UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023, or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-17272

BIO-TECHNE CORPORATION

(Exact name of registrant as specified in its charter)


Minnesota	41-1427402
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

614 McKinley Place N.E. Minneapolis, MN 55413	(612) 379-8854
(Address of principal executive offices) (Zip Code)	(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	TECH	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b- 2). ☐ Yes ☒ No

At November 1, 2023, 158,150,379 shares of the Company's Common Stock (par value $0.01) were outstanding.

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

Bio-Techne Corporation and Subsidiaries

(in thousands, except per share data)

(unaudited)


	Quarter Ended
	September 30,
	2023		2022

Net sales	$	276,935	$	269,655
Cost of sales		91,744		90,060
Gross margin		185,191		179,595

Operating expenses:
Selling, general and administrative		105,331		99,375
Research and development		23,998		23,903
Total operating expenses		129,329		123,278
Operating income		55,862		56,317

Other income (expense)		(6,304)		47,399
Earnings before income taxes		49,558		103,716
Income taxes (benefit)		(1,435)		13,982
Net earnings, including noncontrolling interest		50,993		89,734
Net earnings attributable to noncontrolling interest		—		179
Net earnings attributable to Bio-Techne	$	50,993	$	89,555
Other comprehensive income (loss):
Foreign currency translation adjustments		(11,602)		(21,457)
Foreign currency translation reclassified to earnings with Eminence deconsolidation		—		119
Unrealized gains (losses) on derivative instruments - cash flow hedges, net of tax amounts disclosed in Note 8		(350)		4,695
Other comprehensive income (loss)		(11,952)		(16,643)
Other comprehensive income (loss) attributable to noncontrolling interest		—		(33)
Other comprehensive income (loss) attributable to Bio-Techne		(11,952)		(16,610)
Comprehensive income attributable to Bio-Techne	$	39,041	$	72,945

Earnings per share attributable to Bio-Techne⁽¹⁾:
Basic	$	0.32	$	0.57
Diluted	$	0.31	$	0.55

Weighted average common shares outstanding⁽¹⁾:
Basic		158,130		156,929
Diluted		161,940		162,172

⁽¹⁾Prior period results have been adjusted to reflect the four-for-one stock split effected in the form of a stock dividend on November 29,2022. See Note 1 for details.

See Notes to Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED BALANCE SHEETS

Bio-Techne Corporation and Subsidiaries

(in thousands, except share and per share data)


	September 30,
	2023		June 30,
	(unaudited)		2023
ASSETS
Current assets:
Cash and cash equivalents	$	148,663	$	180,571
Short-term available-for-sale investments		—		23,739
Accounts receivable, less allowance for doubtful accounts of $4,920 and $4,738, respectively		204,570		218,468
Inventories		186,080		171,638
Other current assets		52,164		27,066
Total current assets		591,477		621,482

Property and equipment, net		231,683		226,200
Right of use asset		102,277		98,326
Goodwill		969,376		872,737
Intangible assets, net		578,971		534,645
Other assets		281,576		285,302
Total assets	$	2,755,360	$	2,638,692
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	28,084	$	25,679
Salaries, wages and related accruals		34,891		36,747
Accrued expenses		15,937		14,880
Contract liabilities		24,516		23,069
Income taxes payable		5,938		12,022
Operating lease liabilities - current		12,198		11,199
Contingent consideration payable		1,750		3,500
Other current liabilities		4,440		1,413
Total current liabilities		127,754		128,509

Deferred income taxes		83,134		88,982
Long-term debt obligations		440,000		350,000
Operating lease liabilities		97,332		93,766
Other long-term liabilities		9,394		10,919

Bio-Techne’s Shareholders’ equity:
Undesignated capital stock, no par; authorized 5,000,000 shares; none issued or outstanding		—		—
Common stock, par value $.01 per share; authorized 400,000,000; issued and outstanding 158,354,579 and 157,641,914 respectively		1,584		1,576
Additional paid-in capital		746,606		721,543
Retained earnings		1,327,572		1,309,461
Accumulated other comprehensive loss		(78,016)		(66,064)
Total Bio-Techne’s shareholders’ equity		1,997,746		1,966,516
Noncontrolling interest		—		—
Total shareholders’ equity		1,997,746		1,966,516
Total liabilities and shareholders’ equity	$	2,755,360	$	2,638,692

