Bio-Techne Corp Q3 2025 Earnings Call Summary

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

Question: Puneet Souda - Leerink Partners - Analyst : Yeah, hi, guys. Thanks for taking my questions here. Maybe the first one, on the guide, could you provide more context into that, Jim, in terms of the impact you're expecting on academic and it's just, it's a meaningful reduction versus what you had before and what you're seeing in the quarter. So it does beg a question was there a pull forward that you saw on the pharmacy side, and as a result you're seeing, more impact in the 4th quarter. Also on the pharma side, if you could clarify. I think you said low double digit at first, but then, mid-single digit for biopharma. So could you just clarify what was the growth in pharma, in large pharma? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Alright, I don't recall saying anything about biopharma, but so to clarify, large pharma was a double-digit growth for the quarter with respect to -- we think about Q3 versus Q4, Kim mentioned in his comments that you know we have -- our reagents, our quality reagents are also sold to other life science tools companies or partners, as call it ingredients into some of their products. And we had some nice orders come from those customers who are largely serving from our customers as well this most recent quarter and some of those orders we don't expect to repeat again the selling Q4. So that's going to be part of the reason for the step down on organic growth but as it pertains to academia, we started our Q3 in academia very strong in January and then of course, in February with all these announcements, there was a great slowdown in academia and then it kind of stabilized again in March, and we kind of expect that stabilization to occur or continue throughout Q4, but thus be lower than where we were in Q3. I think the biggest question, and I think we we're being somewhat conservative, but I think prudent to be conservative on the on the pharma side to expect, double digit growth in pharma in Q4 given the tariff environment that has been announced as of April 2, which is, didn't really impact Q3 as much as it could Q4 is really, I think one of the biggest. A difference in the guide is in 4 versus how we perform in Q3. And then with regards to where our expectations were at the very beginning of the year, clearly, yeah, even though our performance year-to-date has more or less been in line with those expectations, how we got there is quite different, meaning large pharma has outperformed where we expected to be up to this point in time, but clearly we didn't expect the situation with the academic in the US policies. And then, since you may ask about smaller biotech or pharma, we talked about that being gradually gaining momentum in our first half of the year, but that momentum somewhat stalled, it didn't go backwards, but it somewhat stalled in Q3, and I think that's just a nature of the overall global economic uncertainties where our biotech customers are most susceptible to that in terms of where their next dollar might come from down the road. So I think it's highly more highly sensitive to the more macro environment and that's what we're seeing from them. So hopefully that helps.

Question: Puneet Souda - Leerink Partners - Analyst : Got it. That's helpful. And then, since we're fiscal year 2026 is around the corner, wondering, what you can provide there just given a lot of -- I appreciate the uncertainty, but with China, NIH, and with tariffs, I appreciate you quantifying at least the gross impact, but how should we think about 2026 and this may be a specific question on China. I believe it's 50-50 instrumentation and consumables for you there. How should we think about the China growth rate 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: Dan Leonard - UBS Investment Bank - Analyst : Thank you. My first question is on tariffs. I would love to understand your exposure a bit better. I mean, China is 9% of your revenue, and I think you quantify the analytical instrument exposure into China, but as Puneet mentioned, you sell more than analytical instruments into China, and I would assume that most of that is manufactured outside of China. So any kind of color commentary, Kim, you can provide on why that tariff headwind is not larger.

Question: Dan Leonard - UBS Investment Bank - Analyst : Understood, thank you for that clarification. And then just a follow up. Does the current tariff situation impact at all you're thinking on having more of a local manufacturing footprint in China?

