong sequential improvement in year-over-year growth. In our spatial biology franchise, we saw a meaningful acceleration in bookings for our automated COMET platform. In addition, we delivered our 3rd consecutive quarter of growth in China, alongside notable strength across the rest of Asia. The team delivered these top-line results with a continued focus on our sector-leading profitability profile. Adjusted operating margins expanded, like in our Q1, by approximately 100 basis points year-over-year to 31.1%. This performance reflects our disciplined approach to productivity and cost management while continuing to invest in the strategic growth verticals that will continue to shape Bio-Techne's future.
Kim Kelderman: Cell therapy, excluding our 2 largest FDA Fast Track customers, delivered strong sequential improvement in year-over-year growth. In our spatial biology franchise, we saw a meaningful acceleration in bookings for our automated COMET platform. In addition, we delivered our 3rd consecutive quarter of growth in China, alongside notable strength across the rest of Asia. The team delivered these top-line results with a continued focus on our sector-leading profitability profile. Adjusted operating margins expanded, like in our Q1, by approximately 100 basis points year-over-year to 31.1%. This performance reflects our disciplined approach to productivity and cost management while continuing to invest in the strategic growth verticals that will continue to shape Bio-Techne's future.
Speaker #1: diagnostic grew modestly more in All Q2 than during Q1 . Cell therapy , excluding our fast FDA customers track two largest , delivered sequential strong year improvement in over year biology spatial growth saw a franchise .
Speaker #1: We acceleration in bookings for our meaningful automated comet platform . In addition , we delivered our third consecutive quarter of growth in China alongside notable strength across the rest of Asia .
Speaker #1: The line top results with a continued focus on our sector , leading profitability profile . Adjusted margins , expanded like in our first quarter by approximately 100 basis points year over year to 31.1% .
Speaker #1: This performance reflects our disciplined approach to productivity and cost management . While continuing to invest in the strategic growth verticals that will shape continue to BIO-TECHNE Corp future .
Kim Kelderman: These four strategically important growth verticals, cell therapy, proteomic analytical instrumentation, spatial biology, and precision diagnostic tools, now represent 47% of our total revenue, up from 32% in fiscal 2020, and with that, delivering an upper teens CAGR over the past 5 years. Notably, our core portfolio of reagents, assays, and diagnostic controls delivered a competitive mid-single-digit CAGR over the same period. Calendar 2026 is a milestone year as we celebrate Bio-Techne's 50th anniversary. Several events are planned to mark the occasion, including ringing the Nasdaq closing bell on the 25th of February. Over the past 5 decades, we have built one of the most durable and differentiated portfolios in life science tools, addressing high-growth, high-value applications aligned with global healthcare megatrends. We recently highlighted several of these high-value applications during our presentation at the JP Morgan Healthcare Conference.
Kim Kelderman: These four strategically important growth verticals, cell therapy, proteomic analytical instrumentation, spatial biology, and precision diagnostic tools, now represent 47% of our total revenue, up from 32% in fiscal 2020, and with that, delivering an upper teens CAGR over the past 5 years. Notably, our core portfolio of reagents, assays, and diagnostic controls delivered a competitive mid-single-digit CAGR over the same period. Calendar 2026 is a milestone year as we celebrate Bio-Techne's 50th anniversary. Several events are planned to mark the occasion, including ringing the Nasdaq closing bell on the 25th of February. Over the past 5 decades, we have built one of the most durable and differentiated portfolios in life science tools, addressing high-growth, high-value applications aligned with global healthcare megatrends. We recently highlighted several of these high-value applications during our presentation at the JP Morgan Healthcare Conference.
Speaker #1: These four strategically growth important therapy cell protocols , proteomic , analytical instrumentation , spatial biology , and Precision diagnostic tools now represent 47% of our total revenue , up from 32% in fiscal 2020 .
Speaker #1: And with that , delivering an upper teens kegger over the past five years . Notably , our core portfolio of reagents , assays and diagnostic controls delivered a competitive mid-single digit kegger over the same period .
Speaker #1: Calendar 2026 is a milestone year as we celebrate BIO-TECHNE Corp 50th anniversary . Several events are planned to mark the occasion , including ringing the Nasdaq closing bell on the 25th of February .
Speaker #1: Over the past five decades , we have built one of the most durable and differentiated portfolios in life science tools , addressing high growth , high value aligned applications with global healthcare .
Speaker #1: Megatrends . We recently highlighted several of these high value applications during our presentation at the J.P. Morgan Healthcare Conference . As a case in point , we often emphasize the role our essential GMP reagents proteomic and analysis instruments play in enabling cell therapy workflows .
Kim Kelderman: As a case in point, we often emphasize the essential role our GMP reagents and proteomic analysis instruments play in enabling cell therapy workflows. But these capabilities extend well beyond cell therapy, as our tools support development and manufacturing across a broad range of advanced therapies. Our ProteinSimple franchise, for example, is an essential component in the development, manufacturing, and quality processes of monoclonal antibodies, antibody-drug conjugates, and other advanced biological treatments. Turning now to the performance of our end markets in the most recent quarter, beginning with the biopharma customers, excluding cell therapy. The divergence between large pharma and emerging biotech persisted in Q2, although the gap narrowed. Revenue from our large pharma customers remained strong, increasing low double digits for the fourth consecutive quarter.
Kim Kelderman: As a case in point, we often emphasize the essential role our GMP reagents and proteomic analysis instruments play in enabling cell therapy workflows. But these capabilities extend well beyond cell therapy, as our tools support development and manufacturing across a broad range of advanced therapies. Our ProteinSimple franchise, for example, is an essential component in the development, manufacturing, and quality processes of monoclonal antibodies, antibody-drug conjugates, and other advanced biological treatments. Turning now to the performance of our end markets in the most recent quarter, beginning with the biopharma customers, excluding cell therapy. The divergence between large pharma and emerging biotech persisted in Q2, although the gap narrowed. Revenue from our large pharma customers remained strong, increasing low double digits for the fourth consecutive quarter.
Speaker #1: these But capabilities beyond cell extend well therapy , as our tools support development and manufacturing across a broad range of advanced therapies . Our protein simple franchise , for example , is an essential component in the development , manufacturing and quality processes of monoclonal antibodies .
Speaker #1: Antibody drug conjugates and other advanced biological treatments . Turning now to the performance of our end markets in the most recent quarter , beginning with the biopharma customers excluding cell therapy , the divergence between large drama and emerging biotech persisted in Q2 .
Speaker #1: Although the gap narrowed . Revenue from our large pharma customers remained strong , increasing low double digits for the fourth consecutive quarter in contrast , emerging biotech declined mid-single digits , reflecting continued pressures stemming from negative funding conditions during the first half of calendar 2025 .
Kim Kelderman: In contrast, emerging biotech declined mid-single digits, reflecting continued pressures stemming from negative funding conditions during the first half of calendar 2025. While growth from these smaller biotech customers remained challenging, we did see sequential improvement. As many of you know, biotech funding rebounded meaningfully in the second half of calendar 2025, positioning this end market for improvement going forward. In academia, stabilization in the US continued with constructive developments on the federal funding front. Both the House and Senate appropriation bills include roughly 1% NIH budget increase, maintaining indirect funding rates, and capping multi-year grants at fiscal 2025 levels. While these bills must still be reconciled, the proposals are far more supportive of academic research than originally feared.
Kim Kelderman: In contrast, emerging biotech declined mid-single digits, reflecting continued pressures stemming from negative funding conditions during the first half of calendar 2025. While growth from these smaller biotech customers remained challenging, we did see sequential improvement. As many of you know, biotech funding rebounded meaningfully in the second half of calendar 2025, positioning this end market for improvement going forward. In academia, stabilization in the US continued with constructive developments on the federal funding front. Both the House and Senate appropriation bills include roughly 1% NIH budget increase, maintaining indirect funding rates, and capping multi-year grants at fiscal 2025 levels. While these bills must still be reconciled, the proposals are far more supportive of academic research than originally feared.
Speaker #1: While growth from these smaller biotech customers remained challenging . We did see sequential improvement . As many of you know , biotech funding rebounded meaningfully in the second half of calendar 2025 , positioning this end market for improvement , going forward in academia , stabilization in the US continued with constructive developments on the federal funding front .
Speaker #1: Both the House and Senate appropriation bills include a roughly 1% . NIH budget increase indirect . Maintaining funding rates and capping multi-year grants at fiscal 2025 levels .
Speaker #1: While these bills must still be reconciled to , proposals are far more supportive of academic research than originally feared . For BIO-TECHNE Corp , a modest decline in our US academic business was partially offset by stable growth in Europe , and this resulted in a low single digit decline for this end market .
Kim Kelderman: For Bio-Techne, a modest decline in our US academic business was partially offset by stable growth in Europe, and this resulted in a low single-digit decline for this end market overall. Shifting to performance by geography, the Americas declined high single digits. However, after adjusting for cell therapy order timing headwinds, revenue in the region grew low single digits. EMEA was flat against a strong double-digit comparison from the prior year, as strength in diagnostics was offset by order timing dynamics. China grew mid-single digits, marking its third consecutive quarter of growth, supported by R&D investments from CDMO, CRO, and biotech customers working on advanced therapies. This activity level is driving demand for reagents and proteomic analytical tools. Across the APAC region, we saw strong, broad-based performance with growth approaching 20%.
Kim Kelderman: For Bio-Techne, a modest decline in our US academic business was partially offset by stable growth in Europe, and this resulted in a low single-digit decline for this end market overall. Shifting to performance by geography, the Americas declined high single digits. However, after adjusting for cell therapy order timing headwinds, revenue in the region grew low single digits. EMEA was flat against a strong double-digit comparison from the prior year, as strength in diagnostics was offset by order timing dynamics. China grew mid-single digits, marking its third consecutive quarter of growth, supported by R&D investments from CDMO, CRO, and biotech customers working on advanced therapies. This activity level is driving demand for reagents and proteomic analytical tools. Across the APAC region, we saw strong, broad-based performance with growth approaching 20%.
Speaker #1: Overall . Shifting to performance by geography , the Americas high declined single digits . However , after adjusting for cell therapy order timing headwinds , revenue in the region grew low .
Speaker #1: Single digits flat against a . EMEA was strong double digit comparison from the prior year , as strength in diagnostics was offset by order timing dynamics .
Speaker #1: China grew mid-single digits, marking its third consecutive quarter of growth supported by R&D investments from CDMO, CRO, and biotech working on advanced customer therapies.
Speaker #1: This activity level is demand for driving reagents and proteomic analytical tools across the APAC region . We strong , broad saw based performance with growth approaching 20% .
Kim Kelderman: We remain encouraged by the momentum in both China and APAC, and believe that these regions are well-positioned for continued growth. Let's now turn to our segments, starting with the protein sciences segment, which declined 1% organically. As expected, fast track designation from the FDA for our two largest cell therapy customers reduced near-term GMP reagent demand, given that these customers had already secured the materials necessary to complete their clinical programs. Therefore, the revenue in our cell therapy business declined over 30%, including a 50% drop in the GMP reagents specifically. However, excluding the two customers that are progressing through priority review with the FDA, GMP reagents grew nearly 30%, which underscores the strength of our offering and improving end market demand. Sticking with cell therapy, I'd also like to give an update on Wilson Wolf.
Kim Kelderman: We remain encouraged by the momentum in both China and APAC, and believe that these regions are well-positioned for continued growth. Let's now turn to our segments, starting with the protein sciences segment, which declined 1% organically. As expected, fast track designation from the FDA for our two largest cell therapy customers reduced near-term GMP reagent demand, given that these customers had already secured the materials necessary to complete their clinical programs. Therefore, the revenue in our cell therapy business declined over 30%, including a 50% drop in the GMP reagents specifically. However, excluding the two customers that are progressing through priority review with the FDA, GMP reagents grew nearly 30%, which underscores the strength of our offering and improving end market demand. Sticking with cell therapy, I'd also like to give an update on Wilson Wolf.
Speaker #1: We remain encouraged by the momentum in both China APAC , and that these believe and regions well are positioned for continued growth . Let's now turn to our segments , starting with the protein Sciences segment , which declined 1% organically as , fast expected track designation from the FDA for our two largest cell therapy customers GMP reduced reagent near-term demand Given that these .
Speaker #1: Had customers already secured the materials necessary to complete their clinical programs. Therefore, the revenue in our cell therapy business declined over 30%, including a 50% drop in the reagents GMP.
Speaker #1: . However Specifically , excluding two customers that are progressing the through priority review with FDA the , GMP reagents grew nearly 30% , which underscores the strength of our and improving end market offering demand .
Kim Kelderman: As a reminder, Wilson Wolf manufactures the market-leading G-Rex line of bioreactors used to efficiently and economically scale cell therapies. We currently own 20% of Wilson Wolf and will complete the full acquisition by the end of calendar year 2027 or sooner, based upon achievement of certain milestones. Wilson Wolf's G-Rex bioreactor remains highly synergistic with our cell therapy offering. This single-use system requires media and GMP proteins to efficiently scale cell therapies, and is fully compatible with our closed ProPak cytokine delivery solutions. Wilson Wolf performed exceptionally well, delivering 20% organic revenue growth in the quarter and upper teens growth on a trailing 12-month basis. We also continued to advance our organoid initiatives during the quarter. Organoids, lab-grown 3D representations of human organs, depend heavily on cell culture matrices, small molecules, growth factors, and cytokines, all of which are long-standing strengths for Bio-Techne.
Kim Kelderman: As a reminder, Wilson Wolf manufactures the market-leading G-Rex line of bioreactors used to efficiently and economically scale cell therapies. We currently own 20% of Wilson Wolf and will complete the full acquisition by the end of calendar year 2027 or sooner, based upon achievement of certain milestones. Wilson Wolf's G-Rex bioreactor remains highly synergistic with our cell therapy offering. This single-use system requires media and GMP proteins to efficiently scale cell therapies, and is fully compatible with our closed ProPak cytokine delivery solutions. Wilson Wolf performed exceptionally well, delivering 20% organic revenue growth in the quarter and upper teens growth on a trailing 12-month basis. We also continued to advance our organoid initiatives during the quarter. Organoids, lab-grown 3D representations of human organs, depend heavily on cell culture matrices, small molecules, growth factors, and cytokines, all of which are long-standing strengths for Bio-Techne.
Speaker #1: Sticking with cell therapy , I'd like to also give an update on Wilson Wolfe . As a reminder , Wilson Wolfe manufacturers the market leading G-rex line of bioreactors used to efficiently and economically scale cell therapies .