See Notes to Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Bio-Techne Corporation and Subsidiaries

(in thousands)

(unaudited)


	Quarter Ended
	September 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings, including noncontrolling interest	$	50,993	$	89,734
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		28,540		26,641
Costs recognized on sale of acquired inventory		181		300
Deferred income taxes		(11,591)		(4,767)
Stock-based compensation expense		10,093		14,461
Fair value adjustment to contingent consideration payable		(1,750)		(100)
Gain on sale of CCXI investment		—		(37,176)
Fair value adjustment on available-for-sale investments		(283)		(911)
(Gain) loss on equity method investment		2,382		—
Gain on sale of Eminence		—		(11,682)
Leases, net		613		2,545
Other operating activity		182		(32)
Change in operating assets and operating liabilities, net of acquisition:
Trade accounts and other receivables, net		15,599		17,335
Inventories		(5,216)		(10,685)
Prepaid expenses		(2,572)		(2,760)
Trade accounts payable, accrued expenses, contract liabilities, and other		(2,695)		(1,401)
Salaries, wages and related accruals		(2,157)		(28,360)
Income taxes payable		(22,936)		2,939
Net cash provided by (used in) operating activities		59,383		56,081

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of available-for-sale investments		23,759		14,509
Purchases of available-for-sale investments		—		(14,500)
Proceeds from sale of CCXI investment		—		73,219
Additions to property and equipment		(13,592)		(9,556)
Acquisitions, net of cash acquired		(166,426)		(101,184)
Distributions from (Investments in) Wilson Wolf		2,149		—
Proceeds from sale of Eminence		—		17,824
Net cash provided by (used in) investing activities		(154,110)		(19,688)

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends		(12,654)		(12,545)
Proceeds from stock option exercises		14,394		11,950
Re-purchases of common stock		—		(19,562)
Borrowings under line-of-credit agreement		160,000		449,661
Repayments of long-term debt		(70,000)		(441,000)
Taxes paid on RSUs and net share settlements		(20,228)		(17,853)
Other financing activity		—		(2,457)
Net cash provided by (used in) financing activities		71,512		(31,806)

Effect of exchange rate changes on cash and cash equivalents		(8,693)		(11,897)
Net change in cash and cash equivalents		(31,908)		(7,310)
Cash and cash equivalents at beginning of period		180,571		172,567
Cash and cash equivalents at end of period	$	148,663	$	165,257

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	32,797	$	14,892
Cash paid for interest	$	4,506	$	3,409

See Notes to Condensed Consolidated Financial Statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Bio-Techne Corporation and Subsidiaries

(unaudited)

Note 1. Basis of Presentation and Summary of Significant Accounting Policies:

The interim consolidated financial statements of Bio-Techne Corporation and subsidiaries, (the Company) presented here have been prepared by the Company and are unaudited. They have been prepared in accordance with accounting principles generally accepted in the United States of America and with instructions to Form 10-Q and Article 10 of Regulation S-X. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto for the fiscal year ended June 30, 2023, included in the Company's Annual Report on Form 10-K for fiscal 2023. A summary of significant accounting policies followed by the Company is detailed in the Company's Annual Report on Form 10-K for fiscal 2023. The Company follows these policies in preparation of the interim unaudited condensed consolidated financial statements.

During the quarter ended September 30, 2023, the Company operated under two operating segments, Protein Sciences and Diagnostics and Genomics. The operating segments the Company operated under were consistent with the Company's operating segments disclosed in the Company's Annual Report on Form 10-K for fiscal 2023.

At the 2022 annual meeting of shareholders of the Company held on October 27, 2022, the shareholders approved an amendment and restatement of the Company’s articles of incorporation to increase the number of authorized shares of the Company’s common stock from 100,000,000 to 400,000,000. On November 1, 2022, the Company’s board of directors approved and declared a four-for-one split of the Company’s common stock in the form of a stock dividend. Each stockholder of record on November 14, 2022 received three additional shares of common stock for each then-held share, which were distributed after close of trading on November 29, 2022. All share and per share amounts presented herein have been retroactively adjusted to reflect the impact of the stock split.