Question: Matt Larew - William Blair & Company, LLC - Analyst : I think maybe I'll just circle back on the first question actually as you'd originally built the guide for this year, which I think you've called fairly well, it was exiting in the high single digits and in the streets were used as a proxy for fiscal 26, as you alluded to, much has changed. But to the point, Jim on sort of lemons and lemonade, it feels like maybe the lemons are accumulating in your term and the lemonade takes a little longer to squeeze out. So 8.5% organic growth for next year, is maybe the way you're guiding us for fiscal 25, at least more reasonable starting points than the Maple Street at today. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah, I mean what I would say Matt, is that what we're experiencing right now is very abrupt, but we also, I think everyone hopes will be somewhat temporary, right? Our momentum going into Q3 was very strong. We were basically on our projections for smaller biotech. We were on our projections and trajectory for China and academic was holding up very well as it has been consistently up until this last couple of months, and in pharma was actually ahead of our expectations. So it's really this temporary -- I call it temporary jolt of uncertainty caused by proposed changes in policies and tariffs, and I think once that uncertainty is resolved and becomes more certain, almost regardless of what the outcome is, we will be extremely well positioned to basically resume the trajectory that we are on. With our, now is that a quarter out or six months out or a year out, hopefully we'll have more clarity in three months, but you know at some point the uncertainty becomes more certain. 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: Matt Larew - William Blair & Company, LLC - Analyst : Okay. And then, obviously the margins were very strong, the strongest in a couple years here and, year to year that was mostly driven from spending leverage. I think, OpEx up something like 5% year-to-date as the top plan has recovered. And you mentioned in the comments, but can you just speak to sort of that tension between ongoing cost containment and investment and where you're seeing additional opportunities to drive leverage? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance I mean, the teams have been doing a great job, actually for a couple of years now and with regards to managing that balance between investments and cost containment and alignment of our structure according to the various profiles of our business and that, it has just basically continued and we've been especially been diligent on the on the you know k call discretionary cost side. The past three months or so, especially with the increased uncertainty that we've been seeing in our end markets, a time of uncertainty is the last the last time that you want to shift gears with regards to accelerating investment or any kind of discretionary spend. So I think the outperformance we saw in our margin was a combination of the revenues coming in as we had expected, but really holding back on the cost, seeing the kind of uncertainty build throughout the quarter that we did just to make sure that we're extremely well prepared for fiscal year '26 in particular when these uncertainties start to become more certain.

Question: Daniel Markowitz - Evercore ISI - Analyst : Hey, thanks for taking the question. The first one I had is based on the guidance, it seems like four margins are expected in like the 32%-ish type range, and that's before tariff mitigation flows through. Is it fair to assume that fiscal '26 margins at that 4Q exit rate of about 32% makes sense, or should we be more prudent given the macro could imply that 26% organic needs to come down a few percent? 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: Daniel Markowitz - Evercore ISI - Analyst : Great. And then just one follow up, on A&G specifically just using peer comments, it implies that the US academic and government and market could see like 10% to 15% incremental headwinds in calendar 2025. Is there any reason to believe this wouldn't be an appropriate way to think about it? Is your exposure a little bit different? And then just what are the kind of cost offsets and a reasonable decremental margin profile on these US academic and government revenues? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah, I mean, I can't come out specifically on the 10% to 15% except to say that our thoughts are this is that, first of all, the money that's largely being spent now by academic and probably for quarters to come are from grants that we've already been approved and released. So we're really talking about the impact of probably counting your 2026 and beyond with regards to whatever gets decided upon with regards to NIH budgets. And as a reminder, I think everyone understands its history, but I'll repeat it. This is -- this has happened before in a prior Trump administration where there were severe cuts proposed and a bipartisan congress actually increased budgets every single year. So again, I think it's a bit overblown with regards to what the impact of budgets will be. But in the meantime, it's understandable that, and we have, several members of our board who come from academia and there's, of course, they've shared with us that there's natural concern around this all this uncertainty, and it causes distraction for them to as they think about where their next funds might come from for future grants. So that's why I think certainty as to where the budgets are at will be the most important thing to calm down the academic market. That all being said, much of the double digit increases that have occurred in NH funding over the past four or five years since COVID. Has been directed more towards infectious disease, vaccine development, things around COVID and such that is not our sweet spot where our portfolio plays. And so, we've heard the administration say they want to defocus those areas and so if that's where the cuts happen, that will likely ultimately be much less, if any, impact to us and could actually be a tailwind, which is the lemonade I spoke of with regards to funds being redirected more towards. Traditional chronic diseases such as cancer, diabetes, and neurology, and that's again where our portfolio strengths are. So that's how we think about it.