Speaker #1: We currently own 20% of Wilson, Wolfe and will complete the full acquisition by the end of calendar year 2027 or sooner, based upon achievement of certain milestones.
Speaker #1: Wilson Wolfe's bioreactor remains highly synergistic cell therapy with our offering . This single system use requires media and GMP proteins to efficiently scale cell therapies , and is fully compatible with our closed Powerpack cytokine delivery solutions .
Speaker #1: Wilson Wolfe performed exceptionally well , delivering 20% organic revenue growth in the quarter and upper teens growth on a trailing 12 month basis .
Speaker #1: We also continued to advance our organoid initiatives during the quarter . Organoids lab grown 3D representations of human organs depend heavily on cell culture matrices , small molecules , growth factors , and all of cytokines , which are long standing strengths for BIO-TECHNE Corp .
Kim Kelderman: The FDA's recent validation of organoid solutions as acceptable replacements for animal-based models further underscores the rising importance of these cell-based systems. To support this shift, we recently launched Culturex Synthetic Hydrogel, a fully defined synthetic matrix designed to reduce variability relative to the traditional animal-based products, and to align with the growing adoption of non-animal-derived models. Now, let's discuss our proteomic analytical instruments, collectively marketed under the Protein Simple brand. The productivity and precision these platforms deliver across research by pharma manufacturing and QA/QC applications continue to resonate strongly with customers. Even in a challenging capital equipment environment, particularly among biotech and academic laboratories, instrument sales grew upper single digits in the quarter, with strength across all three major platforms... We continue to advance innovation across our instrumentation portfolio, highlighted by the introduction of ultra-sensitive assays on our automated multiplexing immunoassay platform called Ella.
Kim Kelderman: The FDA's recent validation of organoid solutions as acceptable replacements for animal-based models further underscores the rising importance of these cell-based systems. To support this shift, we recently launched Culturex Synthetic Hydrogel, a fully defined synthetic matrix designed to reduce variability relative to the traditional animal-based products, and to align with the growing adoption of non-animal-derived models. Now, let's discuss our proteomic analytical instruments, collectively marketed under the Protein Simple brand. The productivity and precision these platforms deliver across research by pharma manufacturing and QA/QC applications continue to resonate strongly with customers. Even in a challenging capital equipment environment, particularly among biotech and academic laboratories, instrument sales grew upper single digits in the quarter, with strength across all three major platforms... We continue to advance innovation across our instrumentation portfolio, highlighted by the introduction of ultra-sensitive assays on our automated multiplexing immunoassay platform called Ella.
Speaker #1: The FDA's recent validation of organoid solutions as acceptable replacements for animal based models further the rising underscores importance of these cell based systems .
Speaker #1: support To this shift . recently launched We Cultrex synthetic Hydrogel , a fully defined synthetic matrix designed to reduce variability relative to the traditional animal based products and to align with the growing adoption of derived non-animal models .
Speaker #1: Now , let's discuss our proteomic , analytical instruments collectively marketed under the brand . Proteinsimple The productivity and precision these platforms deliver across research , biopharma , manufacturing and QA , QC applications continue to resonate strongly with customers , even in a challenging capital equipment environment , particularly among biotech and academic .
Speaker #1: Instrument laboratories sales grew upper single digits in the quarter , with strength across all three major platforms . We continue to advance innovation across our instrumentation portfolio , highlighted by the introduction of ultrasensitive our assays on automated multiplexing immunoassay platform called Ela .
Kim Kelderman: These new assays enable femtogram-level detection of low abundance biomarkers in blood, which represents a 2- to 5-fold improvement in sensitivity over legacy Ella assays. We launched the first application of this enhanced capability for research use, only supporting the detection of neurological biomarkers. Within our Simple Western franchise, demand for Leo, our next generation high throughput automated Western blot system, remained exceptionally strong. Leo exceeded our expectations once again, driven by continued robust adoption and an expanding order funnel. This past quarter, we further enhanced the platform by adding fluorescence detection, enabling multiplexing workflows and providing deeper insight into protein expression and pathway characterization. These enhancements meaningfully broaden Leo's utility in advanced proteomic applications and address significant needs in the biopharma end markets.
Kim Kelderman: These new assays enable femtogram-level detection of low abundance biomarkers in blood, which represents a 2- to 5-fold improvement in sensitivity over legacy Ella assays. We launched the first application of this enhanced capability for research use, only supporting the detection of neurological biomarkers. Within our Simple Western franchise, demand for Leo, our next generation high throughput automated Western blot system, remained exceptionally strong. Leo exceeded our expectations once again, driven by continued robust adoption and an expanding order funnel. This past quarter, we further enhanced the platform by adding fluorescence detection, enabling multiplexing workflows and providing deeper insight into protein expression and pathway characterization. These enhancements meaningfully broaden Leo's utility in advanced proteomic applications and address significant needs in the biopharma end markets.
Speaker #1: These new assays enable femtogram level detection of low abundance biomarkers in blood , which represents a 2 to 5 fold improvement in sensitivity over legacy lsas .
Speaker #1: We the first application of this enhanced capability for use research only , supporting the detection of neurological biomarkers within our simple Western franchise .
Speaker #1: Demand for Leo , our next generation high throughput automated Western blot system remained exceptionally strong . Leo exceeded our expectations once again , driven by robust continued adoption and an expanding order funnel this past quarter .
Speaker #1: We further enhanced the platform by adding fluorescence detection, enabling multiplexing workflows and providing deeper insight into protein expression and pathway characterization. These enhancements meaningfully broaden Leo's utility in advanced proteomic applications and address significant needs in the biopharma and markets.
Kim Kelderman: Wrapping up protein sciences, our core reagent and assay portfolio, which includes more than 6,000 proteins and 400,000 antibody types, delivered low single-digit growth for the quarter. The portfolio's lot-to-lot consistency, high bioactivity, and broad catalog continue to differentiate this offering. Stabilization across US academia and biotech, combined with ongoing strength in pharma, supported overall performance in the quarter. Now, let's turn to our diagnostics and spatial biology segment, which delivered 3% organic growth. Within spatial biology, our RNAscope product suite generated low single-digit growth. RNAscope enables researchers to detect and visualize RNA sequences at single-cell resolution within intact tissue samples, offering best-in-class specificity and sensitivity. Customers are increasingly leveraging RNAscope and microRNAscope probes and assays to assess biodistribution and toxicity for nucleic acid-based therapeutics, including antisense oligonucleotides and small interfering RNA therapies.
Kim Kelderman: Wrapping up protein sciences, our core reagent and assay portfolio, which includes more than 6,000 proteins and 400,000 antibody types, delivered low single-digit growth for the quarter. The portfolio's lot-to-lot consistency, high bioactivity, and broad catalog continue to differentiate this offering. Stabilization across US academia and biotech, combined with ongoing strength in pharma, supported overall performance in the quarter. Now, let's turn to our diagnostics and spatial biology segment, which delivered 3% organic growth. Within spatial biology, our RNAscope product suite generated low single-digit growth. RNAscope enables researchers to detect and visualize RNA sequences at single-cell resolution within intact tissue samples, offering best-in-class specificity and sensitivity. Customers are increasingly leveraging RNAscope and microRNAscope probes and assays to assess biodistribution and toxicity for nucleic acid-based therapeutics, including antisense oligonucleotides and small interfering RNA therapies.
Speaker #1: Wrapping up. Protein Sciences, our core reagent and assay portfolio, which now includes more than 6,000 proteins and 400,000 antibody types, delivered low single-digit growth for the quarter.
Speaker #1: The portfolio's lot to lot consistency , high bioactivity and broad catalog continue to differentiate this offering . Stabilization across US academia and biotech , combined with ongoing strength in pharma supported overall performance in the quarter .
Speaker #1: Let's now turn to our Diagnostics and Spatial Biology segment, which delivered 3% organic growth within Spatial Biology. Our RNAscope product suite generated low single-digit growth.
Speaker #1: RNA scope enables researchers to detect and RNA visualize sequences at single cell resolution within intact tissue samples , offering best in class specificity and sensitivity .
Speaker #1: Customers are increasingly leveraging rnascope and micro RNA scope probes and assays assess to biodistribution and for nucleic acid based therapeutics , including antisense oligonucleotides and small interfering RNA therapies .
Kim Kelderman: Adoption of RNAscope in our diagnostic settings, which we do through our platform partners, also continued to expand rapidly, with growth exceeding 20% for both the quarter and the first half of the fiscal year. Momentum also continued with our COMET instrument, which delivered nearly 40% growth in bookings, marking the second consecutive quarter of strong booking activity. COMET's fully automated multiomic capabilities are increasingly valued by both academic and biopharma customers as a powerful tool for uncovering novel biological insights. Spatial biology remains the business within our portfolio, with the highest academic concentration and a meaningful presence in biotech. Despite ongoing challenges across both of these end markets, we remain encouraged by the sustained momentum in this franchise. Lastly, our diagnostics business delivered high single-digit growth, supported by balanced performance across both clinical controls and molecular diagnostic kits.
Kim Kelderman: Adoption of RNAscope in our diagnostic settings, which we do through our platform partners, also continued to expand rapidly, with growth exceeding 20% for both the quarter and the first half of the fiscal year. Momentum also continued with our COMET instrument, which delivered nearly 40% growth in bookings, marking the second consecutive quarter of strong booking activity. COMET's fully automated multiomic capabilities are increasingly valued by both academic and biopharma customers as a powerful tool for uncovering novel biological insights. Spatial biology remains the business within our portfolio, with the highest academic concentration and a meaningful presence in biotech. Despite ongoing challenges across both of these end markets, we remain encouraged by the sustained momentum in this franchise. Lastly, our diagnostics business delivered high single-digit growth, supported by balanced performance across both clinical controls and molecular diagnostic kits.
Speaker #1: Adoption of RNAScope in our diagnostic settings, which we do through our platform partners, also continued to expand rapidly, with growth exceeding 20% for both the quarter and the first half of the fiscal year.
Speaker #1: Momentum also continued with our comet instrument , which delivered nearly 40% growth in bookings , marking the second consecutive quarter of strong booking activity .
Speaker #1: Comet’s fully automated multi-omic capabilities are increasingly valued by both academic and biopharma customers, as a powerful tool for uncovering novel biological insights.
Speaker #1: Spatial biology remains the business within our portfolio with the highest academic concentration and a meaningful presence in biotech. Despite ongoing challenges across both of these end markets, we remain encouraged by the sustained momentum in this franchise.
Speaker #1: our Lastly , diagnostics business delivered high single digit growth , supported by balanced performance across both clinical controls and molecular diagnostic kits . Recent innovation within our molecular diagnostics portfolio is driving increased customer interest evaluation and adoption , particularly among oncology and screening .
Kim Kelderman: Recent innovation within our molecular diagnostics portfolio is driving increased customer interest, evaluation, and adoption, particularly among oncology and carrier screening reference laboratories. This includes our ESR1 Exosome-Based Mutation Kit, which is used to monitor resistance to breast cancer therapies, as well as our AmpliDex Carrier Screening Plus kit, which interrogates 11 of the most common genes associated with elevated risk for genetic disorders. In summary, the Bio-Techne team continues to execute extremely well while navigating an end market environment that is stabilizing but still challenging. Our disciplined focus on productivity and cost management remains a key driver of our operating margin expansion. And although funding uncertainty has influenced customer behavior in emerging biotech and US academia, recent strength in biotech funding activity and the favorable fiscal 2026 US appropriation bills position both these end markets for continued stabilization and gradual improvement.
Kim Kelderman: Recent innovation within our molecular diagnostics portfolio is driving increased customer interest, evaluation, and adoption, particularly among oncology and carrier screening reference laboratories. This includes our ESR1 Exosome-Based Mutation Kit, which is used to monitor resistance to breast cancer therapies, as well as our AmpliDex Carrier Screening Plus kit, which interrogates 11 of the most common genes associated with elevated risk for genetic disorders. In summary, the Bio-Techne team continues to execute extremely well while navigating an end market environment that is stabilizing but still challenging. Our disciplined focus on productivity and cost management remains a key driver of our operating margin expansion. And although funding uncertainty has influenced customer behavior in emerging biotech and US academia, recent strength in biotech funding activity and the favorable fiscal 2026 US appropriation bills position both these end markets for continued stabilization and gradual improvement.
Speaker #1: carrier Reference laboratories . This includes our Esr1 exosome based mutation kit , which is used to monitor breast cancer resistance to therapies , as well as our carrier screening kit , which interrogates 11 of the most common genes associated with elevated risk for genetic disorders .
Speaker #1: In summary , the BIO-TECHNE Corp team continues to execute well while extremely navigating an end market environment that is stabilizing but still challenging our disciplined focus on productivity and cost management remains a key driver of our operating margin expansion .
Speaker #1: And although funding uncertainty has influenced customer behavior in emerging biotech and US academia , recent strength in biotech funding activity and the favorable fiscal 2026 US appropriation bills position both these end markets for continued stabilization and gradual improvement as we enter 50th year as a company , I our confident in the durable moat surrounding our core portfolio and in our competitive positions across our fast growing verticals of cell therapy , proteomic analysis , spatial biology , and molecular diagnostics .
Kim Kelderman: As we enter our 50th year as a company, I remain confident in the durable mode surrounding our core portfolio and in our competitive positions across our fast-growing verticals of cell therapy, proteomic analysis, spatial biology, and molecular diagnostics. With that, I'll turn the call over to Jim. Jim?
Kim Kelderman: As we enter our 50th year as a company, I remain confident in the durable mode surrounding our core portfolio and in our competitive positions across our fast-growing verticals of cell therapy, proteomic analysis, spatial biology, and molecular diagnostics. With that, I'll turn the call over to Jim. Jim?
Jim Hippel: Thanks, Kim. I'll begin with additional details on our Q2 financial performance, followed by thoughts on our forward outlook. Adjusted EPS for the quarter was $0.46, up 10% year-over-year, with foreign exchange having a favorable impact of $0.04. GAAP EPS came in at $0.24, up from $0.22 in the prior year period. Total revenue for Q2 was $295.9 million, flat year-over-year on both an organic and reported basis. Foreign currency exchange contributed a 2% tailwind, while businesses held for sale created a 2% headwind.... Excluding the timing impact from our 2 largest cell therapy customers, who received FDA Fast Track designation, organic growth was 4% for the quarter.
