Second Quarter Fiscal 2023

Revenue

Net sales for the second quarter increased 1% to $271.6 million. Organic growth was 4% compared to the prior year with acquisitions contributing 1% and foreign currency exchange having an unfavorable impact of 4%.

GAAP Earnings Results

GAAP EPS was $0.31 per diluted share, versus $0.49 in the same quarter last year. Prior year GAAP EPS was favorably impacted by a non-recurring gain of approximately $28.4 million on our ChemoCentryx investment. GAAP operating income for the second quarter of fiscal 2023 increased 9% to $67.9 million, compared to $62.3 million in the second quarter of fiscal 2022. GAAP operating margin was 25.0%, compared to 23.2% in the second quarter of fiscal 2022. GAAP operating margin compared to prior year was positively impacted by a non-recurring impairment in the prior year related to our Eminence investment.

Non-GAAP Earnings Results

Adjusted EPS was $0.47 per diluted share in both the second quarter of fiscal 2023 and in the comparative period. Adjusted EPS remained flat year-over-year with unfavorable foreign currency exchange being offset by reduced net interest expense. Adjusted operating income for the second quarter of fiscal 2023 decreased 6% compared to the second quarter of fiscal 2022. Adjusted operating margin was 35.5%, compared to 38.3% in the second quarter of fiscal 2022. Adjusted operating margin decreased compared to the prior year due to unfavorable foreign currency exchange, higher inflation, and strategic growth investments including the Namocell acquisition.

Segment Results

Management uses adjusted operating results to monitor and evaluate performance of the Company’s business segments, as highlighted below.

Protein Sciences Segment

The Company’s Protein Sciences segment is one of the world’s leading suppliers of specialized proteins such as cytokines and growth factors, immunoassays, antibodies and reagents, to the biotechnology and academic research communities. Additionally, the segment provides an array of platforms useful in various areas of protein analysis. Protein Sciences segment’s second quarter fiscal 2023 net sales were $203.9 million, a decrease of 1% from $205.0 million for the second quarter of fiscal 2022. Organic growth for the segment was 2%, with foreign currency exchange having an unfavorable impact of 4% and acquisitions contributing 1%. Protein Sciences segment’s operating margin was 43.8% in the second quarter of fiscal 2023 compared to 45.5% in the second quarter of fiscal 2022. The segment’s operating margin compared to the prior year was negatively impacted by unfavorable foreign currency exchange, higher inflation, and the Namocell acquisition.

Diagnostics and Genomics Segment

The Company’s Diagnostics and Genomics segment provides blood chemistry and blood gas quality controls, hematology instrument controls, immunoassays and other bulk and custom reagents for the in vitro diagnostic market. The Diagnostics and Genomics segment also develops and provides in situ hybridization products as well as exosome-based diagnostics for various pathologies, including prostate cancer. The Diagnostics and Genomics segment’s second quarter fiscal 2023 net sales were $68.0 million, an increase of 5% from $64.5 million for the second quarter of fiscal 2022. Organic growth for the segment was 7%, with foreign exchange having an unfavorable impact of 2%. The Diagnostics and Genomics segment’s operating margin was 12.2% in the second quarter of fiscal 2023 compared to 16.9% in the second quarter of fiscal 2022. The segment’s operating margin was negatively impacted by foreign exchange, higher inflation, and the timing of strategic growth investments.

Conference Call

Bio-Techne will host an earnings conference call today, February 2, 2023 at 8:00 a.m. CST. To listen, please dial 1-877-407-9208 or 1-201-493-6784 for international callers, and reference conference ID 13735661. The earnings call can also be accessed via webcast through the following link https://investors.bio-techne.com/ir-calendar.

A recorded rebroadcast will be available for interested parties unable to participate in the live conference call by dialing 1-844-512- 2921 or 1-412-317-6671 (for international callers) and referencing Conference ID 13735661. The replay will be available from 11:00 a.m. CST on Thursday, February 2, 2023, until 11:00 p.m. CST on Thursday, March 2, 2023.

Use of non-GAAP Adjusted Financial Measures:

This press release contains financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (GAAP). These non-GAAP measures include:

Organic growth

Adjusted diluted earnings per share

Adjusted net earnings

Adjusted tax rate

Adjusted gross margin

Adjusted operating income

Adjusted operating margin

· Earnings before interest, taxes, depreciation, and amortization (EBITDA)

· Adjusted EBITDA

We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.

