Bio-Techne Corp Q4 2025 Earnings Call Transcript

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

Question: Puneet Souda - Leerink Partners LLC - Analyst : First one on the guide. I just wanted to clarify and the outlook comments you made. Are you expecting low single digit for the full year fiscal '26, and if you could talk a little bit about the cadence of that over the next four quarters. How should we think about the Protein Sciences segment growth within that context versus the DSS growth? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance So first of all, to clarify, the guidance was not necessarily for full year fiscal '26 growth of low single digits. It was that we expect low single-digit growth until there is more certainty around the various administration policies out there on academic funding, and pharmaceutical tariffs and FM pricing. And if that takes the full fiscal year to become more certain, then yes, that would translate to a full fiscal year '26. But to be clear, I'm not necessarily anticipating that will take the full year for that starting to become more known. With regards to the Life segment, as you know, we don't give guidance specifically by segment. I think there's some puts and takes within both the segments, but I wouldn't expect a big material change in the growth rates in either one under this environment.

Question: Daniel Arias - Stifel, Nicolaus & Company Inc - Analyst : Thanks for the questions. I appreciate you doing the legwork to understand the NIH exposure there. low single-digit exposure is actually pretty low. Can you expand on where the funding is coming from for the two-third of the academic customers that aren't tied to the NIH, is it pharma? Is it private sources? Where are these guys getting their money from? 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 Arias - Stifel, Nicolaus & Company Inc - Analyst : Yeah. Okay. And then maybe on Wilson Wolf, since you guys touched on that. Obviously, the top line performance that would trigger the change of control is something that you can only do so much about, but the EBITDA threshold could be managed to, especially since I think that's the one that's actually closer to hitting the target. Do you have a sense for whether that business is going to be run with a sooner rather than later take out in mind? Or is it really just kind of it will do what it does and that change will take place whenever that happens to happen?

Question: Matt Larew - William Blair Capital Partners - Analyst : You referenced a set of unknowns that's driving the low single-digit outlook. And I think it's likely that those are not resolved simultaneously and probably there's some cadence to how that occurs. It sounds like you did a lot of customer outreach and surveys over the course of the last few months. What did you learn about budget unlock and what will really kind of catalyze spend from those different sets of uncertainties that are influencing the outlook? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Well, I think from the academic perspective, Matt, it comes down to this customer behavior. We're hearing that despite the NIH funding being less than a third of what actually fund these academic institutions, natural behavior is to kind of overreact and hold back on everything, being concerned of where money might come from in the future. And so we're hearing about at least temporary budgets being cut 10%, 15% across the board in terms of not cut, but just in terms of holding back on spending in anticipation of what may or may not happen. So I think our actual belief after talking to many customers and hearing a bunch of surveys around this is that what we're experiencing now in academic is from a behavior perspective, might be worse than any actual negative outcome of the funding. So I actually view a resolution of, call it, certainty of where the NIH budgets fall out, whether that's flat, whether that's minus 10% or even minus 15%, I actually view that as upside once that unknown becomes known because we believe customers are actually behaving more conservative than even the worst-case scenario. 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 Capital Partners - Analyst : Okay. So obviously, the Exosome divestment followed the -- an early one, the Atlanta Biologics one a couple of years ago. You referenced M&A remains a key focus. In light of some of the portfolio reshaping that's going on, you referenced sort of renewed focus on margin profile. How are you thinking about M&A, be it by segment, be it by stage of company or relative profitability and potential?

Question: Kyle Butcher - TD Securities (USA) LLC - Analyst : I wanted to just dig in a little bit on trends you're seeing between large pharma and biotech, and maybe how they sort of trended throughout the quarter? And then maybe on the large pharma side, some peers have been a little bit more positive on large pharma that it's stable, if not steadily improving a little bit. So I guess just in the context of your low single-digit growth expectation, how does pharma fit within that framework? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance Yeah. So even this most recent quarter, we had low single-digit growth and yet our pharma -- large pharma grew double digit. So large pharma has been very robust for us as well. And our guidance going forward basically assumes more of the same. Is there a risk that could soften a bit with the MFN concerns and so forth? Yes. We feel like that's balanced with somewhat from academic being a bit overly conservative right now with regards to what the eventual outcome there could be. So our -- the low single digit basically is more of the same that we saw this current quarter. We just lived through a quarter of some of the largest uncertainties we faced in the life science tools industry in quite a long time. And those uncertainties haven't gone away. They haven't gotten any worse, but they haven't gotten any better. And so we kind of expect more of the same in all three of our major end markets until these uncertainties are resolved.