Jim Hippel: Thanks, Kim. I'll begin with additional details on our Q2 financial performance, followed by thoughts on our forward outlook. Adjusted EPS for the quarter was $0.46, up 10% year-over-year, with foreign exchange having a favorable impact of $0.04. GAAP EPS came in at $0.24, up from $0.22 in the prior year period. Total revenue for Q2 was $295.9 million, flat year-over-year on both an organic and reported basis. Foreign currency exchange contributed a 2% tailwind, while businesses held for sale created a 2% headwind.... Excluding the timing impact from our 2 largest cell therapy customers, who received FDA Fast Track designation, organic growth was 4% for the quarter.
Speaker #1: With that , I'll turn the call over to Jim . Jim .
Speaker #2: Thanks , Kim . I'll additional begin with our Q2 details on financial performance , followed by thoughts on our forward outlook . Adjusted EPs for the quarter was $0.46 , up 10% year over year with foreign exchange having a favorable impact of $0.04 .
Speaker #2: GAAP , EPs came in at $0.24 , up from $0.22 in the prior year period . Total revenue for Q2 was $295.9 million , flat year over year on both an organic and reported basis .
Speaker #2: Foreign currency exchange contributed a 2% tailwind, while businesses held for sale created a 2% headwind. Excluding the timing impact from our two largest cell therapy customers who received FDA Fast Track designation.
Jim Hippel: From a geographic lens, North America declined upper single digits, as strength from large pharma was offset by order timing and cell therapy, continued funding pressure in biotech, and soft but sequential stabilization from our academic customers. In Europe, revenue was flat against a very strong prior year comparison, with low single-digit growth in academia, offsetting a modest decline from biopharma in the region. We are encouraged by the third consecutive quarter of growth in China, where revenue increased mid-single digits. APAC, excluding China, increased almost 20%, as the Asian geography continues to show signs of sustained momentum. By end market, biopharma declined mid-single digits overall. However, excluding our largest cell therapy customers, biopharma grew mid-single digits, driven by strong pharma demand, but partially offset by emerging biotech softness. Academia declined low single digits, with low single-digit growth in Europe, partially offsetting low single-digit declines in the US.
Jim Hippel: From a geographic lens, North America declined upper single digits, as strength from large pharma was offset by order timing and cell therapy, continued funding pressure in biotech, and soft but sequential stabilization from our academic customers. In Europe, revenue was flat against a very strong prior year comparison, with low single-digit growth in academia, offsetting a modest decline from biopharma in the region. We are encouraged by the third consecutive quarter of growth in China, where revenue increased mid-single digits. APAC, excluding China, increased almost 20%, as the Asian geography continues to show signs of sustained momentum. By end market, biopharma declined mid-single digits overall. However, excluding our largest cell therapy customers, biopharma grew mid-single digits, driven by strong pharma demand, but partially offset by emerging biotech softness. Academia declined low single digits, with low single-digit growth in Europe, partially offsetting low single-digit declines in the US.
Speaker #2: Organic was growth 4% for the quarter from a geographic lens , North America declined upper single digits as strength from large pharma was offset by order timing in cell therapy , continued funding pressure in and soft .
Speaker #2: biotech But sequential stabilization from our academic customers in Europe , revenue was flat against a strong prior year very . Comparison with low single digit growth in academia , offsetting a modest decline from biopharma region .
Speaker #2: We are in the encouraged by the third consecutive quarter of growth in China , where revenue increased mid-single digits . APAC , excluding increased China , almost 20% as the Asian geography continues to show signs of sustained momentum by end market .
Speaker #2: Biopharma declined mid-single digits overall . However , excluding our largest cell therapy customers , biopharma grew digits , mid-single driven by strong pharma demand but partially offset by emerging biotech softness .
Jim Hippel: Below the revenue line, adjusted gross margin was 68.5%, down from 70.5% last year. The decline was driven by unfavorable product and customer mix, which we expect to gradually improve as the calendar year progresses. Adjusted SG&A was 29.6% of revenue, down 240 basis points compared to 32% last year. R&D expense was 7.8%, compared to 8.5% in the prior year. The operating leverage reflects the benefits of structural streamlining and disciplined expense management, partially offset by targeted investments in strategic growth initiatives. Adjusted operating margin reached 31.1%, up 100 basis points year over year. This improvement was fueled by the exosome diagnostics divestiture and productivity gains, partially offset by unfavorable product mix.
Jim Hippel: Below the revenue line, adjusted gross margin was 68.5%, down from 70.5% last year. The decline was driven by unfavorable product and customer mix, which we expect to gradually improve as the calendar year progresses. Adjusted SG&A was 29.6% of revenue, down 240 basis points compared to 32% last year. R&D expense was 7.8%, compared to 8.5% in the prior year. The operating leverage reflects the benefits of structural streamlining and disciplined expense management, partially offset by targeted investments in strategic growth initiatives. Adjusted operating margin reached 31.1%, up 100 basis points year over year. This improvement was fueled by the exosome diagnostics divestiture and productivity gains, partially offset by unfavorable product mix.
Speaker #2: declined low Academia single digits with low single digit growth in Europe partially offsetting low single digit declines in the US . Below the revenue line , adjusted gross margin was 68.5% , down from 70.5% last year decline was driven .
Speaker #2: The unfavorable product and mix we expect to gradually improve as the calendar year progresses. Adjusted G&A was 29.6% of revenue, down 240 basis points compared to 32% last year.
Speaker #2: R&D expense was 7.8% , compared to 8.5% in the prior year . The operating leverage reflects the benefits of structural streamlining and disciplined expense management , partially offset by targeted investments in strategic growth initiatives .
Speaker #2: Adjusted operating margin reached 31.1% , up 100 basis points year over year . This improvement was fueled exosome diagnostics productivity divestiture and partially offset by unfavorable product mix .
Jim Hippel: Our better-than-expected margin reflects deliberate management of productivity and cost containment measures aimed at maximizing operating leverage in a dynamic environment. Below operating income, net interest expense was $1.1 million, up $0.5 million year-over-year, due to the expiration of interest rate hedges. Bank debt at quarter end stood at $260 million, down $40 million sequentially. Other adjusted non-operating income was $1.9 million, up $3.2 million from the prior year, primarily due to non-recurring foreign exchange losses in the prior year related to overseas cash pooling arrangements. Our adjusted effective tax rate was 22.3%, up 80 basis points year-over-year, driven by geographic mix. Turning to cash flow and capital deployment, we generated $82.4 million in operating cash flow, with $5.9 million in net capital expenditures.
Jim Hippel: Our better-than-expected margin reflects deliberate management of productivity and cost containment measures aimed at maximizing operating leverage in a dynamic environment. Below operating income, net interest expense was $1.1 million, up $0.5 million year-over-year, due to the expiration of interest rate hedges. Bank debt at quarter end stood at $260 million, down $40 million sequentially. Other adjusted non-operating income was $1.9 million, up $3.2 million from the prior year, primarily due to non-recurring foreign exchange losses in the prior year related to overseas cash pooling arrangements. Our adjusted effective tax rate was 22.3%, up 80 basis points year-over-year, driven by geographic mix. Turning to cash flow and capital deployment, we generated $82.4 million in operating cash flow, with $5.9 million in net capital expenditures.
Speaker #2: Our expected margin reflects deliberate management of productivity and cost containment measures aimed at maximizing operating leverage in a dynamic environment below operating income.
Speaker #2: Net interest expense was 1.1 million , up 0.5 million year over year due to the expiration of interest rate hedges , bank debt at quarter end stood at 260 million , down 40 million sequentially .
Speaker #2: Other adjusted non-operating income was 1.9 million , 3.2 million from the prior year , up primarily due to non-recurring foreign exchange losses in the prior year related to overseas cash pooling arrangements .
Speaker #2: adjusted Our effective tax rate was 22.3% , up 80 basis points year over year , driven by geographic mix . Turning to cash flow and capital deployment , we generated 82.4 million in operating cash flow , with capital 5.9 million in net expenditures .
Jim Hippel: Also during Q2, we returned $12.5 million to shareholders via dividends and ended the quarter with 157 million average diluted shares outstanding, down 2% year-over-year. Our balance sheet remains strong, with $172.9 million in cash and a total leverage ratio well below 1x EBITDA. M&A remains a top priority for capital allocation. Now let's review our segment performance, beginning with protein sciences. Q2 reported sales were $215.1 million, an increase of 2% year-over-year. Organic revenue declined 1%, with a 3% benefit from foreign exchange. Excluding cell therapy timing impacts from our largest customers, organic growth was 4%.
Jim Hippel: Also during Q2, we returned $12.5 million to shareholders via dividends and ended the quarter with 157 million average diluted shares outstanding, down 2% year-over-year. Our balance sheet remains strong, with $172.9 million in cash and a total leverage ratio well below 1x EBITDA. M&A remains a top priority for capital allocation. Now let's review our segment performance, beginning with protein sciences. Q2 reported sales were $215.1 million, an increase of 2% year-over-year. Organic revenue declined 1%, with a 3% benefit from foreign exchange. Excluding cell therapy timing impacts from our largest customers, organic growth was 4%.
Speaker #2: during Q2 , we returned Also 12.5 million to shareholders via dividends and ended the quarter diluted 157 million average shares outstanding , down over year 2% year .
Speaker #2: sheet Our balance strong , with remains cash and a 172.9 million in leverage well ratio below total EBITDA one times remains a top priority for .
Speaker #2: M&A capital allocation Now let's review our . segment performance beginning with protein Sciences Q2 reported sales were 215.1 million , an increase of 2% year over year .
Speaker #2: revenue Organic declined 1% , with a 3% benefit from foreign exchange , excluding cell therapy . Timing impacts from our largest customers , organic growth was led 4% .
Jim Hippel: Growth was led by our proteomic analytical tools franchise, with notable strength from large pharma customers, as well as low single-digit growth within our core portfolio of research reagents and assays. There was also a large reagent order from an OEM commercial supply customer in Q2 that historically was placed in our fiscal Q3. The timing of this order added an additional 1% growth to protein sciences and the company overall. Protein sciences operating margin was 39.3%, down 190 basis points year-over-year, primarily due to unfavorable product mix, partially offset by ongoing profitability initiatives. In our diagnostics and spatial biology segment, Q2 sales were $81.2 million, down 4% year-over-year.
Jim Hippel: Growth was led by our proteomic analytical tools franchise, with notable strength from large pharma customers, as well as low single-digit growth within our core portfolio of research reagents and assays. There was also a large reagent order from an OEM commercial supply customer in Q2 that historically was placed in our fiscal Q3. The timing of this order added an additional 1% growth to protein sciences and the company overall. Protein sciences operating margin was 39.3%, down 190 basis points year-over-year, primarily due to unfavorable product mix, partially offset by ongoing profitability initiatives. In our diagnostics and spatial biology segment, Q2 sales were $81.2 million, down 4% year-over-year.
Speaker #2: Growth was by our proteomic analytical tools franchise , with notable strength from pharma large customers . As well as digit low our core single growth within portfolio of research reagents and assays .
Speaker #2: There was also a large reagent order from an OEM commercial supply customer in Q2 that historically was placed in our fiscal Q3 . The timing of this order added an additional 1% growth Protein to Sciences , and the company overall , protein Sciences operating margin was 39.3% , down 190 basis points year over year , primarily due to unfavorable product mix , partially offset by ongoing profitability initiatives in diagnostics and our biology segment .
Jim Hippel: The divestiture of Exosome Diagnostics negatively impacted reported growth by 8%, while foreign exchange had a favorable impact of 1%, resulting in 3% organic growth for the segment. Diagnostics products grew upper single digits, while spatial biology was relatively flat. It's worth noting that this segment grew low double digits organically in the prior year, creating a challenging comparison. And as Kim already highlighted, our COMET instrument saw a solid double-digit growth in bookings for the second consecutive quarter. Segment operating margin improved to 10.4%, up from 3.9% last year, driven by the Exosome Diagnostics divestiture and productivity initiatives, partially offset by unfavorable mix among our OEM customers. We expect continued margin expansion as our COMET spatial biology platform scales.
Jim Hippel: The divestiture of Exosome Diagnostics negatively impacted reported growth by 8%, while foreign exchange had a favorable impact of 1%, resulting in 3% organic growth for the segment. Diagnostics products grew upper single digits, while spatial biology was relatively flat. It's worth noting that this segment grew low double digits organically in the prior year, creating a challenging comparison. And as Kim already highlighted, our COMET instrument saw a solid double-digit growth in bookings for the second consecutive quarter. Segment operating margin improved to 10.4%, up from 3.9% last year, driven by the Exosome Diagnostics divestiture and productivity initiatives, partially offset by unfavorable mix among our OEM customers. We expect continued margin expansion as our COMET spatial biology platform scales.
Speaker #2: spatial Q2 sales were 81.2 million , down 4% year over year . The divestiture of exosome diagnostics negatively impacted reported growth by 8% .
Speaker #2: While foreign exchange had a favorable impact of 1%, resulting in 3% organic growth for the segment. Diagnostics products grew upper single digits, while spatial biology was relatively flat.
Speaker #2: It's worth noting that this segment grew low double digits organically in the prior creating year , a challenging comparison . And as Kim already our comment , instruments highlighted , saw a solid double digit growth in bookings for the second consecutive quarter .
Speaker #2: Segment operating margin improved to 10.4%, up from 3.9% last year, driven by the exosome diagnostics divestiture and productivity initiatives. This was partially offset by unfavorable mix among our OEM customers.
Jim Hippel: In summary, the team delivered strong Q2 execution in a stable market with improved biotech funding, as well as further progression towards more favorable NIH funding outcomes, giving us reasons to believe that customer sentiment should be gradually improving as we progress through the calendar year 2026. We remain excited about the FDA Fast Track designation awarded to our largest cell therapy customers... These designations accelerate clinical timelines but reduce near-term reagent demand. Following strong ordering in fiscal year 2025, these customers are now progressing through phase 3 trials, resulting in a temporary pause in GMP reagent purchases. We expect this headwind to moderate slightly in Q3, impacting growth by approximately 300 basis points year-over-year, before moderating further in our Q4 and then being completely out of our year-over-year comparisons in fiscal 2027.
