The call for the Fourth Quarter of Fiscal Year 2024 has begun and all participants are in listen-only mode. The call will be open for questions after management's prepared remarks. David Clair, Bio-Techne's Vice President of Investor Relations, is leading the call with Kim Kelderman, President and CEO, and Jim Hippel, CFO. The safe harbor statement is briefly covered and non-GAAP financial measures may be used. The company's 10-K and other SEC filings can be found on their website. Upcoming events, including conferences, are mentioned. Kim Kelderman thanks Dave and greets everyone.

In the fourth quarter conference call, it was reported that the company's fourth quarter results met expectations with a 1% year-over-year organic revenue growth. This was achieved through the company's core portfolio of research and diagnostic reagents and four growth verticals. Despite challenges in the biotech funding environment and R&D budget recalibration, the proteomics analytical franchise and cell and gene therapy verticals saw mid single-digit growth, while the spatial biology vertical also saw solid growth.

Bio-Techne's four growth verticals, including spatial biology, molecular diagnostics, core research reagents, and diagnostic tools, have driven double-digit growth and will continue to do so as the market recovers from the COVID-19 pandemic. These verticals have a five-year CAGR of over 20% and accounted for 45% of the company's revenue in fiscal 2024. The addition of Dr. Judith Klimovsky to the Board of Directors brings valuable experience and expertise to the company's global expansion strategy.

The biopharma end market saw continued stabilization in the quarter, with a decline in low single-digits. Biotech funding has been stronger in the first half of the year, which is expected to drive increased demand for life science products in the coming quarters. Academia also saw a decline in low single-digits, with particularly challenging comparisons to the same period last year. North America and Europe both declined in the quarter, while China continued its trend of stabilization. The team in China delivered double-digit growth for the core reagent portfolio and mid single-digit growth for the biologics portfolio.

In the fourth quarter, China's decline was in line with expectations due to last year's stimulus resulting in high growth. The recently announced stimulus is expected to positively impact revenue growth in the second half of the fiscal year. ProteinSimple instrumentation saw low single-digit organic growth, with double-digit growth in consumables due to strong utilization of global installed base. The automated multiplexing immunoassay instrument, Ella, was a standout performer and is being adopted by cell and gene therapy customers and CROs. The company also recently announced an investment in Spear Bio, a leader in ultrasensitive immunoassays.

Spear Bio's assays are compatible with qPCR equipment, making them easily accessible to research and clinical facilities. Their initial focus is on biomarkers for Alzheimer's disease. The company recently announced a new addition to their Simple Western platforms called Leo, which automates the western blotting process. This system is expected to begin shipping in the second half of fiscal year 2025. Simple Western is gaining traction in cell and gene therapy applications, with Regulus Therapeutics utilizing it for a Phase 1b study. The company's own cell and gene therapy business unit is also a growth pillar within the Protein Science segment.

The company's growth vertical includes proteomic reagents and scalable workflow solutions for accelerating the development and commercialization of next-generation therapeutics. The GMP proteins business saw quarter-to-quarter lumpiness due to order timing from large customers, but the number of customers using highly active GMP proteins continues to grow. The GMP small molecules business also saw significant growth and the company's new GMP facility in the UK is well-positioned to meet demand. The Protein Science segment declined for the quarter and fiscal year, but is expected to improve as the China and biopharma end markets recover. The Diagnostics and Genomics segment saw organic revenue growth of 9% in the quarter and 6% for the full fiscal year, with the molecular diagnostics growth pillar performing exceptionally well with over 20% organic revenue growth. The ExoDx Prostate test has a strong value proposition for both patients and physicians.

The paragraph discusses the success of the ExoDx Prostate test and Asuragen brand in the molecular diagnostics business, with a 30% increase in physicians ordering 25 or more tests per quarter. The company is also expanding its product pipeline with the launch of an exosome-based breast cancer monitoring kit and an expanded carrier screening assay. In the spatial biology growth pillar, demand for the Comet platform exceeded manufacturing capacity, but the team is making progress in scaling up production. The launch of RNAscope HiPlex capabilities on Comet allows for detection and visualization of multiple proteins and RNA targets simultaneously, making it a highly differentiated system in the spatial biology market. These new capabilities will be rolled out to the company's installed base over the next few months.

