Bio-Techne Corp at Robert W Baird Global Healthcare Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Catherine Ramsey - Robert W. Baird & Co. Incorporated - Analyst : <_ALACRA_META_ABSTRACT>Maybe just to kick things off, give us the state of the union on the fourth quarter, you delivered 3% organic growth. Maybe just talk a little bit about what you're seeing from your end markets and then we can dive into each of those. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Sure. So I mean our key 3 end markets, of course, would be starting large to small, would be our pharma end markets, roughly 30% of our revenue, followed by smaller biotech, which is roughly 20%. And then academia, which is also around 20%, although like roughly a little -- just slightly over half of that's US based and the rest of it is mostly US-based. And when we think about those 3 end markets, starting with pharma, we had predicted a year ago that a lot of the pipeline reshuffling, so to speak, pharma was down as a result of the IRA legislation was going to be occurring throughout 2024, which it was, and that it would be mostly behind us by the time we got the calendar 2025 and that the R&D funded would be allocated, maybe more pro rata across the portfolio as opposed to leaning towards more early-stage stuff. And we were happy to see us exactly kind of how it played out even earlier than we thought, starting even in late November, December and definitely throughout our Q3 and Q4, which gets us into the summertime, pharma returned to what we call normal kind of growth, which for us is double-digit growth. And it was great because it was -- we watched it carefully how real it was. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Catherine Ramsey - Robert W. Baird & Co. Incorporated - Analyst : Yes. So as we think about that and a low single-digit outlook going forward. You just did 3% in the fourth quarter. But as you noted, Pharma grew double digits. You had some pull forward in China. I know low single digit isn't necessarily a guide, but should we think about that as at least a floor for the first half? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yes. I mean, how I would think about it. I think the analysts. We're in line with the analyst view they have us pretty much at low single-digit growth for the year. And we believe that is very possible, very doable, even in this dynamic environment. And we've positioned the company for that rate of growth from a cost perspective to make sure we can hold and even grow our margins. But the dynamics within the quarters can be a bit noisy. We already talked about the headwinds that are more near term than perhaps in the back -- the first part of 2026 calendar year. I think the noise will settle down by the -- and that's what we're looking for. It's for a baseline where our customers can now know what to work from. But also, frankly, a little bit of suffered a little bit from our own success from last year, right? I don't think there's any other company out there that reported 9% growth in the December quarter and very few that reported mid-single-digit growth in the September quarter. So we've got some pretty tough internal comps to overcome as well. So it might be a bit bumpy along the way, but we still overall -- we've planned for low single-digit growth for the year and from a cost base perspective and investment perspective, with the hopes that there's upside in the back half that we can see some even stronger margin pull-through.

Question: Catherine Ramsey - Robert W. Baird & Co. Incorporated - Analyst : As we think about this kind of low single-digit near-term outlook versus the mid-teens CAGR that you guys expect long term. How would you rank these headwinds of pharma uncertainty with MFN and tariffs? Biotech, China, academic, what do you think is -- how would you rank order those in terms of the biggest -- driving the biggest delta between what you're seeing today versus your long-term expectations? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Well, I know it makes sound like a bit of a copout answer, but the biggest delta is just getting the markets healthy again. I mean I believe that our -- what's kept us in the black throughout this entire call it, COVID hangover period, much less at first two quarters of this, I call the new disease, which is the Trump effect in our industry, at least. But what's kept us afloat has been those growth pillars, many that you just mentioned, cell therapy, our proteomic analytics instrument or protein simple franchise. Our spatial franchise even although academic recently still didn't end up mid-single-digit growth for the year. So our growth pillars of what had been carrying us. And if anything, the performance in this down market has given us added confidence of their ability to lead with very solid double-digit growth when the markets normalize. And when the markets normalize, then the 55% that's our core, will no longer be a drag and the growth will actually help contribute to the growth. When you add those two together, it makes for -- I hate to say simplistic, but actually a pretty logical rationale as to REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Catherine Ramsey - Robert W. Baird & Co. Incorporated - Analyst : Yes. Maybe on one of those growth pillars. And in an environment where research instruments are having a tougher time. Your analytical instruments grew at mid-teens in the quarter. So can you just talk through what's driving that strength and how you expect the instrumentation portfolio to trend going forward? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah. I mean the simplest answer is it was driven by pharma. Big pharma is the biggest end market for our instrumentation. And the return of pharma -- two quarters in a row, getting back to health in terms of their allocation of spend across the portfolio. And they always spent the same out that was all -- in 2024, it was all about near-term stuff. Now they've rebalanced it. And we saw that come back in spades in our instrumentation. And I've been saying for quite a while now, which sounds a little bit counterintuitive because kind of the main thesis out there, which is usually true is that when -- in a recovery of markets, you usually see it in your consumables first and your instruments later. But I actually believe at least for us, we would actually see it in our instruments first and the reason I say that a couple of reasons, but one of the main reasons is that throughout the COVID hangover and downturn that we had, the utilization of our instruments continue to grow at a double-digit rate, placements, new placements were low, but the consumables, and we know exactly because they have to buy the cartridges from us to use the instrument every time they use it. And we had some course 20% growth even during the downturn. And at the rate of utilization, we knew what the capacity instruments were. First of all, it validated to us that these instruments are used as productivity tools in a down market. But at some point, they start to run out of capacity. And so our my thesis is once they have some available dollars, especially for CapEx, we're going to see it. And I think that's what happened.