Our non-GAAP financial measure of organic growth represents revenue growth excluding revenue from acquisitions within the preceding 12 months, the impact of foreign currency, as well as the impact of partially-owned consolidated subsidiaries. Excluding these measures provides more useful period-to-period comparison of revenue results as it excludes the impact of foreign currency exchange rates, which can vary significantly from period to period, and revenue from acquisitions that would not be included in the comparable prior period. Revenues from partially-owned subsidiaries consolidated in our financial statements are also excluded from our organic revenue calculation, as those revenues are not fully attributable to the Company. There was no revenue from partially-owned consolidated subsidiaries for the quarter ended December 31, 2022 due to the sale of Changzhou Eminence Biotechnology Co., Ltd. (Eminence) in the first quarter of fiscal 2023. Revenue from partially-owned consolidated subsidiaries was $2.0 million for the six months ended December 31, 2022.

Our non-GAAP financial measures for adjusted gross margin, adjusted operating margin, adjusted EBITDA, and adjusted net earnings, in total and on a per share basis, exclude stock-based compensation, the costs recognized upon the sale of acquired inventory, amortization of acquisition intangibles, acquisition related expenses inclusive of the changes in fair value of contingent consideration, and other non-recurring items including non-recurring costs, goodwill and long-lived asset impairments, and gains. Stock-based compensation is excluded from non-GAAP adjusted net earnings because of the nature of this charge, specifically the varying available valuation methodologies, subjection assumptions, variety of award types, and unpredictability of amount and timing of employer related tax obligations. The Company excludes amortization of purchased intangible assets, purchase accounting adjustments, including costs recognized upon the sale of acquired inventory and acquisition-related expenses inclusive of the changes in fair value contingent consideration, and other non-recurring items including gains or losses on legal settlements, goodwill and long-lived asset impairment charges, and one-time assessments from this measure because they occur as a result of specific events, and are not reflective of our internal investments, the costs of developing, producing, supporting and selling our products, and the other ongoing costs to support our operating structure. Additionally, these amounts can vary significantly from period to period based on current activity. The Company also excludes revenue and expense attributable to partially-owned consolidated subsidiaries in the calculation of our non-GAAP financial measures as the revenues and expenses are not fully attributable to the Company.

The Company’s non-GAAP adjusted operating margin and adjusted net earnings, in total and on a per share basis, also excludes stock-based compensation expense, which is inclusive of the employer portion of payroll taxes on those stock awards, restructuring, impairments of equity method investments, gain and losses from investments, and certain adjustments to income tax expense.

Impairments of equity investments are excluded as they are not part of our day-to-day operating decisions. Additionally, gains and losses from other investments that are either isolated or cannot be expected to occur again with any predictability are excluded.

Costs related to restructuring activities, including reducing overhead and consolidating facilities, are excluded because we believe they are not indicative of our normal operating costs. The Company independently calculates a non-GAAP adjusted tax rate to be applied to the identified non-GAAP adjustments considering the impact of discrete items on these adjustments and the jurisdictional mix of the adjustments. In addition, the tax impact of other discrete and non-recurring charges which impact our reported GAAP tax rate are adjusted from net earnings. We believe these tax items can significantly affect the period-over-period assessment of operating results and not necessarily reflect costs and/or income associated with historical trends and future results.

BIO-TECHNE CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)


	QUARTER				SIX MONTHS
	ENDED				ENDED
	12/31/2022		12/31/2021		12/31/2022		12/31/2021
Net Sales	$	271,581	$	269,276	$	541,236	$	526,995
Cost of sales		88,221		85,585		178,280		172,307
Gross margin		183,360		183,691		362,956		354,688
Operating Expenses:
Selling, general and administrative		93,010		100,693		192,386		186,868
Research and development		22,459		20,650		46,362		42,250
Total Operating Expenses		115,469		121,343		238,748		229,118
Operating income		67,891		62,348		124,208		125,570
Other income (expense)		(1,462)		23,831		45,938		27,992
Earnings before income taxes		66,429		86,179		170,146		153,562
Income taxes		16,424		14,120		30,407		12,522
Net earnings, including noncontrolling interest	$	50,005	$	72,059	$	139,739	$	141,040
Net earnings (loss) attributable to noncontrolling interest		-		(8,114)		179		(8,748)
Net earnings attributable to Bio-Techne		50,005		80,173		139,560		149,788
Earnings per share¹⁾:
Basic	$	0.32	$	0.51	$	0.89	$	0.95
Diluted	$	0.31	$	0.49	$	0.86	$	0.91
Weighted average common shares outstanding¹⁾
Basic		157,011		157,240		156,887		156,808
Diluted		161,750		164,828		161,766		164,636

¹⁾Prior period share and per share amounts have been retroactively adjusted to reflect the four-for-one stock split effected in the form of a stock dividend in November 2022.