Bio-Techne delivered a solid quarter and fiscal year despite the challenging funding environment. As the end markets stabilize and recover from the pandemic, the company is well positioned for growth. The fourth quarter saw a 2% increase in revenue, with organic growth comparable to the full fiscal year. North America, Europe, and China saw slight decreases, while APAC outside of China saw a low double-digit increase. Both biopharma and academia declined in the quarter, excluding China.

In the fourth quarter, the company saw stable global conditions in the biopharma market, but faced tougher comparisons in academia. The adjusted gross margin decreased slightly due to the Lunaphore acquisition and product mix, but was partially offset by productivity initiatives. SG&A expenses increased due to the acquisition and timing of annual incentive compensation accruals. The adjusted operating margin decreased compared to the prior year, but increased sequentially. Net interest expense decreased due to lower debt levels, and other non-operating income increased. The adjusted effective tax rate remained consistent throughout the fiscal year but increased compared to the prior year.

In the fourth quarter, the company generated $75.5 million in cash from operations and had a net investment of $18 million in capital expenditures. They also returned $12.6 million in dividends to shareholders and ended the quarter with a strong balance sheet. M&A remains the top priority for capital allocation. The Protein Sciences segment reported a 4% decrease in revenue due to the decision to divest the FBS business. The Diagnostics and Genomics segment saw a 15% increase in reported sales, with organic revenue growth of 9%. The Lunaphore acquisition had a 6% impact on growth. The segment's operating margin was 12.5%.

The segment's operating margin decreased due to the impact of the Lunaphore acquisition, but excluding that, it would have been over 20%. Diagnostics and Genomics saw steady improvement in operating margins throughout the fiscal year, with a 320 basis point increase from Q3 and a significant improvement from Q1. The company's strategic portfolio positioning and resilient execution by employees has allowed for higher revenue than before the COVID pandemic. The industry is now waiting for a return to normalized market growth, which is expected to be mid-single-digit over the long term. There are indications that a gradual recovery may happen in the back half of calendar year 2024 and throughout 2025, including a decrease in OEM customer destocking, improved biotech funding, and large pharma customers completing their realignment of R&D priorities.

The China region is expected to experience an increase in instrument growth in 2025 due to government stimulus, leading to a gradual recovery in end markets and biotech needs. Bio-Techne's proteomic analysis platforms have shown strong growth in instrument-based consumables during the downturn, and there is pent-up demand for more instruments. The company's cell and gene therapy offering has also gained new customers despite reduced biotech funding. The recent launch of an automated solution for spatial biology is expected to drive growth in RNA scope and antibody reagents. Additionally, the company's Molecular Diagnostics growth vertical is already seeing growth due to its unique and underpenetrated portfolio of products. Overall, Bio-Techne's organic revenue growth is expected to gradually accelerate in fiscal 2025, with low single-digit growth in the first half and a possibility of mid-single-digit growth once biotech funding returns to normal levels. Growth is expected to reach high single digits in the second half of the year, driven by Chinese stimulus funding and normalized pharma budgets.

The company plans to fund new investments with productivity initiatives and cover inflation with pricing actions in order to improve adjusted operating margin for the upcoming year. However, there will be a 100 basis point headwind to fiscal year 2025's adjusted operating margin due to the reinstatement of incentive compensation accruals. The first half of the year is expected to have lower adjusted operating margin due to the incentive compensation reinstatement and negative product mix, while the second half is expected to see higher margin due to revenue volume leverage and planned productivity initiatives. The company is anticipating a gradual recovery in end markets in fiscal year 2025, which will allow for double-digit growth and a long-term goal of 35% adjusted operating margin. The first question in the Q&A portion of the call was about the performance of RUO antibodies and cytokines in the quarter.

The company's instrumentation portfolio is holding up well, while the attached consumables are growing. The instrumentation growth rates have been under pressure due to market constraints, but consumables related to the instruments have been growing double digits for seven quarters in a row. The company is confident that the installed base is being utilized optimally and that there will be a drive to increase capacity, which will drive instrumentation numbers. The RUO antibodies business has been lumpy, but the overall portfolio is well-positioned. The company expects mid- to high-single digit organic growth in fiscal year 2025, with a low double-digit exit rate in the fourth quarter of that year.