Jim Hippel: In summary, the team delivered strong Q2 execution in a stable market with improved biotech funding, as well as further progression towards more favorable NIH funding outcomes, giving us reasons to believe that customer sentiment should be gradually improving as we progress through the calendar year 2026. We remain excited about the FDA Fast Track designation awarded to our largest cell therapy customers... These designations accelerate clinical timelines but reduce near-term reagent demand. Following strong ordering in fiscal year 2025, these customers are now progressing through phase 3 trials, resulting in a temporary pause in GMP reagent purchases. We expect this headwind to moderate slightly in Q3, impacting growth by approximately 300 basis points year-over-year, before moderating further in our Q4 and then being completely out of our year-over-year comparisons in fiscal 2027.
Speaker #2: We expect continued margin expansion as our common spatial biology platform scales . In team summary , the delivered strong second quarter execution in a stable market with improved biotech funding further , as well as towards more progression favorable NIH outcomes , giving us believe that reasons to customer sentiment funding gradually improving as we progress through the calendar year 2026 .
Speaker #2: We excited remain about the FDA Fast Track designation awarded to our largest cell therapy customers . These designations accelerate clinical but timelines , reduce near-term reagent demand following strong ordering in fiscal year 2025 .
Speaker #2: These customers are now progressing through phase three trials , resulting in a temporary pause in GMP reagent . We expect this headwind to moderate in slightly Q3 , impacting growth by approximately 300 basis points year over year before moderating further in our fourth quarter and then being completely out of our year over year comparisons in fiscal 2027 .
Jim Hippel: Also, as I mentioned in my protein sciences commentary, Q2 benefited from the timing of a large commercial supply order from one of our OEM partners that was originally expected in Q3. This timing benefit in Q2 will now be 100 basis points headwind to Q3. Taking these customer-specific headwinds into account, we anticipate overall Q3 organic growth to be consistent with Q2. However, excluding the customer-specific cell therapy and OEM headwinds, we expect underlying growth for the remainder of our business to be mid-single digits. This outlook tracks with the stabilization of our end markets and improving customer sentiment. You'll recall that in our fiscal Q1, our underlying organic growth, excluding the largest cell therapy customers, was 1%. In Q2, the underlying growth was 3%, and also backing out the favorable timing of the protein sciences OEM customer supply order.
Jim Hippel: Also, as I mentioned in my protein sciences commentary, Q2 benefited from the timing of a large commercial supply order from one of our OEM partners that was originally expected in Q3. This timing benefit in Q2 will now be 100 basis points headwind to Q3. Taking these customer-specific headwinds into account, we anticipate overall Q3 organic growth to be consistent with Q2. However, excluding the customer-specific cell therapy and OEM headwinds, we expect underlying growth for the remainder of our business to be mid-single digits. This outlook tracks with the stabilization of our end markets and improving customer sentiment. You'll recall that in our fiscal Q1, our underlying organic growth, excluding the largest cell therapy customers, was 1%. In Q2, the underlying growth was 3%, and also backing out the favorable timing of the protein sciences OEM customer supply order.
Speaker #2: Also , as I protein mentioned in my Sciences commentary , Q2 benefited from the timing of a large commercial supply order from one of our OEM partners .
Speaker #2: That was originally expected in Q3 . This timing benefit in Q2 will now be 100 basis points headwind to Q3 . Taking these customer specific headwinds into account , we anticipate overall Q3 organic growth to be consistent with Q2 .
Speaker #2: excluding customer specific the However , cell therapy OEM and expect underlying headwinds , we growth for the remainder of our business to mid-single be digits .
Speaker #2: outlook tracks with the stabilization of This our end and markets improving customer sentiment . You will recall that in our fiscal Q1 , our underlying organic growth , excluding the largest cell therapy customers , was in 1% Q2 , the was growth underlying When also 3% .
Jim Hippel: This near-term outlook also sets us up nicely for continued improvement in Q4 and a great start to fiscal year 2027, as improved biotech funding should translate into higher spending. Resolution of US academic budgets is reached, our company-specific headwinds start to abate, and we begin to lap lower year-over-year comps. From a margin perspective, we remain focused on balancing growth investments with operational efficiency. We're pleased with the upside delivered in Q1 and Q2, and remain on track to achieve 100 basis points of operating margin expansion for the full fiscal year. That concludes my prepared remarks. I'll turn the call back over to the operator to open the line for questions.
Jim Hippel: This near-term outlook also sets us up nicely for continued improvement in Q4 and a great start to fiscal year 2027, as improved biotech funding should translate into higher spending. Resolution of US academic budgets is reached, our company-specific headwinds start to abate, and we begin to lap lower year-over-year comps. From a margin perspective, we remain focused on balancing growth investments with operational efficiency. We're pleased with the upside delivered in Q1 and Q2, and remain on track to achieve 100 basis points of operating margin expansion for the full fiscal year. That concludes my prepared remarks. I'll turn the call back over to the operator to open the line for questions.
Speaker #2: On the backing timing of the favorable protein OEM customer supply sciences order, this nicely sets up the near-term outlook for continued improvement in Q4 and a great start to fiscal year 2027.
Speaker #2: As improved biotech funding should translate into higher spending resolution of US academic budgets is reached . Our company specific headwinds start to abate , and we begin to lap lower year over year comps from a margin perspective , we remain focused on balancing growth investments with operational efficiency .
Speaker #2: We're pleased with the upside delivered in Q1 and Q2, and remain on track to achieve 100 basis points of operating margin expansion for the full fiscal year.
Operator: Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. Thank you. Our first question comes from Matt Larew with William Blair. Your line is open.
Operator: Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. Thank you. Our first question comes from Matt Larew with William Blair. Your line is open.
Speaker #2: That prepared concludes my remarks . I'll turn the call back over to the operator to open the line for questions .
Speaker #3: you . If Thank you'd like to ask a question , press one on your keypad to queue at any time , Star press star two .
Speaker #3: Once again , that is star one . To ask a question . Thank you . Our first question comes from Matt Leroux with William Blair .
Matt Larew: Hi, good morning, and thanks for taking the question. So, Jim, just following up on the growth cadence. So 1%, you know, X items in fiscal Q1, then 3%, and you're saying mid-single in Q3, and I believe there's a 100 basis points headwind in fiscal Q4. So, I just reading this through, you're expecting sort of for the calendar year 2026, X these items, mid-single-digit growth with improvement throughout the year. Is that the message?
Matthew Larew: Hi, good morning, and thanks for taking the question. So, Jim, just following up on the growth cadence. So 1%, you know, X items in fiscal Q1, then 3%, and you're saying mid-single in Q3, and I believe there's a 100 basis points headwind in fiscal Q4. So, I just reading this through, you're expecting sort of for the calendar year 2026, X these items, mid-single-digit growth with improvement throughout the year. Is that the message?
Speaker #3: Your line is open .
Speaker #4: Good morning , Hi . and thanks for taking the question . So , Jim , just following up on the the . Growth cadence .
Speaker #4: So 1% , you know , X items in fiscal Q1 , then 3% . And you're saying mid-single inf Q3 . And I believe there's a 100 bips headwind in fiscal Q4 .
Speaker #4: So am reading this I through . You're expecting sort of for the calendar year 26 x . These items , mid-single digit growth with improvement throughout the year , is that the message ?
Jim Hippel: Make sure, yeah. So we haven't come off our low single-digit view for the full year, and that would require mid-single-digit growth in Q4, at least, yes.
Jim Hippel: Make sure, yeah. So we haven't come off our low single-digit view for the full year, and that would require mid-single-digit growth in Q4, at least, yes.
Speaker #2: sure . Yeah . we So Make haven't come off our low single digit view for the full year . And that would require mid-single digit growth in Q4 at least .
Kim Kelderman: I think, Matt, good morning. What you, what you're trying to ask is, if you take these two large customers from the GMP headwinds out, would that be the underlying growth? I think that's in the ballpark.
Kim Kelderman: I think, Matt, good morning. What you, what you're trying to ask is, if you take these two large customers from the GMP headwinds out, would that be the underlying growth? I think that's in the ballpark.
Speaker #2: Yes .
Speaker #1: think And I Matt , good morning . Would you trying to ask is if you two large customers from the take these GMP headwinds out , would that be the underlying growth ?
Matt Larew: Okay, very good. Just following up on gross margins, you know, that the year-over-year step down makes sense because of your two large customers. The quarter-over-quarter initially was less clear, but perhaps it's that large OEM order that shifted from fiscal Q3 into fiscal Q2. So Jim, maybe just give a sense for why, on a sequential basis, gross margins were down and how those should trend for the balance of the year.
Matthew Larew: Okay, very good. Just following up on gross margins, you know, that the year-over-year step down makes sense because of your two large customers. The quarter-over-quarter initially was less clear, but perhaps it's that large OEM order that shifted from fiscal Q3 into fiscal Q2. So Jim, maybe just give a sense for why, on a sequential basis, gross margins were down and how those should trend for the balance of the year.
Speaker #1: And I think that's in the ballpark .
Speaker #4: Okay . Very good . And then just following up on on gross margins , you know , the year over year step down makes sense because of your two large customers .
Speaker #4: The quarter-over-quarter initially was less clear. But perhaps it's that large OEM that order shifted from fiscal Q3 into fiscal Q2.
Speaker #4: So Jim , maybe just give a sense for why on a sequential basis , gross margins down were and and how those should trend for the balance of the year .
Jim Hippel: Yeah, I mean, unfortunately, it was really driven by an unfavorable mix on a number of fronts. Unfavorable mix in terms of our reagents versus our instruments. We talked about the strength in our ProteinSimple franchise. Great margins, but still less than our reagents. And we also had some margin pressures in our diagnostics and spatial segment there, where we had, of course, spatial underperforming the diagnostics side that has higher margin pull-through, so you got mix issues there. But in addition, within the diagnostics orders, a lot of different OEM customers have different margin profiles, and it just so happened that we had a larger influx of lower-margin customers this quarter.
Jim Hippel: Yeah, I mean, unfortunately, it was really driven by an unfavorable mix on a number of fronts. Unfavorable mix in terms of our reagents versus our instruments. We talked about the strength in our ProteinSimple franchise. Great margins, but still less than our reagents. And we also had some margin pressures in our diagnostics and spatial segment there, where we had, of course, spatial underperforming the diagnostics side that has higher margin pull-through, so you got mix issues there. But in addition, within the diagnostics orders, a lot of different OEM customers have different margin profiles, and it just so happened that we had a larger influx of lower-margin customers this quarter. But we again expect the overall mix, well, both within protein factors as well as in diagnostics, to gradually improve as those mix mixes start to unwind more favorably in Q3 and Q4.
Speaker #2: Yeah , I mean , it was really driven by . A unfavorable mix on a number of fronts . Unfavorable mix in terms of our reagents versus instruments .
Speaker #2: We talked about the strength and our protein . Simple franchise . Great margins , but still less than our reagents . And we also had some margin pressures in our in our diagnostics and spatial segment there where we had of course , spatial underperforming , underperforming the diagnostics side that has higher margin pull through .
Speaker #2: So you got mixed issues there . But in addition , within the diagnostics orders , a lot of different OEM customers have different margin profiles .
Jim Hippel: But we again expect the overall mix, well, both within protein factors as well as in diagnostics, to gradually improve as those mix mixes start to unwind more favorably in Q3 and Q4.
Speaker #2: And it just so happened that we had a larger influx of lower margin this quarter customers again . But we expect the overall mix will both within protein sciences as well , within diagnostics to gradually improve as those mix mixes start to unwind more favorably in Q3 and Q4 .
Matt Larew: Okay, thank you.
Matthew Larew: Okay, thank you.
Jim Hippel: Mm-hmm.
Operator: We'll move next to Dan Leonard with UBS. Your line is open.
Operator: We'll move next to Dan Leonard with UBS. Your line is open.
Speaker #4: Okay . Thank you .
Dan Leonard: Thank you very much. Maybe I'll pick up that gross margin question. Jim, what's the driver of a more favorable unwind on gross margin? Presumably, you still expect ProteinSimple to be strong, and spatial, it sounds like it ought to recover, given the, you know, growth in bookings.
Daniel Leonard: Thank you very much. Maybe I'll pick up that gross margin question. Jim, what's the driver of a more favorable unwind on gross margin? Presumably, you still expect ProteinSimple to be strong, and spatial, it sounds like it ought to recover, given the, you know, growth in bookings.
Speaker #3: We'll move next to Dan Leonard with UBS . Your line is .
Speaker #5: Thank you very much . Maybe I'll take up that gross margin question . Jim , what's the driver of a more unwind on favorable gross margin ?
Speaker #5: still expect Presumably you protein simple to be strong and spatial . It sounds like it ought to recover , given the growth in bookings .
Jim Hippel: Yeah, so with the overall, we think market gradually improving and our core has been improving, the margins of our high, the high margins of our reagents will start to flow through more. Again, the customer mix within diagnostics, we know we have visibility to what's flowing through there, and we believe that will improve as well. So it truly is more of a mix scenario than anything else. And based on our current view, outlook, and what we see ahead of us, we see that mix again gradually improving in the back half of the year.
Jim Hippel: Yeah, so with the overall, we think market gradually improving and our core has been improving, the margins of our high, the high margins of our reagents will start to flow through more. Again, the customer mix within diagnostics, we know we have visibility to what's flowing through there, and we believe that will improve as well. So it truly is more of a mix scenario than anything else. And based on our current view, outlook, and what we see ahead of us, we see that mix again gradually improving in the back half of the year.
Speaker #2: Yeah . I so with the , we think market overall gradually improving in our core has been the the improving margins of our high or the high margins of our reagents will start to flow through more .
Speaker #2: Again , the customer within mix diagnostics . We have visibility to what's flowing through there . And we believe that will improve as well .
Speaker #2: So it truly is more of a mix scenario than anything else . And based on our current view and outlook and what we see ahead of us , we see that mix again improving in the back half of the year , gradually .
Dan Leonard: Okay, thank you.
Daniel Leonard: Okay, thank you. Then a high level question, you know, given the times we're in, I would be curious for your team's thoughts on AI's impact on demand for biotech needs, just given the number of times Pfizer mentioned yesterday, you know, AI as a cost saving and productivity enhancer in R&D.
Jim Hippel: ...Then a high level question, you know, given the times we're in, I would be curious for your team's thoughts on AI's impact on demand for biotech needs, just given the number of times Pfizer mentioned yesterday, you know, AI as a cost saving and productivity enhancer in R&D.
Speaker #5: Okay . Thank you . And then a high level question the , given times we're in , I would be curious for your team's thoughts on AI's impact on demand for biotech .