BIO-TECHNE CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

(Unaudited)


	12/31/2022		6/30/2022
ASSETS
Cash and equivalents	$	164,682	$	172,567
Short-term available-for-sale investments		32,074		74,462
Accounts receivable, net		184,763		194,548
Inventories		160,233		141,123
Other current assets		23,431		22,856
Total current assets		565,183		605,556

Property and equipment, net		223,851		223,242
Right of use asset		83,937		65,556
Goodwill and intangible assets, net		1,437,236		1,353,623
Other assets		53,194		46,828
Total assets	$	2,363,401	$	2,294,805

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses	$	69,012	$	113,704
Contract liabilities		21,812		23,406
Income taxes payable		25,277		13,237
Contingent consideration payable		—		—
Operating lease liabilities - current		10,975		11,928
Current portion of long-term debt obligations		—		12,500
Other current liabilities		1,319		1,243
Total current liabilities		128,395		176,018

Deferred income taxes		111,381		98,994
Long-term debt obligations		200,000		243,410
Operating lease liabilities		78,183		58,133
Long-term contingent consideration payable		7,000		5,000
Other long-term liabilities		11,336		12,239
Stockholders' equity		1,827,106		1,701,011
Total liabilities and stockholders' equity	$	2,363,401	$	2,294,805

BIO-TECHNE CORPORATION

RECONCILIATION OF ADJUSTED GROSS MARGIN PERCENTAGE

(Unaudited)


	QUARTER				SIX MONTHS
	ENDED				ENDED
	12/31/2022		12/31/2021		12/31/2022		12/31/2021
Gross margin percentage - GAAP	67.5	%	68.2	%	67.1	%	67.3	%
Identified adjustments:
Costs recognized upon sale of acquired inventory	0.0	%	0.0	%	0.1	%	0.3	%
Amortization of intangibles	4.1	%	3.8	%	4.1	%	3.9	%
Stock compensation expense - COGS	0.1	%	0.2	%	0.1	%	0.1	%
Impact of partially-owned consolidated subsidiaries¹⁾	—	%	0.1	%	(0.1)	%	0.2	%
Gross margin percentage - Adjusted	71.7	%	72.3	%	71.3	%	71.8	%

BIO-TECHNE CORPORATION

RECONCILIATION OF ADJUSTED OPERATING MARGIN PERCENTAGE

(Unaudited)


	QUARTER				SIX MONTHS
	ENDED				ENDED
	12/31/2022		12/31/2021		12/31/2022		12/31/2021
Operating margin percentage - GAAP	25.0	%	23.2	%	22.9	%	23.8	%
Identified adjustments:
Costs recognized upon sale of acquired inventory	0.0	%	0.0	%	0.1	%	0.3	%
Amortization of intangibles	7.0	%	6.8	%	7.1	%	7.0	%
Acquisition related expenses and other	(3.0)	%	(4.9)	%	(1.3)	%	(2.9)	%
Eminence Impairment	-	%	7.0	%	-	%	3.6	%
Stock-based compensation, inclusive of employer taxes	6.2	%	5.5	%	6.0	%	5.4	%
Restructuring costs	0.3	%	0.3	%	0.5	%	0.4	%
Impact of partially-owned consolidated subsidiaries¹⁾	0.0	%	0.4	%	(0.1)	%	0.4	%
Operating margin percentage - Adjusted	35.5	%	38.3	%	35.2	%	38.0	%

¹⁾ Includes the quarterly results of the partially-owned consolidated subsidiary prior to the sale of this partially-owned consolidated subsidiary to a third party in the first fiscal quarter of 2023. As disclosed in our use of Non-GAAP Adjusted Financial Measures, the adjusted operating margin percentages excludes partially-owned consolidated revenue and expense amounts. The excluded revenue attributable to partially-owned consolidated subsidiaries had no impact on the operating margin for the second quarter of fiscal 2023, and a 0.1% impact for the comparative prior period. The excluded operating (income)/loss had no impact on the operating margin for the second quarter of fiscal 2023, and 0.3% impact for the comparative prior period. The excluded revenue attributable to partially-owned consolidated subsidiaries had a 0.1% impact on the operating margin for the first six months of fiscal 2023 and had a 0.1% impact for the first six months of fiscal 2022. The excluded operating (income)/loss had a (0.2)% impact on the operating margin for the first six months of fiscal 2023, and 0.3% on the first six months of fiscal 2022.