Partially-owned consolidated subsidiary: On September 1, 2022, the Company completed the sale of its equity shares of Changzhou Eminence Biotechnology Co., Ltd. (Eminence) for approximately $17.8 million to a third party. Eminence was considered a variable-interest entity that was fully consolidated in our financial statements. Prior to the sale, Eminence had revenue of $2.0 million for the first fiscal quarter of 2023 within our Protein Sciences segment. As a result of the sale of the business, the Company recorded a gain of $11.7 million within the Other income (expense) line in the Condensed Consolidated Statement of Earnings.

Investments: In December 2021, the Company paid $25 million to enter into a two-part forward contract which requires the Company to make an initial ownership investment followed by purchase of full equity interest in Wilson Wolf Corporation (Wilson Wolf) if certain annual revenue or annual earnings before interest, taxes, depreciation, and amortization (EBITDA) thresholds are met. Wilson Wolf is a leading manufacturer of cell culture devices, including the G-Rex product line. The first part of the forward contract is triggered upon Wilson Wolf achieving approximately $92 million in annual revenue or $55 million in EBITDA at any point prior to December 31, 2027. During the quarter ended March 31, 2023, the Company determined that Wilson Wolf had met the EBITDA target. On March 31, 2023, the Company paid an additional $232 million to acquire 19.9% of Wilson Wolf.

Since the first part of the forward contract has been triggered, the second part of the forward contract will automatically trigger, and requires the Company to acquire the remaining equity interest in Wilson Wolf on December 31, 2027 based on a revenue multiple of approximately 4.4 times trailing twelve month revenue. The second part of the contract would be accelerated in advance of December 31, 2027, if Wilson Wolf meets its second milestone of approximately $226 million in annual revenue or $136 million in annual EBITDA. If the second milestone is achieved, the forward contract requires the Company to pay approximately $1 billion plus potential consideration for revenue in excess of the revenue milestone.

The investment in Wilson Wolf is accounted for as an equity method investment under ASC 323. The Company initially records its equity method investments at the amount of the Company’s investment and adjusts each period for the Company’s share of the investee’s income or loss and dividends paid. Distributions from the equity method investee are accounted for using the cumulative earnings approach on the Consolidated Statement of Cash Flows. For the quarter ended September 30, 2023, there was $2.3 million of

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loss recorded on the Company’s Consolidated Statement of Earnings and Comprehensive Income related to the investment. The Company’s total investment of $252 million is included within Other assets on the Consolidated Balance Sheet.

Restructuring actions: Restructuring actions generally include significant actions involving employee-related severance charges, contract termination costs, and impairments and disposals of assets associated with such actions. Employee-related severance charges are based upon distributed employment policies and substantive severance plans. These charges are reflected in the quarter when the actions are probable and the amounts are estimable, which typically is when management approves the associated actions. Asset impairment and disposal charges include right of use assets, leasehold improvements, and other asset write-downs associated with combining operations and disposal of assets.

Fiscal Year 2023 Restructuring Actions:

Protein Sciences realignment

In December 2022, the Company informed employees it would undertake certain actions to strategically reallocate operations resources to high growth areas of the business. Additional actions were taken in June 2023 primarily related to the sales organization. The actions impacted a limited number of employees and are expected to be completed in the fourth quarter of fiscal 2024. As a result of the realignment, a pre-tax charge of $1.7 million related to employee severance was recorded in the Selling, general and administrative line of operating income within our Protein Sciences segment during the year ended June 30, 2023. Restructuring actions, including cash and non-cash impacts, are as follows (in thousands):


	Employee
	severance
Expense incurred in fiscal year 2023	$	1,677
Fiscal year 2023 cash payments		(762)
Fiscal year 2023 adjustments		(18)
Accrued restructuring actions balances as of June 30, 2023	$	897
Fiscal year 2024 cash payments		(707)
Fiscal year 2024 adjustments⁽¹⁾		89
Accrued restructuring actions balances as of September 30, 2023⁽²⁾	$	279

⁽¹⁾Fiscal year 2024 adjustments relate to the refinement of the accrual recorded in fiscal year 2023.

⁽²⁾ The remaining balance as of September 30, 2023 relates to employee severance that is paid out over a one-year period.