Speaker #5: Just given the number of times mentioned Pfizer yesterday , you know , AI is a cost saving and productivity enhancer in R&D
Kim Kelderman: I can give you a high level view on that, Dan. Overall, we do believe that AI is a great enabler, not only for our customers, also for us, obviously. But our customers will use AI to better understand and to better drive their programs forward. Highly likely, AI will help them to be more specific in what kind of materials they want. And highly likely, because of the capabilities, the molecules and the ingredients that they will want to use, are going to be more complex. And, you know, we've worked for 50 years honing our capabilities in designing, but also manufacturing in a reproducible way, these ingredients in very high quality formats.
Kim Kelderman: I can give you a high level view on that, Dan. Overall, we do believe that AI is a great enabler, not only for our customers, also for us, obviously. But our customers will use AI to better understand and to better drive their programs forward. Highly likely, AI will help them to be more specific in what kind of materials they want. And highly likely, because of the capabilities, the molecules and the ingredients that they will want to use, are going to be more complex. And, you know, we've worked for 50 years honing our capabilities in designing, but also manufacturing in a reproducible way, these ingredients in very high quality formats.And we believe that these trends will therefore play into our cards, into the strengths that we have built as a company, and overall, are going to be a tailwind.
Speaker #5: . give you a I can
Speaker #1: high level . View on that . Dan , the overall , we do believe that AI is a great enabler , not only for our customers , also for us , obviously , but our customers will use AI to better understand better .
Speaker #1: and to Drive their programs forward . Highly likely AI will help them to be more specific in what kind of materials they want highly , and likely because of the the capabilities , the molecules and the ingredients that they will want to use are going to be more complex .
Speaker #1: And , you know , we've worked for 50 years honing our capabilities in designing , but also manufacturing in a reproducible way . These ingredients in very high quality formats .
Kim Kelderman: And we believe that these trends will therefore play into our cards, into the strengths that we have built as a company, and overall, are going to be a tailwind.
Speaker #1: We believe that these trends will therefore play into our cards, into the strengths that we have built as a company.
Jim Hippel: Appreciate that. Thanks, Kim.
Jim Hippel: Appreciate that. Thanks, Kim.
Speaker #1: And overall are going to be a tailwind .
Operator: We'll move next to Puneet Souda with Leerink Partners. Your line is open.
Operator: We'll move next to Puneet Souda with Leerink Partners. Your line is open.
Speaker #5: Appreciate that. Thanks, Kim.
Puneet Souda: Yeah, hi, guys. Thanks for the questions here. So, first one, I mean, I appreciate the meaningful step up that needs to happen in Q4 here, in organic growth. And I think you gave some underlying drivers to that, but just wondering, you know, I just want to—if you could maybe point out a number that we should be thinking about exiting the year. And then on 2027, I know it's just 2 quarters away for you, after the guide. I was wondering if you're willing to share any thoughts on, you know, potentially reaching high single digit, or is that visibility not clear yet, just given all of the moving parts in the end market?
Puneet Souda: Yeah, hi, guys. Thanks for the questions here. So, first one, I mean, I appreciate the meaningful step up that needs to happen in Q4 here, in organic growth. And I think you gave some underlying drivers to that, but just wondering, you know, I just want to—if you could maybe point out a number that we should be thinking about exiting the year. And then on 2027, I know it's just 2 quarters away for you, after the guide. I was wondering if you're willing to share any thoughts on, you know, potentially reaching high single digit, or is that visibility not clear yet, just given all of the moving parts in the end market?
Speaker #3: We'll move next to Punta Tsuda with Leerink Partners . open Your line is .
Speaker #6: Yeah . Hi , guys . Thanks for the questions here . So first one , I mean , I appreciate the meaningful step up that needs to happen in the fourth fiscal quarter here in in organic growth .
Speaker #6: And I think you gave some drivers to that . just wondering , you know I just want to if you could maybe point out a number that's we should be thinking about exiting the year and then 27 , on I know it's just two quarters away for you .
Speaker #6: guide After the wondering if you're willing to share any thoughts on , you know , potentially reaching high single digit , or is that visibility not clear yet , just given all of the moving parts in the end market ?
Kim Kelderman: Yeah, Puneet, let me begin your first question with the underlying business trends, and I'll let Jim talk to the, what that means for the numbers. But if you, if you look at our last couple of quarters, and I'll segment it in the way we usually do it, we, we have our core business, which is a little over half of the company, where we can clearly see a recuperation increase of our run rate business, right? You see the underlying business accelerating, and that bodes well for the activity levels in the markets overall. And if I then double click on the performance in our four growth protocols and cell therapy, you know, obviously, the two fast track designation accounts play a big role in that.
Kim Kelderman: Yeah, Puneet, let me begin your first question with the underlying business trends, and I'll let Jim talk to the, what that means for the numbers. But if you, if you look at our last couple of quarters, and I'll segment it in the way we usually do it, we, we have our core business, which is a little over half of the company, where we can clearly see a recuperation increase of our run rate business, right? You see the underlying business accelerating, and that bodes well for the activity levels in the markets overall. And if I then double click on the performance in our four growth protocols and cell therapy, you know, obviously, the two fast track designation accounts play a big role in that.
Speaker #1: Yeah . Let me begin . Your first question with the underlying business trends , and I'll let Jim talk through what that means for the numbers .
Speaker #1: But if you if you look at our last couple of quarters and I'll segment it in the way we usually do it , we have our core business , which is a little over half of the company where we can clearly see a recuperation increase of our run rate business .
Speaker #1: Right . And you see the underlying business accelerating . And that bodes well for the activity levels in the markets overall . And if I then double click on the performance in our for protocols in cell therapy two fast obviously the track , designation accounts play a big role in that .
Kim Kelderman: But if you take those out, the business has been growing 30%, and that's in line with where we expect it to be, even in tough markets. We have fantastic traction in organoids, which is a strong up-and-coming end market for us. The proteomic analysis obviously accelerating business too. We're now sitting back in the mid-single digits, accelerating. Spatial 2x in the black, where we are flattish, but back in the positive growth territory for the reagents. Sorry, for the reagents. And instruments coming, coming along because we have strong order bookings. Sprinkle on top of that, the new product introductions, where we have basically every month introduced a significant new feature for every business.
Kim Kelderman: But if you take those out, the business has been growing 30%, and that's in line with where we expect it to be, even in tough markets. We have fantastic traction in organoids, which is a strong up-and-coming end market for us. The proteomic analysis obviously accelerating business too. We're now sitting back in the mid-single digits, accelerating. Spatial 2x in the black, where we are flattish, but back in the positive growth territory for the reagents. Sorry, for the reagents. And instruments coming, coming along because we have strong order bookings. Sprinkle on top of that, the new product introductions, where we have basically every month introduced a significant new feature for every business.
Speaker #1: But if you take those out , the business has been growing 30% and that's in line with where we expect it to be .
Speaker #1: Even in tough markets . We have fantastic traction in organoids , which is a strong up and coming and market for us . The proteomic analysis obviously business to we're now accelerating sitting back in the mid single digits , accelerating spatial two times in the black , where we are flattish .
Speaker #1: But back in positive growth territory for the regions . Sorry for the reagents and instruments coming , coming along because we have strong order bookings .
Speaker #1: Sprinkle new—that. The—on top of introductions, where we have basically every month introduced a significant new new feature for every business.
Kim Kelderman: And then, you know, not that we're banking on it, but we've seen very positive trending in our end markets, China and APAC. For the third time, China in positive growth, and accelerating. APAC is turning even stronger. And then, as you know, tough markets in academic and biotech, but we've talked about some of the indicators, why there are positive opportunities there when it comes to the overall end market health. So that is the underlying dynamic, and Jim can actually translate that in numbers.
Kim Kelderman: And then, you know, not that we're banking on it, but we've seen very positive trending in our end markets, China and APAC. For the third time, China in positive growth, and accelerating. APAC is turning even stronger. And then, as you know, tough markets in academic and biotech, but we've talked about some of the indicators, why there are positive opportunities there when it comes to the overall end market health. So that is the underlying dynamic, and Jim can actually translate that in numbers.
Speaker #1: And then , that we're you know , not banking on it , but we've seen very positive in our end trending markets . China and APAC for the third time , China in in positive growth and accelerating APAC is is turning even stronger .
Speaker #1: And then as you know markets in , tough academic and biotech . But we've talked some of the indicators why there's why there are positive .
Speaker #1: Positive . Opportunities there if it comes to the overall end market health . So so that is the underlying dynamic . And Jim can actually translate that in numbers .
Jim Hippel: Yeah. So Puneet, let's just start with, you know, the comps we're facing from Q3 versus Q4. So we grew 6% of the company in Q3 of last year, and we grew 3% in Q4. That decrease in growth rate, you know, from a comp perspective, is a combination of, from a headwind or a tailwind perspective, a combination of lower headwinds from these two cell therapy customers we've talked about, but also, you know, easier comps within our both academic and small biotech starting in February. So there's a 3% tailwind sequentially, just right there as a combination of those three things.
Jim Hippel: Yeah. So Puneet, let's just start with, you know, the comps we're facing from Q3 versus Q4. So we grew 6% of the company in Q3 of last year, and we grew 3% in Q4. That decrease in growth rate, you know, from a comp perspective, is a combination of, from a headwind or a tailwind perspective, a combination of lower headwinds from these two cell therapy customers we've talked about, but also, you know, easier comps within our both academic and small biotech starting in February. So there's a 3% tailwind sequentially, just right there as a combination of those three things.
Speaker #1: Yeah .
Speaker #2: So let's just with , you know , start the comp we're facing from Q3 versus Q4 . So we grew 6% of the company in Q3 of last year .
Speaker #2: And we grew 3% in Q4 . That decrease in growth rate , from a comp perspective , is a combination of headwind or tailwind perspective , a combination of of lower headwinds from our these two cell therapy customers .
Speaker #2: We've talked about . But also , you know , easier comps within our both academic and small biotech starting and starting in February .
Jim Hippel: And then, as Kimmel has talked about, in terms of the underlying momentum we're seeing in our whole entire rest of our business, as I mentioned in my comments, if you exclude these two customers and this one OEM timing that we had, our underlying growth was 1% in Q1, 3% in Q2. Our implied guidance would suggest a slight step up in Q3. And so you see this momentum building within our baseline business. And so we think that will continue to build as we exit the year in Q4, and that's on top of the, you know, the 3% tailwind we have from a comp perspective.
Jim Hippel: And then, as Kimmel has talked about, in terms of the underlying momentum we're seeing in our whole entire rest of our business, as I mentioned in my comments, if you exclude these two customers and this one OEM timing that we had, our underlying growth was 1% in Q1, 3% in Q2. Our implied guidance would suggest a slight step up in Q3. And so you see this momentum building within our baseline business. And so we think that will continue to build as we exit the year in Q4, and that's on top of the, you know, the 3% tailwind we have from a comp perspective.
Speaker #2: So there's a 3% tailwind sequentially just right there as a combination of those three things . And then as Kim talked about in terms of the underlying momentum we're seeing in our whole entire rest of our business , as I mentioned in my comments , if you exclude these two customers and this one OEM timing that we had , our underlying growth was 1% in Q1 , 3% in Q2 , our implied guidance was suggest a slight step up in Q in Q3 .
Speaker #2: so you And see this momentum building within our baseline business . And so we think that will continue to build as exit the we Q4 year in .
Jim Hippel: So that's how we're thinking about exiting the year, which is obviously a very, you know, very strong momentum as an underlying base business growth, as the final headwinds from these customers go away at the start of our fiscal year 2027. So not giving any fiscal year 2027 guidance, obviously, at this point, but the momentum of business is very encouraging right now.
Jim Hippel: So that's how we're thinking about exiting the year, which is obviously a very, you know, very strong momentum as an underlying base business growth, as the final headwinds from these customers go away at the start of our fiscal year 2027. So not giving any fiscal year 2027 guidance, obviously, at this point, but the momentum of business is very encouraging right now.
Speaker #2: that's And on top of the 3% tailwind we have from a comp perspective . So that's how we're thinking about exiting year , which is the obviously a very , you know , very strong momentum as we underlying base business growth as the final headwinds from these customers go away .
Speaker #2: And at the start of our fiscal 27 . year So not getting any fiscal year 21 guidance , obviously at this but point , the momentum of the business is very encouraging right now
Puneet Souda: Got it. That, that's helpful, Jim. And then on China, you pointed that out a couple of times throughout the call. What's clearly interesting here is, you're growing ahead of the peers, indeed, consistently. So just could you dive a bit deeper into that? And what's driving this strength, the end market, the customers, what's different here, versus for Bio-Techne versus some of the peers? Thank you.
Puneet Souda: Got it. That, that's helpful, Jim. And then on China, you pointed that out a couple of times throughout the call. What's clearly interesting here is, you're growing ahead of the peers, indeed, consistently. So just could you dive a bit deeper into that? And what's driving this strength, the end market, the customers, what's different here, versus for Bio-Techne versus some of the peers? Thank you.
Speaker #2: .
Speaker #6: . That's Got it helpful . Jim then on . And China , I you pointed that out a couple of times throughout the call .
Speaker #6: clearly What's interesting here is you're going growing ahead of the peers . Indeed consistently . So just could you drive a bit deeper into that .
Speaker #6: And what's driving this a strength . The end market the customers . What's different here for BIO-TECHNE Corp versus some of the peers ?
Kim Kelderman: Yeah, you're welcome. Yeah, China, it's Q3. We are in a positive territory, and the growth is accelerating. I think the China market is overall gaining momentum. They have approved their 15th five-year funding plan, in which life science is again a high priority. And we've seen successes from local biotech companies having exits in the form of M&A or through licensing, and you can clearly see a peak of deals done with China biotech. Overall activity in CDMO and CRO is also improving, and I think we're well positioned to capitalize on that, and that's really been driving our results.
Kim Kelderman: Yeah, you're welcome. Yeah, China, it's Q3. We are in a positive territory, and the growth is accelerating. I think the China market is overall gaining momentum. They have approved their 15th five-year funding plan, in which life science is again a high priority. And we've seen successes from local biotech companies having exits in the form of M&A or through licensing, and you can clearly see a peak of deals done with China biotech. Overall activity in CDMO and CRO is also improving, and I think we're well positioned to capitalize on that, and that's really been driving our results.
Speaker #6: Thank you .
Speaker #1: Yeah . You're welcome . The yeah China . It's the third quarter . We are in in in a positive territory . it's And the growth is accelerating I think the China market is overall gaining momentum have .