Question: Catherine Ramsey - Robert W. Baird & Co. Incorporated - Analyst : Got it. And so should we still expect strong 20%-plus growth for GMP for you in '26? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Catherine Ramsey - Robert W. Baird & Co. Incorporated - Analyst : Yes. And on Wilson Wolf, you've been working with them for years. But to your point, you're getting closer and closer to when that's a part of Bio-Techne. Maybe just remind us what that will do from a margin standpoint and financial profile standpoint. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance I actually still think it's one of the most underappreciated part of our company that's not built in, I think to most people's models or thinking about our future. And why I say that is -- and thanks for teeing it up is because, we already talked about the growth rates that they're now ramping up to again with the commercialized products, and they're running currently to over 70% EBITDA. Now we model and we own the company for it to be only 60% EBITDA. That's because we know that there's investments we're ready to make there to make it a public worthy addition to our company. But nonetheless, very, very. It's very rare you can find acquisitions accretive to our margins. So it'll be very accretive. And we think by the time we purchase it, it will be right in the sweet spot of its growth curve. And to give you a sense of that growth curve, they are roughly $80 million, $85 million run rate today on revenue. The provisions to buy them out early is if they hit either $236 million of revenue on an annualized basis, TTM or $136 million of EBITDA, which if they hit either one, it's going to be the EBITDA first because their margins are tracking way ahead of their goal. But that's still a massive step up from where we are today. Publicly, we've been saying we're modeling into 2027 at 4.4 times revenue because that's the other part of the contract with them is that if they don't hit these milestones, then we're obligated to buy the company from that 4.4 times TTM revenue, which is obviously still a smoking deal. John Wilson still thinks it can happen up to a year sooner. And the reality is he could very well be right. But that gives you a sense of the kind of ramp that these commercialized products can provide.

Question: Catherine Ramsey - Robert W. Baird & Co. Incorporated - Analyst : Yes. And as we think about capital deployment, -- you've been highly acquisitive in the past. I think now you're pretty happy with your portfolio as it stands today. But what are your priorities from an M&A perspective, and you've been ramping up buybacks as well. So it's not something you intend to continue pursuing? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Well, yes. So I mean on the buyback front, we did formally put out a 10b5-1 plan they call it. so that we can systematically buy back stock at certain levels, and we clearly think our stock as our actions have shown in the past two quarters or more, more or less the last year or so, we've been buying back stock. But not because that's become a priority over M&A. It's just M&A is -- our target set tend to be private companies, -- and it's like a private owner who owns their house. They always think their house is worth more than it is even in a down market, and it's the last thing they want to that go, right? And so it's taken much longer for the private market to kind of realize that the go-go days of COVID valuations are behind us. But we're seeing that start to change here more recently. So a combination of I think the reality setting in and normalizing from a valuation perspective, combined with the fact that when Kim came in over a year ago, one of the first things he did was essentially built a very, what I call, professionalized corpoteam, still a very small team, but professionals come with Danaher, come from the outside banking world. And their first task was to actually drill us internally and challenge us on our strategy, challenges on our product lines. what our assumptions were around market sizes and our ability to penetrate and they rate us over the coals. I'm telling me that for M&A targets, I would be one of those targets. But it was also a very healthy exercise because it just reinvigorated our commitment and our belief in our strategy and our portfolios. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Catherine Ramsey - Robert W. Baird & Co. Incorporated - Analyst : All right. We've got a minute left, maybe a closing question. As you think about the next 12 to 18 months, what do you think the two biggest opportunities for your business are? And maybe the two biggest potential challenges? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Let's see. End markets and end markets. That's kind of I would say. I mean, in all fairness, I mean, that's what it is. When you think about the opportunities, I do feel like we are in the mindset of our academic US customers and our biotech customers is that the settlement for them is at an all-time low. So I'm very encouraged that when you start -- when you look 12 months out, the academic threat that we've been facing in the last 6 months, maybe even for a year before we're out of it, but we'll be behind us I think pharma, again, I think that noise will settle down relatively quickly, and this will be more of a blip for them as opposed to a whole pipeline review like they had to do with IRA. I feel pretty comfortable about that. The biotech one, it still gives me the most pause about the next 12 months, and that would be the -- that would be more of the downside challenge. But just even getting those two farm out back to make sure that stays healthy, getting academic healthy again. I always kind of joke a little bit, Catherine, that either in those end markets get a sniffle biotech gets a cold. And if anyone else get a cold, biotech gets pneumonia and that's kind of how I feel right now. So I mean, very, very upbeat about the next 12 to 18 months. And our internal market work that I just talked about, suggested that. And it was nice to hear for some of the call the big boys out there talked about '26, '27 and kind of validated our view on that.