QT Holdings Corporation (Quad)

In August 2022, the Company informed employees of our decision to close our QT Holdings Corporation (Quad) facility as part of a realignment of activities within our Reagent Solutions division. The closure of the site was completed in the fourth quarter of fiscal 2023. As a result of the restructuring activities, a pre-tax charge of $2.2 million was recorded within our Protein Sciences segment. The related restructuring charges for the year ended June 30, 2023 were recorded in the income statement as follows (in thousands):


	Employee		Asset
	severance		impairment and other		Total
Selling, general and administrative	$	1,328	$	842	$	2,170



	Employee		Asset
	severance		impairment and other		Total
Expense incurred in the first quarter of 2023	$	1,328	$	842	$	2,170
Cash payments		(1,233)		(772)		(2,005)
Adjustments		(95)		(70)		(165)
Accrued restructuring actions balances as of June 30, 2023	$	—	$	—	$	—

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Recently Adopted Accounting Pronouncements

There were no accounting pronouncements adopted in the quarter ended September 30, 2023. Refer to the Form 10-K for accounting pronouncements adopted prior to June 30, 2023.

Note 2. Revenue Recognition:

Consumables revenues consist of specialized proteins, immunoassays, antibodies, reagents, blood chemistry and blood gas quality controls, and hematology instrument controls that are typically single-use products recognized at a point in time following the transfer of control of such products to the customer, which generally occurs upon shipment. Instruments revenues typically consist of longer-lived assets that, for the substantial majority of sales, are recognized at a point in time in a manner similar to consumables. Service revenues consist of extended warranty contracts, post contract support, and custom development projects that are recognized over time as either the customers receive and consume the benefits of such services simultaneously or the underlying asset being developed has no alternative use for the Company at contract inception and the Company has an enforceable right to payment for the portion of the performance completed. Service revenues also include laboratory services recognized at point in time.

We recognize royalty revenues in the period the sales occur using third party evidence. The Company elected the "right to invoice" practical expedient based on the Company's right to invoice a customer at an amount that approximates the value to the customer and the performance completed to date.

The Company elected the exemption to not disclose the unfulfilled performance obligations for contracts with an original length of one year or less and the exemption to exclude future performance obligations that are accounted under the sales-based or usage-based royalty guidance. The Company’s unfulfilled performance obligations for contracts with an original length greater than one year were not material as of September 30, 2023.

Contracts with customers that contain instruments may include multiple performance obligations. For these contracts, the Company allocates the contract’s transaction price to each performance obligation on a relative standalone selling price basis. Allocation of the transaction price is determined at the contracts’ inception.

Payment terms for shipments to end-users are generally net 30 days. Payment terms for distributor shipments may range from 30 to 90 days. Service arrangements commonly call for payments in advance of performing the work (e.g. extended warranty and service contracts), upon completion of the service (e.g. custom development manufacturing) or a mix of both.

Contract assets include revenues recognized in advance of billings. Contract assets are included within other current assets in the accompanying balance sheet as the amount of time expected to lapse until the company's right to consideration becomes unconditional is less than one year. We elected the practical expedient allowing us to expense contract costs that would otherwise be capitalized and amortized over a period of less than one year. Contract assets as of September 30, 2023 are not material.

Contract liabilities include billings in excess of revenues recognized, such as those resulting from customer advances and deposits and unearned revenue on warranty contracts. Contract liabilities as of September 30, 2023 and June 30, 2023 were approximately $25.8 million and $24.6 million, respectively. Contract liabilities as of June 30, 2023 subsequently recognized as revenue during the quarter ended September 30, 2023 were approximately $11.8 million. Contract liabilities in excess of one year are included in Other long-term liabilities on the consolidated balance sheet.

Any claims for credit or return of goods must be made within 10 days of receipt. Revenues are reduced to reflect estimated credits and returns. Although the amounts recorded for these revenue deductions are dependent on estimates and assumptions, historically our adjustments to actual results have not been material.

Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue. Amounts billed to customers for shipping and handling are included in revenue, while the related shipping and handling costs are reflected in cost of products. We elected the practical expedient that allows us to account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment cost, and we accrue costs of shipping and handling when the related revenue is recognized.