Speaker #1: They approved their 15th five year funding plan , in which life sciences , again a high priority . And we've seen successes from local biotech companies having exits in the form of M&A or through And you licensing .
Speaker #1: can clearly see a peak of deals done in in with China , China biotech overall activity in CDMO and CRO is also improving think we're well .
Puneet Souda: Got it. Okay, thank you.
Puneet Souda: Got it. Okay, thank you.
Speaker #1: Positioned to, and I capitalize on that. And that's really been—have been driving our results.
Operator: We'll take our next question from Patrick Donnelly with Citigroup. Your line is open.
Operator: We'll take our next question from Patrick Donnelly with Citigroup. Your line is open.
Speaker #6: Got it. Thank you.
Speaker #3: We'll take our next question from Patrick Donnelly with Citigroup . Your line is open .
Patrick Donnelly: Helpful rundown there of kind of the moving pieces as we head into year-end and next year. I just want to kind of zone in on a few. You know, it sounds like, again, the message here is mid-single digit underlying growth if you back out the customers, or at least in that ballpark, for 2026. And then as biotech improves and then these customers flip, you have some things to build on as you get into 2027. Can you talk about the biotech piece in particular? Again, still declining for you guys, but sounds like all the conversations are improving. Obviously, we've seen the funding numbers, which were quite strong in calendar Q4. What are you hearing from that customer base, and what's the right way to think about the timing of that funding improvement showing up for you guys in terms of revenue?
Patrick Donnelly: Helpful rundown there of kind of the moving pieces as we head into year-end and next year. I just want to kind of zone in on a few. You know, it sounds like, again, the message here is mid-single digit underlying growth if you back out the customers, or at least in that ballpark, for 2026. And then as biotech improves and then these customers flip, you have some things to build on as you get into 2027. Can you talk about the biotech piece in particular? Again, still declining for you guys, but sounds like all the conversations are improving. Obviously, we've seen the funding numbers, which were quite strong in calendar Q4. What are you hearing from that customer base, and what's the right way to think about the timing of that funding improvement showing up for you guys in terms of revenue?
Speaker #7: rundown there . Kind of moving A full pieces as we head into year end and next year . I just want to kind of zone in few .
Speaker #7: It sounds on a like the message here is mid-single digit underlying you back out the growth . If customers , or at least that ballpark for then 26 , and as biotech improves and then these customers flip , you have some things to build on as you get into 27 .
Speaker #7: Can you talk about the biotech piece in particular again , still declining for you guys , but sounds all the like conversations are improving .
Speaker #7: Obviously, we see the funding numbers, which are quite strong in the Q calendar. What are you hearing from that customer base, and what's the right way to think about the timing of that funding improvement?
Patrick Donnelly: Is it kind of that six-month type lag that you've talked about before? What's the right way to think about the path forward on the biotech for you guys?
Patrick Donnelly: Is it kind of that six-month type lag that you've talked about before? What's the right way to think about the path forward on the biotech for you guys?
Speaker #7: Showing up for you guys in terms of revenue? Is it kind of that six-month time lag that you've talked about before?
Kim Kelderman: Patrick, thanks for the question. Sure. Biotech has been a tough end market, right? Obviously, the first half of calendar 2025, funding was dismal. That resulted for us in a negative high single digits Q1, and a negative mid-single digits Q2, improving, but still not very good. Now, we are encouraged because we've really made sure that we are addressing the market with the right products and the right teams. We also have made sure that we're launching new product introductions continuously fit for that end market. And we, of course, keep a close eye on the overall health of the end market, primarily through the funding. And you just mentioned that Q3, calendar Q3, funding stabilized, slightly increased, but funding in Q4 increased significantly.
Kim Kelderman: Patrick, thanks for the question. Sure. Biotech has been a tough end market, right? Obviously, the first half of calendar 2025, funding was dismal. That resulted for us in a negative high single digits Q1, and a negative mid-single digits Q2, improving, but still not very good. Now, we are encouraged because we've really made sure that we are addressing the market with the right products and the right teams. We also have made sure that we're launching new product introductions continuously fit for that end market. And we, of course, keep a close eye on the overall health of the end market, primarily through the funding. And you just mentioned that Q3, calendar Q3, funding stabilized, slightly increased, but funding in Q4 increased significantly.
Speaker #7: What's the right way to think about the path forward on the biotech for you guys ?
Speaker #1: Patrick , thanks for the question . Sure . Biotech has been a tough end market right ? Obviously , first half the of calendar 25 funding was dismal .
Speaker #1: The for us resulted in a negative high single digit Q1 and a negative mid-single digit Q2 improving , but still not very good .
Speaker #1: Now we are we are encouraged because we've we've really made sure that we are addressing the market with the products right and the right the right themes .
Speaker #1: We also made sure that we're launching new product introductions , continuously fit for that . And . And we of course market keep a close eye on the overall health of the end market , primarily through the the funding .
Speaker #1: you just And mentioned that Q3 calendar Q3 funding stabilized slightly increased , but funding in Q4 increased significantly . And we've also seen very healthy numbers for the first month of the new calendar year .
Kim Kelderman: We've also seen very healthy numbers for the first month of the new calendar year. You know, overall, M&A activity is an important indicator and has been trending positive in that market. Licensing has been positive and trending in the market. Lower interest rates are important to funding of that market, and are doing well. Then, you know, assuming that there will be access to capital, yes, you're right. Typically, the delay of the funding coming trickling through in life science tools is six months. There's quite some underutilized infrastructure in place. So, you know, we are anticipating the bell curve to sit at six months, two, let's say two quarters, ±1.
Kim Kelderman: We've also seen very healthy numbers for the first month of the new calendar year. You know, overall, M&A activity is an important indicator and has been trending positive in that market. Licensing has been positive and trending in the market. Lower interest rates are important to funding of that market, and are doing well. Then, you know, assuming that there will be access to capital, yes, you're right. Typically, the delay of the funding coming trickling through in life science tools is six months. There's quite some underutilized infrastructure in place. So, you know, we are anticipating the bell curve to sit at six months, two, let's say two quarters, ±1.
Speaker #1: You know , overall M&A activity is an important indicator and has been trending positive in that market . Licensing has been positive and trending in the market .
Speaker #1: Lower rates interest are important to funding of that market . And and are doing well . And then , you know , assuming that there will be access to capital .
Speaker #1: Yes . You're right . the Typically delay the of funding coming trickling through in life science tools is six months . There's quite some underutilized infrastructure in place .
Kim Kelderman: And that goes from companies switching on or accelerating their programs and ordering a little bit earlier, especially in the reagent side; it can go relatively quickly. But then CapEx takes a little bit longer, and that will be the back end of that bell curve, and that's how we look at the dynamics.
Kim Kelderman: And that goes from companies switching on or accelerating their programs and ordering a little bit earlier, especially in the reagent side; it can go relatively quickly. But then CapEx takes a little bit longer, and that will be the back end of that bell curve, and that's how we look at the dynamics.
Speaker #1: So , we are anticipating the bell curve to sit at six months . To , let's say , two quarters plus or minus one .
Speaker #1: that goes And from companies switching on or accelerating their programs and ordering a little bit especially earlier , reagent side that can go relatively quickly .
Speaker #1: But then CapEx takes a little bit longer, and that will be the back end of that bell curve. And that's how we look at the dynamics.
Patrick Donnelly: On the cell therapy piece, you know, it sounds like, again, Exo's customers are seeing pretty good growth. Can you help us size up? I think at our conference, when we were chatting, you were talking about, at the peak, those two customers were maybe as much as 40% of the GMP business. Again, you talked about the GMP business down 50%, so that makes sense. Are we to kind of expect this, the GMP business normalizes as we get into Q1, fiscal Q1 2027 for you guys, and then gets back to that, you know, over 20% growth as a business?
Patrick Donnelly: On the cell therapy piece, you know, it sounds like, again, Exo's customers are seeing pretty good growth. Can you help us size up? I think at our conference, when we were chatting, you were talking about, at the peak, those two customers were maybe as much as 40% of the GMP business. Again, you talked about the GMP business down 50%, so that makes sense. Are we to kind of expect this, the GMP business normalizes as we get into Q1, fiscal Q1 2027 for you guys, and then gets back to that, you know, over 20% growth as a business? I just wanna make sure we're thinking about clearly the impact of these customers, when it can flip, and again, what the right way to think about the sizing of that business is before the customers, after, and the right baseline. Thank you so much.
Speaker #7: On a cell the on sounds like again , it piece , customers are seeing pretty good growth . Can you can you help us size up ?
Speaker #7: I think at our we were conference when chatting , you were talking about at the peak , those two customers were maybe as much as 40% of the GMP business .
Speaker #7: Again , you talked about GMP business down 50% . So that makes sense . Are we kind of expect this GMP business normalizes as we get into one ?
Patrick Donnelly: I just wanna make sure we're thinking about clearly the impact of these customers, when it can flip, and again, what the right way to think about the sizing of that business is before the customers, after, and the right baseline. Thank you so much.
Speaker #7: Q fiscal Q one 27 for you guys , and then gets back to that over 20% growth as a business , I just want to make sure we're thinking about clearly impact of these the customers when it can flip .
Speaker #7: again , what And the right way to think about the sizing of that business is before the customers , after . And the right Thank you so baseline .
Kim Kelderman: Yeah, Patrick, thanks for the question. We're excited that these two customers have their Fast Track designation, obviously an indication for the importance of the treatments. And we've talked about it extensively, so I'll keep that part short. Underlying 700+ customers, 85 in clinical studies, and 6 in phase 3. But overall, in much more evenly sized customers, so it's not gonna be as lumpy as the two that we are now working through this specific air pocket we talked about. But yes, the air pocket was indeed a 200 basis headwind for Q1, 400 for this quarter, Q2.
Kim Kelderman: Yeah, Patrick, thanks for the question. We're excited that these two customers have their Fast Track designation, obviously an indication for the importance of the treatments. And we've talked about it extensively, so I'll keep that part short. Underlying 700+ customers, 85 in clinical studies, and 6 in phase 3. But overall, in much more evenly sized customers, so it's not gonna be as lumpy as the two that we are now working through this specific air pocket we talked about. But yes, the air pocket was indeed a 200 basis headwind for Q1, 400 for this quarter, Q2.
Speaker #7: , Patrick .
Speaker #1: Thanks. We're excited that these two customers received fast track designation. Obviously, the importance is in the indication for each of the treatments as they had their designations.
Speaker #1: And we've talked about it extensively . I'll So keep that I'll part short . Underlying 700 plus customers . 85 in clinical studies and six in phase three .
Speaker #1: But overall in in much more evenly sized customers . going to be as So it's not lumpy as the two that that we are now working through working this , this pocket .
Speaker #1: about talked air We yes , the air pocket was . But headwind for 200 basis Q1 400 for this quarter . Q2 . And then we're thinking of the impact to be 300 basis points .
Kim Kelderman: And then we're thinking of the impact to be 300 basis points, and then somewhere around 150, anywhere between 100 and 200 for Q4, and then a total reset. So your conclusion is right, that from there, we will go back to normalized growth. As I just mentioned in the first question, the underlying growth in that business was 30% this last quarter, and that is actually a growth that we would expect from this business. But take into account that that is still under very constrained conditions, if you look at academic and biotech markets. So overall, we have a very positive view on the end market in particular.
Kim Kelderman: And then we're thinking of the impact to be 300 basis points, and then somewhere around 150, anywhere between 100 and 200 for Q4, and then a total reset. So your conclusion is right, that from there, we will go back to normalized growth. As I just mentioned in the first question, the underlying growth in that business was 30% this last quarter, and that is actually a growth that we would expect from this business. But take into account that that is still under very constrained conditions, if you look at academic and biotech markets. So overall, we have a very positive view on the end market in particular.
Speaker #1: And then somewhere around 150 , anywhere between 100 and 200 for Q4 . And then a total reset . So your conclusion is right that from there , we will go back to normalized growth , as I just mentioned in the in the first question , the the underlying growth in that business was 30% this last quarter .
Speaker #1: And that is growth that a actually we would expect from this But business . take into account that that is still under constrained conditions .
Speaker #1: If you look at academic and biotech markets . So overall , we have a very positive view on , on , on market the end in particular , knowing that our comparables will be flushed out , Q1 2027 .
Kim Kelderman: Knowing that, our comparables will be flushed out Q1 2027, also knowing that the number of clinical studies have increased in a healthy pace, and knowing that the mix of clinical studies has tilted towards cell therapy, related treatments, that really plays into our strengths and reads much better on our portfolio. So, so overall, we're very positive about, this division going forward into the, new fiscal year.
Kim Kelderman: Knowing that, our comparables will be flushed out Q1 2027, also knowing that the number of clinical studies have increased in a healthy pace, and knowing that the mix of clinical studies has tilted towards cell therapy, related treatments, that really plays into our strengths and reads much better on our portfolio. So, so overall, we're very positive about, this division going forward into the, new fiscal year.
Speaker #1: Also, knowing that the number of clinical studies in healthy increased at pace, and knowing that the mix of clinical studies has tilted towards cell therapy-related treatments, that really plays into our strengths and reads much better on our portfolio.
Speaker #1: So , so overall , we're very positive about this . This division going forward into the new year .
Operator: We'll move next to Dan Arias with Stifel. Your line is open.
Operator: We'll move next to Dan Arias with Stifel. Your line is open.
Dan Arias: Good morning, guys. Thank you. Jim, I'm sorry. I just want to go back to the outlook one more time, if I can. Is the picture that you're kind of sketching out for the end of the fiscal year, the mid-single digit growth in 4Q, does that assume that both academic and biotech are growing at that point? Or is it what gets you there really just continued pharma strength and then normalized spending from these two GMP customers?
Daniel Arias: Good morning, guys. Thank you. Jim, I'm sorry. I just want to go back to the outlook one more time, if I can. Is the picture that you're kind of sketching out for the end of the fiscal year, the mid-single digit growth in 4Q, does that assume that both academic and biotech are growing at that point? Or is it what gets you there really just continued pharma strength and then normalized spending from these two GMP customers?
Speaker #3: We'll move next to Dan with Arias Stiefel Your . open .
Speaker #8: Good morning guys . Thank you Jim I'm sorry . I just want to go back to the outlook one more time if I can .