BIO-TECHNE CORPORATION

NON-GAAP ADJUSTED CONOLIDATED NET EARNINGS and EARNINGS per SHARE

(In thousands, except per share data) (Unaudited)


	QUARTER						SIX MONTHS
	ENDED						ENDED
	12/31/2022			12/31/2021			12/31/2022			12/31/2021
Net earnings before taxes- GAAP	$	66,429		$	86,179		$	170,146		$	153,562
Identified adjustments attributable to Bio-Techne:
Costs recognized upon sale of acquired inventory		100			84			400			1,596
Amortization of intangibles		19,125			18,380			38,408			36,769
Acquisition related expenses and other		(8,162)			(13,168)			(7,484)			(15,430)
Eminence impairment		—			18,715			—			18,715
Gain on sale of partially owned consolidated subsidiaries		—			—			(11,682)			—
Stock-based compensation, inclusive of employer taxes		16,878			14,815			32,336			28,675
Restructuring costs		780			743			2,950			1,928
Investment (gain) loss and other non-operating		74			(28,395)			(38,013)			(34,630)
Impact of partially-owned consolidated subsidiaries¹⁾		—			1,004			(420)			2,567
Net earnings before taxes - Adjusted¹⁾	$	95,224		$	98,357		$	186,641		$	193,752
Non-GAAP tax rate		21.0	%		21.4	%		21.0	%		21.2	%
Non-GAAP tax expense		19,998			21,048			39,195			41,076
Non-GAAP adjusted net earnings attributable to Bio-Techne¹⁾	$	75,226		$	77,309		$	147,446		$	152,676
Earnings per share - diluted - Adjusted^1,2)	$	0.47		$	0.47		$	0.91		$	0.93

¹⁾ Includes the results of the partially-owned consolidated subsidiary prior to the sale of this partially-owned consolidated subsidiary to a third party in the first fiscal quarter of 2023.

²⁾ Prior period share and per share amounts have been retroactively adjusted to reflect the four-for-one stock split effected in the form of a stock dividend in November 2022.

BIO-TECHNE CORPORATION

NON-GAAP adjusted tax rate (In percentages)

(Unaudited)


	QUARTER				SIX MONTHS
	ENDED				ENDED
	12/31/2022		12/31/2021		12/31/2022		12/31/2021
GAAP effective tax rate	24.7	%	16.4	%	17.9	%	8.2	%
Discrete items	(7.0)		7.5		1.9		16.4
Impact of non-taxable net gain	(0.2)		—		1.4		—
Annual forecast update	3.7		0.7		—		—
Long-term GAAP tax rate	21.2	%	24.6	%	21.2	%	24.6	%
Rate impact items
Stock based compensation	(2.0)	%	(1.7)	%	(2.5)	%	(1.9)	%
Other	1.8	%	(1.5)	%	2.3	%	(1.5)	%
Total rate impact items	(0.2)	%	(3.2)	%	(0.2)	%	(3.4)	%
Non-GAAP adjusted tax rate	21.0	%	21.4	%	21.0	%	21.2	%

BIO-TECHNE CORPORATION

SEGMENT REVENUE

(In thousands)

(Unaudited)


	QUARTER				SIX MONTHS
	ENDED				ENDED
	12/31/2022		12/31/2021		12/31/2022		12/31/2021
Protein Sciences segment revenue	$	203,887	$	204,971	$	403,836	$	402,156
Diagnostics and Genomics segment revenue		68,003		64,527		137,907		125,512
lntersegment revenue		(309)		(222)		(507)		(673)
Consolidated revenue	$	271,581	$	269,276	$	541,236	$	526,995

BIO-TECHNE CORPORATTON

SEGMENT OPERATING INCOME

(In thousands)

(Unaudited)