Question: Dan Arias - Stifel, Nicolaus & Company, Incorporated - Analyst : Yeah, hey, good morning guys. Thanks, Jim. I'm sorry, but I think I need to go back to the academic stuff here. You're calling out the headwinds there which makes total sense and then you're guiding organic down next quarter partially with that in mind, but I think your comment was that even under the most severe scenarios, funding would have an immaterial impact to getting to double digit growth long term. So you know if the budget over the next couple of years is down 20%, 30%, 40%, which is in line with the proposals for 2026, is the idea that you can still get back to double digits once the smoke clears on the other macro elements? I think I just need a little help with how you're framing that over the 2026, 2027 period. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah sure, Dan, thanks for the question. So yeah I mean, at the end of the day when you look around our strategic plan, the key academic is, it's even -- it's an important part of our business because it feeds into the biotech and karma, etc. It has never been the key growth driver for our growth plans and our projections never assumed academic being a double digit grower and more like a mid-single digit grower which it historically has been. And so, quite simply, I took the details of our strategic plan. And assumed the worst, absolute worst case scenario was a 40% cut in our academic revenue across the board and then from there a gradual increase, to historical growth rates of 3% to 5%, and we were still overall at a double digit growth rate, over a five year period. So yes. I've taken that most severe situation into account in stating that it would still be a double-digit growth trajectory given our strategic plan.

Question: Thomas Deversy - Nephron Research LLC - Analyst : Hey guys, thanks for taking the question. My question is just diagnostic, the genomic organic growth. I know you have more difficult cubs in the second half of the year, but would have expected, I guess, a urid overall to kind of be more, I guess, unaffected by changes and so just curious whether there's -- I guess, just, timing issues, related to some of the diagnostic and you know with portfolio?

Question: Thomas Deversy - Nephron Research LLC - Analyst : Great, thank you.

Question: Patrick Donnelli - Citi Global Markets Inc. - Analyst : Hey guys, thanks for taking the questions. Maybe one on the biopharma piece that you talked about mid-single digit growth this quarter. Can you break that down a little bit? I just wanted to talk about the biotech piece in particular. I know you talked a little bit about GMPs, but can you talk about what you're seeing from the biotech customer base? Certainly been a concern across the industry just given the volatility of the funding backdrop, so curious what you're hearing from the customers there and expectations on that front.

Question: Patrick Donnelli - Citi Global Markets Inc. - Analyst : Okay, alright, that's helpful. And then if you don't mind, just a quick update on what's happening with Wilson Wolf, what the trends were this quarter, I just want to keep an eye on that as we go as well. Thanks. James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah Patrick, this is Jim. Thanks for the question. So yeah, Wilson Wolf continues to perform very well. They had growth very solidly into the into the double-digit growth rates at this most recent quarter. So they were projecting to have a very strong year in our, in what will be calendar year 2025 for them going into the year 2026. And so far, they're right on track for that.

Question: Sung Ji Nam - Scotiabank Global Banking and Markets - Analyst : Hi, thanks for taking the questions. Maybe if I could go back to pharma, biopharma, the sectoral tariffs that are under discussion that expanding US manufacturing, restoring, etc. But potential pressure on the early stage or early discovery development work. Just curious how bio-technique is positioned in that environment or if you have different thoughts in terms of how the tariffs could play out. Thanks. 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: Sung Ji Nam - Scotiabank Global Banking and Markets - Analyst : Got it. That's helpful. And then just quickly on the spatial biology side, thanks for the color there and the exposure to the academic market. I was wondering about academic market outside the US whether spatial, could be growing faster. And then also the recent launch of the spatial protein proximity detection capability was curious if that could be also at, it could be utilized within pharma, and kind of you could talk about the competitive dynamics there for that particular application just not familiar with it? Thank you.