Speaker #8: Is the picture that you're kind of sketching out for the end of the year ? The fiscal mid-single digit growth in four ? Q does that assume that both academic and biotech are growing at that point , or is it is what gets you there really just continued pharma strength and then normalized spending from these two GMP customers ?
Jim Hippel: Yeah, because of the easier comps, we can get there largely without seeing much of a step up in those two customers. But, you know, but again, I think any significant improvement in spending of those two partners could be upside.
Jim Hippel: Yeah, because of the easier comps, we can get there largely without seeing much of a step up in those two customers. But, you know, but again, I think any significant improvement in spending of those two partners could be upside.
Speaker #2: Yeah, because of the easier comps, we can get there largely without seeing much of a step up in those two customers.
Speaker #2: But you know , but again , I think any significant improvement in spending of those two partners could be upside .
Dan Arias: Okay. And then maybe on the spatial biology side, you have the academic exposure, that obviously impacts the instrument side of the equation. But on consumables, how are you thinking about the pull-through rate for Lunaphore this year? Is that something that you think can grow as an average?
Daniel Arias: Okay. And then maybe on the spatial biology side, you have the academic exposure, that obviously impacts the instrument side of the equation. But on consumables, how are you thinking about the pull-through rate for Lunaphore this year? Is that something that you think can grow as an average?
Speaker #8: Okay . And then on on the spatial maybe biology side , you have the academic exposure that obviously impacts the instrument side of the But on consumables how are you thinking about the pull through rate for this year ?
Kim Kelderman: Yeah, Dan, thanks, thanks for always keeping a keen eye out on the spatial side of the business. I appreciate it. Yeah, listen, it has indeed a larger proportion of revenue linked to the academic performance. Academic performance has stabilized, and what we're really pleased to see is that the mix of the grants has tilted from some research areas more to oncology and neurology, and a preferred tool for those research and markets is spatial. So you do see, even though the market is under pressure, that our comms revenues have gone back into positive growth territory, and which we are very happy to see in constrained markets. And therefore, this mix is really playing in our favor, a very similar story for biotech.
Kim Kelderman: Yeah, Dan, thanks, thanks for always keeping a keen eye out on the spatial side of the business. I appreciate it. Yeah, listen, it has indeed a larger proportion of revenue linked to the academic performance. Academic performance has stabilized, and what we're really pleased to see is that the mix of the grants has tilted from some research areas more to oncology and neurology, and a preferred tool for those research and markets is spatial. So you do see, even though the market is under pressure, that our comms revenues have gone back into positive growth territory, and which we are very happy to see in constrained markets. And therefore, this mix is really playing in our favor, a very similar story for biotech.
Speaker #8: You think something that can—Is that Luna for—can an average grow as?
Speaker #1: Yeah . Dan , thanks . Thanks for always keeping a keen eye the spatial side business . I of appreciate it . Yeah .
Speaker #1: Listen , it has indeed a larger proportion of revenue to the linked academic performance , academic performance has stabilized . And what we're really pleased to see is that the mix of the grants has , has tilted from some , some research areas .
Speaker #1: More to oncology and neurology and a preferred tool for those research and markets is spatial . So you do see , even though is under the market pressure , that our cons revenues have gone back into positive growth territory and which we are very happy to see in in constrained markets and and therefore this mix is playing in our favor similar story .
Kim Kelderman: And as you know, we, we are very happy with our competitive position of the COMET, our fully automated multiomic instrument. We're really happy to see that our win-loss rates are very high, right there where we want them to, to be. And the pull-through now is, is about $45,000 per instrument per year, but we are working hard on getting the multiomic, capabilities rolled out and customers trained on it, and that will drive, pull-through from our reagents. And we're actively working on broadening our antibody portfolio for spatial analysis as well. And as you know, we have a, a, a broad portfolio of probes in the RNA, on the RNA detection side. We will now have a very broad, capability and offering from the protein detection side, and we're one of the few that, offer true parallel, multiomics.
Kim Kelderman: And as you know, we, we are very happy with our competitive position of the COMET, our fully automated multiomic instrument. We're really happy to see that our win-loss rates are very high, right there where we want them to, to be. And the pull-through now is, is about $45,000 per instrument per year, but we are working hard on getting the multiomic, capabilities rolled out and customers trained on it, and that will drive, pull-through from our reagents. And we're actively working on broadening our antibody portfolio for spatial analysis as well. And as you know, we have a, a, a broad portfolio of probes in the RNA, on the RNA detection side. We will now have a very broad, capability and offering from the protein detection side, and we're one of the few that, offer true parallel, multiomics.
Speaker #1: for for biotech Very . And as you know , we are very happy with our competitive position of comet . Our the fully automated Multi-omic instrument .
Speaker #1: We're really happy to see our win that loss rates are very high right there where we want them to , to be . And the pull through now is , is about 45 K per instrument per year we are working hard on getting the .
Speaker #1: Multiomic capabilities rolled out, and customers trained on it. And that will drive from a reagents standpoint. And we're actively pulling through, working on broadening our antibody portfolio, analysis, and spatial as well.
Speaker #1: as have a And for broad portfolio as you probes in of the RNA , on the RNA detection side , we will now have broad a very capability and offering from the protein detection side .
Kim Kelderman: Therefore, we are aiming that over time, the pull-through per box on the reagent side would be more in the 90,000 per box per year area. So certainly, a pull-through play that will definitely help driving growth, but also drive margins.
Kim Kelderman: Therefore, we are aiming that over time, the pull-through per box on the reagent side would be more in the 90,000 per box per year area. So certainly, a pull-through play that will definitely help driving growth, but also drive margins.
Speaker #1: And we're one of the few that offer true parallel multiomics and are therefore we that aiming over time , the pull through per on the box reagent side would be more in the 90 K per box per area .
Speaker #1: Yeah, so certainly a pull-through play that will help definitely drive growth, but also drive margins.
Dan Arias: Okay, but do you think by the end of this calendar year, you're higher than that 45,000? I mean, 90s, you know, doubling the, the pull-through rate would be great, but I mean, is 2026 a year where it's up?
Daniel Arias: Okay, but do you think by the end of this calendar year, you're higher than that 45,000? I mean, 90s, you know, doubling the, the pull-through rate would be great, but I mean, is 2026 a year where it's up?
Speaker #8: do you think
Speaker #8: end of this . Okay , but by the calendar year , you're higher than that ? 45 K ? I mean , 90 , you know , it's doubling the pull through rate would be great .
Kim Kelderman: We will certainly be able to see the start of that trend, but that's a multi-quarter or maybe even more than a year play that I just talked about. That's a true adoption of multiomics in the space. The space is nascent, but we'll certainly continue to keep pushing forward the ability and the capability that we will offer our customers, and there's certainly demand for it. So that's a longer term play, but yes, the trend will improve quarter by quarter.
Kim Kelderman: We will certainly be able to see the start of that trend, but that's a multi-quarter or maybe even more than a year play that I just talked about. That's a true adoption of multiomics in the space. The space is nascent, but we'll certainly continue to keep pushing forward the ability and the capability that we will offer our customers, and there's certainly demand for it. So that's a longer term play, but yes, the trend will improve quarter by quarter.
Speaker #8: But I mean, it's 2026, a year where it's up.
Speaker #1: We certainly be able to see the will start of trend that . But that's a that's a multi-quarter or maybe more than even a year play that just I talked about .
Speaker #1: That's that's a true adoption of multi-omics in in the space . The space is but will certainly continue to to keep pushing forward the ability and the capability that we will offer our , our , our they're customers and demand for it .
Patrick Donnelly: Yeah, okay. Thanks, Kim.
Patrick Donnelly: Yeah, okay. Thanks, Kim.
Speaker #1: that's a So longer term play . But yes , the trend certainly will improve by quarter quarter will .
Operator: We'll move next to- Oh, my apologies. We'll move next to Mason Carrico with Stephens Inc. Your line is open.
Operator: We'll move next to- Oh, my apologies. We'll move next to Mason Carrico with Stephens Inc. Your line is open.
Speaker #8: Yeah . Okay . Kim Thanks , .
Speaker #3: next We'll move to my apologies . We'll move next to Etalk with Stephens Mac Inc. . Your line is open .
Mason Carrico: Hey, good morning, and thank you for taking my questions. Maybe just given the FDA's focus on reducing animal models, I'd like to just get an update on how interest has trended for your organoid offerings, and can you just give us a sense for how much revenue that's generated from these product lines in the quarter?
Mason Carrico: Hey, good morning, and thank you for taking my questions. Maybe just given the FDA's focus on reducing animal models, I'd like to just get an update on how interest has trended for your organoid offerings, and can you just give us a sense for how much revenue that's generated from these product lines in the quarter?
Speaker #6: Hey . Good morning .
Speaker #9: And thank you for taking my questions. Just given the maybe FDA's focus on reducing animal models, I'd like to just get an update on how interest has trended for your organoid offerings.
Kim Kelderman: Yeah. Organoids, obviously, is a very interesting trend that we picked up on early a couple of years ago. It's a $1.4 billion market growing at mid-teens, and certainly something that we want to play in, especially because of our broad portfolio of products that are very essential in growing cells and not different for organoids. It's about a $50 million run rate business right now, and yeah, we're definitely aligning our product portfolio, our marketing materials, and also our new product introductions in favor of that capability.
Kim Kelderman: Yeah. Organoids, obviously, is a very interesting trend that we picked up on early a couple of years ago. It's a $1.4 billion market growing at mid-teens, and certainly something that we want to play in, especially because of our broad portfolio of products that are very essential in growing cells and not different for organoids. It's about a $50 million run rate business right now, and yeah, we're definitely aligning our product portfolio, our marketing materials, and also our new product introductions in favor of that capability.
Speaker #9: And can you just give us how much revenue that's generated from a sense for these product lines in the quarter ?
Speaker #1: Yeah, organoids obviously is an interesting trend that we picked up on a couple of years ago. It's a $1.4 billion market growing in the mid-teens.
Speaker #1: at And certainly something that we want to play in , especially because of our broad portfolio of products that that are very essential cells in and growing not different for organoids .
Speaker #1: We it's it's about a $50 million run rate business right . And now yeah , we're we're definitely aligning our product portfolio or marketing materials .
Kim Kelderman: 'Cause if you think at the end of it, it's not only the reduced use of animal models, but also the organoid model as such gives you a much better result, much more related to an actual human result than an animal model would. So not only is the quality and the consistency of the data you generate from organoids better, it's also a more humane method of getting that data. So overall, a win-win, and that's also one of the reasons why we just launched our Culturex, Culturex Synthetic Hydrogel, which is, you know, a gel that helps you grow organoids. And even that gel is now animal-free, and that makes consistency much easier of this medium. And it's also much better to analyze.
Kim Kelderman: 'Cause if you think at the end of it, it's not only the reduced use of animal models, but also the organoid model as such gives you a much better result, much more related to an actual human result than an animal model would. So not only is the quality and the consistency of the data you generate from organoids better, it's also a more humane method of getting that data. So overall, a win-win, and that's also one of the reasons why we just launched our Culturex, Culturex Synthetic Hydrogel, which is, you know, a gel that helps you grow organoids. And even that gel is now animal-free, and that makes consistency much easier of this medium. And it's also much better to analyze.
Speaker #1: And also our new product introductions in favor of that , that , that capability . Because if you think at the end of it , it's not only reduced use of animal but also the organoid such models , gives you a much better result , much more related to an actual human result than an animal model would .
Speaker #1: So not only is the quality and the consistency of the data , you generate from organoids better , it's it's it's it's it's also a more humane method of getting that So data .
Speaker #1: overall a win win that's And also one of the reasons why we just launched our . Cultrex Cultrex synthetic hydrogel , which is , you gel helps helps you grow know , a organoids that and even gel is now that free .
Speaker #1: And that animal makes consistency much easier of This medium . And it's also much better to analyze . There's less background any of the noise in analytical methods you would use in organoids .
Kim Kelderman: There's less background noise in any of the analytical methods you would use in organoids. So overall, a very interesting, fast-growing market that makes sense to have a strong adoption in the end markets. And then it's not only our cell therapy, the agents that read on the opportunity, it's also spatial, the spatial capabilities to interrogate these organoids. And then Maurice and Ella, in our protein analysis business, also are tools utilized in the analysis of organoids. So overall, a real boost for our biotech product portfolio.
Kim Kelderman: There's less background noise in any of the analytical methods you would use in organoids. So overall, a very interesting, fast-growing market that makes sense to have a strong adoption in the end markets. And then it's not only our cell therapy, the agents that read on the opportunity, it's also spatial, the spatial capabilities to interrogate these organoids. And then Maurice and Ella, in our protein analysis business, also are tools utilized in the analysis of organoids. So overall, a real boost for our biotech product portfolio.
Speaker #1: So overall , a very interesting , fast growing market that makes sense to to have strong a adoption . In the end then it's markets .
Speaker #1: only our cell And therapy reagents that read on the on the opportunity . It's also spatial . The spatial capabilities to interrogate these the the organoids and then Morris and Ella in our protein analysis business also are tools utilized in the analysis .
Mason Carrico: I appreciate the color there. And then secondly, you've also, you know, consistently discussed M&A as a core capability. How are you thinking about valuations in the pipeline in front of you today, and are there any particular footholds you think an acquisition might, you know, slot you in a little bit better?
Mason Carrico: I appreciate the color there. And then secondly, you've also, you know, consistently discussed M&A as a core capability. How are you thinking about valuations in the pipeline in front of you today, and are there any particular footholds you think an acquisition might, you know, slot you in a little bit better?
Speaker #1: A real So Organoids, overall, for our biotech product portfolio.
Speaker #9: appreciate the I there color . And then secondly , you've also , you know , consistently discussed M&A as a core capability . How are you thinking about valuations and the pipeline in front of you today ?
Speaker #9: And are there any particular footholds you think an acquisition might slot you in a little bit better?
Kim Kelderman: Yeah, M&A has been and will continue to be a core focus for, for us. We've been very, very busy, not been able to, to pull a deal off yet, but certainly very interested in deploying our capital that way. We don't really care if it's private or public. We, we are really looking at, where is the best strategic fit. And if you think about it, our core, specifically around new novel antibodies, we wouldn't mind at all adding to those capabilities. Cell therapy is obviously, a, an area that we want, that we address really well, but we wouldn't mind broadening our portfolio. And then in the proteomic analysis, we're also, keen on adding capabilities, that would benefit the company and fit our strategic model. So, so overall, we, we are very interested.