	QUARTER				SIX MONTHS
	ENDED				ENDED
	12/31/2022		12/31/2021		12/31/2022		12/31/2021
Protein Sciences segment operating income	$	89,336	$	93,281	$	175,278	$	183,381
Diagnostics and Genomics segment operating income		8,296		10,880		16,934		18,344
Segment operating income		97,632		104,161		192,212		201,725
Corporate general, selling, and administrative		(1,165)		(1,334)		(2,567)		(1,524)
Adjusted operating income		96,467		102,827		189,645		200,201
Cost recognized upon sale of acquired inventory		(100)		(84)		(400)		(1,595)
Amortization of intangibles		(19,125)		(18,380)		(38,408)		(36,769)
Acquisition related expenses and other		8,307		13,262		8,010		15,618
Eminence Impairment		—		(18,715)		—		(18,715)
Impact of partially-owned consolidated subsidiaries¹⁾		—		(1,004)		647		(2,567)
Stock-based compensation, inclusive of employer taxes		(16,878)		(14,815)		(32,336)		(28,675)
Restructuring costs		(780)		(743)		(2,950)		(1,928)
Operating income	$	67,891	$	62,348	$	124,208	$	125,570

BIO-TECHNE CORPORATTON

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA

(In thousands)

(Unaudited)


	QUARTER				SIX MONTHS
	ENDED				ENDED
	12/31/2022		12/31/2021		12/31/2022		12/31/2021
Net earnings attributable to Bio-Techne	$	50,005	$	80,173	$	139,560	$	149,788
Net interest expense (income)		1,388		2,657		4,745		5,873
Depreciation and amortization		26,703		25,102		53,344		49,836
Income taxes (benefit)		16,424		14,120		30,407		12,522
EBITDA attributable to Bio-Techne		94,520		122,052		228,056		218,019
Costs recognized upon sale of acquired inventory		100		84		400		1,595
Acquisition related expenses and other		(8,162)		(13,168)		(7,484)		(15,430)
Eminence impairment		—		18,715		—		18,715
Gain on sale of partially owned consolidated subsidiaries		—		—		(11,682)		—
Stock-based compensation, inclusive of employer taxes		16,878		14,815		32,336		28,675
Restructuring costs		780		743		2,950		1,928
Investment (gain) loss and other		74		(28,395)		(38,013)		(34,630)
Impact of partially-owned consolidated subsidiaries¹⁾		—		(7,110)		(241)		(6,181)
Adjusted EBITDA	$	104,190	$	107,736	$	206,322	$	212,691

Net earnings attributable to Bio-Techne excludes non-controlling interest of approximately 43% of the GAAP net earnings or loss for Eminence. To prevent double-counting the non-controlling interest component within our Adjusted EBITDA calculation, the amount accounts for both the non-controlling interest within the GAAP metric and the impact of partially-owned consolidated subsidiaries within our Non-GAAP adjusted consolidated net earnings table

BIO-TECHNE CORPORATION

CONDENSED CASH FLOW

(In thousands)

(Unaudited)


	SIX MONTHS
	ENDED
	12/31/2022		12/31/2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	139,739	$	141,040
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization		53,344		49,836
Costs recognized on sale of acquired inventory		400		1,596
Deferred income taxes		(6,365)		7,233
Stock-based compensation expense		31,205		25,706
Gain on sale of CCXI investment		(37,176)		—
Fair value adjustment to available for sale investments		(839)		(33,672)
Contingent consideration payments - operating		—		(3,300)
Fair value adjustment to contingent consideration payable		(8,600)		(16,400)
Asset impairment restructuring		—		546
Eminence impairment		—		18,715
Gain on sale of Eminence		(11,682)		—
Other operating activities		(39,561)		(41,873)
Net cash provided by (used in) operating activities		120,465		149,427
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment		(15,665)		(16,238)
Acquisitions, net of cash acquired		(101,184)		—
Investment of forward purchase contract		—		(25,000)
Proceeds from sale of Eminence		17,824		—
Proceeds from sale of CCXI investment		73,219		—
Other investing activities		6,009		(1,050)
Net cash provided by (used in) investing activities		(19,797)		(42,288)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends		(25,106)		(25,069)
Proceeds from stock option exercises		16,977		56,500
Long-term debt activity, net		(56,000)		(59,250)
Contingent consideration payments - financing		—		(700)
Share repurchases		(19,562)		(41,294)
Other financing activities		(20,310)		(23,247)
Net cash provided by (used in) financing activities		(104,001)		(93,060)
Effect of exchange rate changes on cash and cash equivalents		(4,552)		(1,325)
Net increase (decrease)in cash and cash equivalents		(7,885)		12,754
Cash and cash equivalents at beginning of period		172,567		199,091
Cash and cash equivalents at end of period	$	164,682	$	211,845