Question: Daniel Markowitz - Evercore Inc - Analyst : I had two. The first one, as you think through the drivers of margin expansion in fiscal '26, it seems like the guide is assuming low single-digit organic. And it's hard to expand margins at that kind of top line growth. But of course, you have a couple of tailwinds coming from the tariff offsets and the ExoDx divestiture. Is the plan to toggle the amount of ExoDx reinvestments depending on top line? Or would any upside to the organic top line lead to upside to margin expansion as well? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance So I'd say that our base case that we're operating right now is low single-digit growth until the markets improve. And I can't predict when exactly that will be, but we are managing the business under that low single-digit growth environment, taking productivity actions as you would expect us to do in that situation. Those productivity actions, combined with Exosome Diagnostics no longer being in our results gives us margin headroom for reinvestment back into our businesses when the markets do return. So that's how we're managing the business today. Now if you're asking when these uncertainties become get resolved, and we should see some tailwinds from that, we will decide when that happens, what next investments are on deck to make and the trade-offs between reinvesting that upside into future growth platforms and/or giving them some more margin back to the investors. So we will continue to have that balancing act as the markets return back to normal. But right now, we're managing the business under a low single-digit growth environment and through productivity actions and ExoDx allowing us to still reinvest for growth while expanding margins.

Question: Daniel Markowitz - Evercore Inc - Analyst : Sorry. Yeah, you called out Wilson Wolf about 20% growth. Was that similar growth profile across the rest of the cell and gene portfolio?

Question: Patrick Donnelly - Citibank Cameroon SA - Analyst : Maybe on China, helpful to talk through -- it seems like maybe a little bit of some pull forward. Can you talk about, I guess, what you saw underlying in the quarter and then the expectations going forward? Where are we in that region? How are you thinking about in terms of that low single-digit growth going forward, how China plays into that would be helpful.

Question: Patrick Donnelly - Citibank Cameroon SA - Analyst : Okay. That's helpful. And then maybe one for Jim. Just in terms of the guide, obviously, I get the kind of the short term, low single digits. I guess in terms of the visibility, are you guys just -- is it just the biotech and academic piece, just a little bit of caution there and want to wait and see before calling any sort of inflection? What are you guys looking for in terms of gaining a little more visibility and ramping back to maybe a little bit more of the normal growth rates we're used to seeing from you guys? James Hippel - Bio-Techne Corp - Chief Financial Officer, Executive Vice President - Finance No. I mean, Patrick, that's exactly right. I mean rather than sit here and try to call an inflection point and call a point in time of when the decisions are going to be made around NIH funding and how the executive branch is going to manage to that and when funding will actually return back to biotech, I mean, I'm not a sus any more than anyone else is. So those are the key indicators we're looking for. We do believe that once all this noise around NIH funding and settles down, we think our customers in academic will also settle down and regroup. And we do think right now, we're experiencing the worst of it. So I see that as upside when that happens. And hopefully, that happens early this fall, but we all know they can drag out longer than that. So we'll have to wait and see. And then biotech funding, same thing. We're monitoring that. The good news is the past couple of months, it appears as though the funding is starting to come back a bit, but it's still down a lot year-over-year from a year-to-date perspective. So two months doesn't make a trend, but we are encouraged by that. But we do believe the biotech funding sentiment follows kind of a combination of both the academic sentiment and the large pharma sentiment. So -- and it can accelerate otherwise. So I think getting resolution on the pharma tariffs, the pharma MFN pricing and how that's going to play out. Once those are more known, I think those will all be inflection points for stabilization of our markets and confidence to reinvest in R&D. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.