Kim Kelderman: Yeah, M&A has been and will continue to be a core focus for, for us. We've been very, very busy, not been able to, to pull a deal off yet, but certainly very interested in deploying our capital that way. We don't really care if it's private or public. We, we are really looking at, where is the best strategic fit. And if you think about it, our core, specifically around new novel antibodies, we wouldn't mind at all adding to those capabilities. Cell therapy is obviously, a, an area that we want, that we address really well, but we wouldn't mind broadening our portfolio. And then in the proteomic analysis, we're also, keen on adding capabilities, that would benefit the company and fit our strategic model. So, so overall, we, we are very interested.
Speaker #1: M&A been and Yeah , will has continue to be a core for for us . We've been very , focus busy , not been able very pull a to deal to , but certainly very interested in deploying our capital that way .
Speaker #1: We don't really care if it's private or public. We are really looking at where is the best strategic fit, if you think about it.
Speaker #1: core around specifically novel antibodies , And we wouldn't mind at all to those adding capabilities , cell obviously a therapy is area that we that we want address really well , but we wouldn't mind broadening our portfolio .
Speaker #1: And then in the proteomic analysis , we're also keen on adding capabilities that benefit the company and fit would our model strategic . So , so we overall , are very we interested .
Kim Kelderman: And in the meantime, as you know, we already have kicked off the Wilson Wolf acquisition. We own 20% of it currently, and we will finalize that acquisition at the latest, a little bit less than 8 quarters from now, at the end of calendar 2027. And as you know, this, this is a business that fits really nicely with the Bio-Techne cell therapy business and has a fantastic synergy between our product lines. It grew 20% this last quarter, has 70%+ EBITDA margins, so immediately accretive. So we're very excited that, if nothing else, we will be working on that, that integration and completing that, that acquisition, but we're very interested in doing something in between, if possible.
Kim Kelderman: And in the meantime, as you know, we already have kicked off the Wilson Wolf acquisition. We own 20% of it currently, and we will finalize that acquisition at the latest, a little bit less than 8 quarters from now, at the end of calendar 2027. And as you know, this, this is a business that fits really nicely with the Bio-Techne cell therapy business and has a fantastic synergy between our product lines. It grew 20% this last quarter, has 70%+ EBITDA margins, so immediately accretive. So we're very excited that, if nothing else, we will be working on that, that integration and completing that, that acquisition, but we're very interested in doing something in between, if possible.
Speaker #1: And in the meantime, as you know, we already have kicked off the Wilson Wolfe acquisition. We own 20% of it currently.
Speaker #1: And we will finalize that acquisition at the latest , a little bit less than At the end eight quarters from now . of calendar 2027 .
Speaker #1: And as you know , this this is a business that fits really with the nicely BIO-TECHNE Corp cell therapy business and has a fantastic synergy between our product It grew 20% this last lines .
Speaker #1: quarter , has 70% plus EBITDA margins . So immediately accretive . very excited So we're that if nothing we will else , be working on that .
Speaker #1: That integration, completing that and that acquisition. But we're very interested in doing something in between, if possible.
Mason Carrico: Appreciate the color.
Mason Carrico: Appreciate the color.
Operator: We'll move next to Brandon Couillard with Wells Fargo. Your line is open.
Operator: We'll move next to Brandon Couillard with Wells Fargo. Your line is open.
Speaker #9: Appreciate the color .
Brandon Couillard: Hey, thanks. Good morning. Jim, it looks like you're kind of outperforming on operating margin expansion in the first half of the year, even though mix is kind of working against you, as you talked about. You're sticking with the 100 basis points for the full year, but you previously talked about maybe exiting up 200 basis points year-over-year. So, is there some reinvestment that's happening in the back half of the year that kind of brings you back to the original goal? And, just kind of unpack how you expect margins to fare or trend in the second half.
Brandon Couillard: Hey, thanks. Good morning. Jim, it looks like you're kind of outperforming on operating margin expansion in the first half of the year, even though mix is kind of working against you, as you talked about. You're sticking with the 100 basis points for the full year, but you previously talked about maybe exiting up 200 basis points year-over-year. So, is there some reinvestment that's happening in the back half of the year that kind of brings you back to the original goal? And, just kind of unpack how you expect margins to fare or trend in the second half.
Speaker #3: move next to We'll Brandon Coulthard with Wells Fargo . Your line is open .
Speaker #7: Hi . Thanks . Good morning .
Speaker #4: It looks like you're kind of outperforming on operating margin expansion in the first half of the year. Even though mix is kind of working against you, as you talked about, you're sticking with the 100 basis points for the full year.
Speaker #4: But you previously talked about maybe exiting up 200 bps year over year. So, is there some reinvestment that's happening in the back half of the year that kind of brings you back to the original goal? And can you just kind of unpack how you expect margins to fare or trend in the second half?
Jim Hippel: ... Yeah, so if you look at the second half, first of all, we have a little bit of an anomaly in Q3. I mean, if you kind of look at from Q2 to Q4 sequentially last year, we went from roughly 30% operating margins, jumped to thirty, almost 35% operating margins, and then in Q4, we were back down to 32%. There was some there was some timing of expenses as well as some mix, but mostly timing of expenses that occurred between Q3 and Q4, which kind of caused that lopsidedness.
Jim Hippel: Yeah, so if you look at the second half, first of all, we have a little bit of an anomaly in Q3. I mean, if you kind of look at from Q2 to Q4 sequentially last year, we went from roughly 30% operating margins, jumped to thirty, almost 35% operating margins, and then in Q4, we were back down to 32%. There was some there was some timing of expenses as well as some mix, but mostly timing of expenses that occurred between Q3 and Q4, which kind of caused that lopsidedness.
Speaker #2: Yeah . So if you if you look at the second half , first of all , we have a anomaly in bit of an Q3 .
Speaker #2: If you kind of from look Q2 to Q4 sequentially last at went from roughly margins jumped to 30 , 30% operating almost Operating 35% .
Speaker #2: . And then Q4 , we were back down to 32 . There was some there was some timing of expenses as well as some mix , but mostly timing of expenses that occur between Q3 and Q4 , which kind of caused that lopsidedness how we're about it thinking is that from a sequential perspective , we'll see continued improvement in gross margin as that negative mix mix starts to unwind , and we'll see sequential revenue growth , always which we do seasonality wise from Q3 to Q2 , Q2 to Q3 , and usually even a little bit of a step up from Q3 to Q4 .
Jim Hippel: Now, how we're thinking about it is that from a sequential perspective, we'll see continued improvement in gross margin as that mix, negative mix starts to unwind, and we'll see sequential revenue growth, which we always do seasonality-wise from Q2 to Q3, and usually even a little bit of a step up from Q3 to Q4 beyond that. So, how we're thinking about it is that sequentially, the margin will continue to expand. Roughly half of that expansion will come from the gross margin improvements throughout the back half of the year, and the other half will come through the higher revenue so that we expect to have in the second half of the year.
Jim Hippel: Now, how we're thinking about it is that from a sequential perspective, we'll see continued improvement in gross margin as that mix, negative mix starts to unwind, and we'll see sequential revenue growth, which we always do seasonality-wise from Q2 to Q3, and usually even a little bit of a step up from Q3 to Q4 beyond that. So, how we're thinking about it is that sequentially, the margin will continue to expand. Roughly half of that expansion will come from the gross margin improvements throughout the back half of the year, and the other half will come through the higher revenue so that we expect to have in the second half of the year.
Speaker #2: Beyond that . So how we're thinking about it is that sequentially , the margin will continue to expand . Roughly half of that expansion will come from the gross margin improvement throughout the back half of the year .
Jim Hippel: How that plays out by quarter is, you know, Q3 will be a tougher comp on an operating margin perspective, but Q4 will be an easier comp. And when it's all said and done, we think it will be 100 basis points of improvement for the second half.
Jim Hippel: How that plays out by quarter is, you know, Q3 will be a tougher comp on an operating margin perspective, but Q4 will be an easier comp. And when it's all said and done, we think it will be 100 basis points of improvement for the second half.
Speaker #2: And the will other half the through come higher revenue so that we expect to have in the second half of the year how that plays out by quarter is is , , you know , Q3 will be a comp on tougher a operating margin perspective , but Q4 will be an easier comp .
Brandon Couillard: Okay. And then, just a question on operating cash flow, down pretty meaningfully in the first half. I mean, you typically do just under half of the full year operating cash flow in the first half. So is there something going on in terms of a timing dynamic that you'd like to call out? And where do you see cash flow shaping out for the full year right now?
Brandon Couillard: Okay. And then, just a question on operating cash flow, down pretty meaningfully in the first half. I mean, you typically do just under half of the full year operating cash flow in the first half. So is there something going on in terms of a timing dynamic that you'd like to call out? And where do you see cash flow shaping out for the full year right now?
Speaker #2: When it's all said and done, we think we'll be at a 100 basis points improvement for the second half.
Speaker #4: And okay , and then just a question on operating cash flow down pretty meaningfully half . I mean , you in the first typically do just under half of the full year operating cash flow in the first half .
Speaker #4: is there So something going on in terms of the timing dynamic that you'd like to call out ? And where do you see cash flow shaping out for the full year ?
Jim Hippel: Yeah, and we may have mentioned the last earnings call, but I'll mention it again. So first of all, our Q2 cash flow was very strong. It was on par with last year, as you'd expect, with our revenue being on par. It was really a Q1 issue, and it was really two main drivers. The first one being the amount and timing of our bonus accrual payouts for incentive compensation purposes. If you go back a year ago, Q1, we had, you know, a very low payout in our bonuses, and in fiscal year 25, we had a more normal payout. And so that turned out to be a much larger cash outflow in bonuses from a year-over-year comp perspective in our first quarter.
Jim Hippel: Yeah, and we may have mentioned the last earnings call, but I'll mention it again. So first of all, our Q2 cash flow was very strong. It was on par with last year, as you'd expect, with our revenue being on par. It was really a Q1 issue, and it was really two main drivers. The first one being the amount and timing of our bonus accrual payouts for incentive compensation purposes. If you go back a year ago, Q1, we had, you know, a very low payout in our bonuses, and in fiscal year 25, we had a more normal payout. And so that turned out to be a much larger cash outflow in bonuses from a year-over-year comp perspective in our first quarter.
Speaker #4: Right now ?
Speaker #2: Yeah , we and mention the last earnings call , but I'll mention it again . So first of our Q2 cash flow was very strong .
Speaker #2: It was on par with last year, as you'd expect with our revenue being on par. It was really a Q1 issue. And it was really two main drivers.
Speaker #2: The first one being the amount and timing of our of our bonus accrual payouts for compensation incentive purposes . If you go back year a ago , Q1 , we had a very low payout in our bonuses and fiscal year in in 25 , we had a more normal payout .
Speaker #2: And so that at that that turned out to be a much larger cash outflow . And bonuses from a year over year comp perspective in our in our first quarter , we also had some of timing tax payments that impacted Q1 and that timing of tax payments is will gradually unwind throughout throughout this fiscal year .
Jim Hippel: We also had some timing of tax payments that impacted Q1, and that timing of tax payments will gradually unwind throughout this fiscal year. Some of it already did in Q2. But, the more permanent timing difference for the year will be that Q1 payment of incentive cash bonuses to employees.
Jim Hippel: We also had some timing of tax payments that impacted Q1, and that timing of tax payments will gradually unwind throughout this fiscal year. Some of it already did in Q2. But, the more permanent timing difference for the year will be that Q1 payment of incentive cash bonuses to employees.
Speaker #2: Some of it already did in Q2, but the more permanent timing difference year for that will be Q1, with the payment of incentive cash bonuses to employees.
Brandon Couillard: Thanks.
Brandon Couillard: Thanks.
Operator: Thank you. At this time, we've reached our allotted time for questions. I'll now turn the call back over to Kim Kelderman for any additional or closing remarks.
Operator: Thank you. At this time, we've reached our allotted time for questions. I'll now turn the call back over to Kim Kelderman for any additional or closing remarks.
Speaker #4: Thanks .
Speaker #3: Thank you. At this time, we've reached the allotted time for our questions. I'll now turn the call back over to Kim Kelderman for any additional or closing remarks.
Kim Kelderman: Thank you, everyone, for joining today's call. I want to acknowledge the team's outstanding execution amid a complex and continually evolving market environment. To the new momentum in biotech funding, progress around the US economic budgets, and strong engagement from our large pharma customers, all reinforce our confidence in the ongoing recovery of our end markets. As we enter our 50th year, we do so with a portfolio that is more durable, more differentiated, and more strategically aligned with the future of science and medicine than at any point in our history. The strength of our durable core portfolio, combined with our continued investments across cell therapy, proteome analytical instruments, spatial biology, and precision diagnostic tools, position Bio-Techne exceptionally well for the opportunities ahead. Thank you again for your interest in Bio-Techne, and we look forward to updating you on our progress next quarter.
Kim Kelderman: Thank you, everyone, for joining today's call. I want to acknowledge the team's outstanding execution amid a complex and continually evolving market environment. To the new momentum in biotech funding, progress around the US economic budgets, and strong engagement from our large pharma customers, all reinforce our confidence in the ongoing recovery of our end markets. As we enter our 50th year, we do so with a portfolio that is more durable, more differentiated, and more strategically aligned with the future of science and medicine than at any point in our history. The strength of our durable core portfolio, combined with our continued investments across cell therapy, proteome analytical instruments, spatial biology, and precision diagnostic tools, position Bio-Techne exceptionally well for the opportunities ahead. Thank you again for your interest in Bio-Techne, and we look forward to updating you on our progress next quarter.
Speaker #1: Thank everyone for you joining today's call. I want to acknowledge the team's outstanding work and execution in a continually evolving market environment.
Speaker #1: The renewed momentum in biotech funding, progress around the US academic budgets, and strong engagement from our large pharma customers all reinforce our confidence in the ongoing recovery of our end markets.
Speaker #1: As we enter our 50th year , we do so with a portfolio that is more durable , differentiated , and more more strategically with the future aligned of science and medicine than at any point in our history .
Speaker #1: The strength of our dual core portfolio , with our combined continued investments across cell therapy , proteomic analytical instruments , spatial biology , and precision diagnostic tools , positioned BIO-TECHNE Corp exceptionally well for the opportunities ahead .
Speaker #1: Thank you again for your interest in and BIO-TECHNE Corp we look forward to updating you on our progress quarter next .
Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Speaker #3: Thank you . This brings us to of today's the end meeting . We your time appreciate and participation . You may now disconnect .