Jim Hippel, in a recent statement, gave guidance on the expected progress of the company for the year. He predicts a gradual improvement in end markets, with a potential uplift in biotech and Chinese stimulus in the later years. However, the rate of growth will depend on the full year numbers. In terms of margins, the company is facing headwinds in the first half of the year due to incentive compensation accrual restatements. They hope to return to growth in the latter part of the year and aim for 35%+ incremental margins, with the potential to reach 40% over time, depending on M&A activity.

The company expects to see incremental margin improvement this year, but believes there is potential for even higher adjusted operating margins if growth rates accelerate throughout the year. The goal is to reach a mid-30s operating margin, with a long-term goal of 35-40%. The company remains committed to its four key growth franchises, which have high activity levels and are continuously monitored for competition.

The speaker explains that they have a strong position in the market with their four growth verticals and core reagents. While the end markets have slowed down, they are confident in reaching their projected numbers, although it may take longer than expected. The GMP revenue for fiscal year 2024 saw growth despite a tough year and they expect growth rates to increase as the market improves.

The company is confident in its forward guidance for 2025 and expects to grow at a higher rate than its peers. They expect a slow recovery in the market and are being conservative in their fiscal year end predictions. They also have company specific activities that will contribute to their growth rate.

Kim Kelderman discusses Bio-Techne's recent launch of Lunaphore and Comet, which will provide multiomic capabilities and drive growth. The company's ProteinSimple franchise has also gained interest from customers. Kelderman believes that the company's activities and a market improvement will lead to a successful year, but they remain cautious due to the slow pace of market recovery. In terms of accelerating growth for the RUO reagent product line, Kelderman mentions the importance of the growth platform and pull-through, as well as improving the marketplace and website. He also notes that some of the RUO product lines are already performing well. Finally, Kelderman mentions that the spatial portfolio is less affected by macro headwinds and is already showing positive results.

Kim Kelderman discusses the growth of the company's portfolio in 2025 and mentions some challenges they may face, such as shuffling in the end market. However, he is confident in the overall growth and potential of the company, especially with the combination of their instrument and reagents. The company is also seeing positive effects from China's stimulus program, which is still in progress.

Customers are interested in the benefits of the company's instrumentation and the company is well positioned to benefit from it. The company has a unique value proposition and has already seen success from a similar funding program in the past. The funding program is expected to be a positive driver for the company in the coming years. The company's Ella product line has been growing in China and consumables for all four platforms have been growing double-digits, indicating a healthy usage of instruments. Lunaphore's demand is outstripping capacity.

The speaker discusses the progress made in increasing manufacturing capacity and the impact it will have on meeting demand. They also mention plans to improve efficiency and reduce costs in the coming year, while still investing in future growth opportunities.

The company has been working on productive initiatives throughout the down cycle and has more projects planned for the next few years. They are balancing adjusting their structure with maintaining growth in their company. They expect low to mid-single digit growth in the first half of fiscal 2025 and are confident in their five-year plan objectives. There is a gradual increase in both end markets and absolute performance projected for the first half.

The speaker discusses the expected improvement in the company's business, particularly in the Protein Sciences segment, as end markets recover from issues in China and the biotech industry. They also mention that China's performance in the previous quarter was similar to the previous one and anticipate growth in the back half of the fiscal year. A question is raised about the performance of the biopharma end market across different geographies.

The biopharma sector, excluding China, saw low single digit growth globally in Q4. However, the sequential performance was consistent and the company is focused on momentum rather than growth rates. The company believes the December quarter was a bottom and the market will gradually recover. The process of linking reagents to instruments for Lunaphore is happening this quarter and will continue to be rolled out over the coming quarters and years.

The academic end market is expected to gradually recover throughout fiscal year 2025, with a low single-digit to mid-single-digit growth rate. This has been the trend for the past several years and is not expected to change much going forward. The focus on infectious diseases due to the pandemic has led to increased funding from organizations like NIH and Horizon, but there is a return to more normal studies in areas such as neurology and immuno-oncology.

The speaker discusses the strong growth in molecular diagnostics and attributes it to both taking market share and underlying market growth. They also mention inventory adjustments and express confidence in the company's performance despite current market conditions.

The company's diverse portfolio targets fast-growing markets in life sciences and is expected to provide strong performance for all stakeholders in the future. The speaker thanks everyone for participating in the earnings call and the operator ends the call.

This summary was generated with AI and may contain some inaccuracies.