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The following tables present our disaggregated revenue for the periods presented.

Revenue by type is as follows (in thousands):


	Quarter Ended
	September 30,
	2023		2022
Consumables	$	224,547	$	216,430
Instruments		24,860		26,458
Services		21,454		21,445
Total product and services revenue, net	$	270,861	$	264,333
Royalty revenues		6,074		5,322
Total revenues, net	$	276,935	$	269,655

Revenue by geography is as follows (in thousands):


	Quarter Ended
	September 30,
	2023		2022

United States	$	159,105	$	155,431
EMEA, excluding United Kingdom		54,798		46,021
United Kingdom		12,449		11,702
APAC, excluding Greater China		17,351		17,465
Greater China		25,485		31,521
Rest of World		7,747		7,515
Net Sales	$	276,935	$	269,655

Note 3. Selected Balance Sheet Data:

Inventories:

Inventories consist of (in thousands):


	September 30,		June 30,
	2023		2023

Raw materials	$	84,739	$	84,551
Finished goods⁽¹⁾		106,539		92,474
Inventories, net	$	191,278	$	177,025

⁽¹⁾Finished goods inventory of $5,198 and $5,387 included within other long-term assets in the respective September 30, 2023 and June 30, 2023, consolidated balance sheet. The inventory is included in long-term assets as it is forecasted to be sold after the 12 months subsequent to the consolidated balance sheet date.

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Property and Equipment:

Property and equipment consist of (in thousands):


	September 30,		June 30,
	2023		2023
Land	$	9,076	$	9,100
Buildings and improvements		245,161		245,302
Machinery and equipment		196,655		190,019
Construction in progress		21,769		15,491
Property and equipment, cost		472,661		459,912
Accumulated depreciation and amortization		(240,978)		(233,712)
Property and equipment, net	$	231,683	$	226,200

Intangible Assets:

Intangible assets consist of (in thousands):


	September 30,		June 30,
	2023		2023

Developed technology	$	674,274	$	616,311
Trade names		151,324		146,945
Customer relationships		214,601		213,878
Patents		3,985		3,815
Other intangibles		11,860		11,566
Definite-lived intangible assets		1,056,044		992,515
Accumulated amortization		(499,773)		(480,570)
Definite-lived intangibles assets, net		556,271		511,945
In process research and development		22,700		22,700
Total intangible assets, net	$	578,971	$	534,645

Changes to the carrying amount of net intangible assets for the period ended September 30, 2023 consist of (in thousands):



Beginning balance	$	534,645
Acquisitions		66,400
Other additions		433
Amortization expense		(20,231)
Currency translation		(2,276)
Ending balance	$	578,971

The estimated future amortization expense for intangible assets as of September 30, 2023 is as follows (in thousands):


Remainder 2024	$	60,132
2025		77,039
2026		73,092
2027		62,952
2028		59,308
Thereafter		223,748
Total	$	556,271

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Goodwill:

Changes to the carrying amount of goodwill for the period ended September 30, 2023 consist of (in thousands):


			Diagnostics and
	Protein Sciences		Genomics		Total
June 30, 2023	$	427,027	$	445,710	$	872,737
Acquisitions		—		102,560		102,560
Currency translation		(2,983)		(2,938)		(5,921)
September 30, 2023	$	424,044	$	545,332	$	969,376

We evaluate the carrying value of goodwill in the fourth quarter of each fiscal year and between annual evaluations if events occur or circumstances change that would indicate a possible impairment. The Company performed a qualitative goodwill impairment assessment for all of its reporting units during the fourth quarter of fiscal 2023. No indicators of impairment were identified as part of our assessment.

Other assets:

Other assets consist of (in thousands):


	September 30,		June 30,
	2023		2023

Investment in Wilson Wolf	$	251,644	$	255,857
Derivative instruments		17,491		16,857
Long-term inventory		5,198		5,387
Other		7,243		7,201
Other assets	$	281,576	$	285,302

Note 4. Acquisitions:

We periodically complete business combinations that align with our business strategy. Acquisitions are accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date and that the results of operations of each acquired business be included in our consolidated statements of comprehensive income from their respective dates of acquisitions. Acquisition costs are recorded in selling, general and administrative expenses as incurred.

Fiscal year 2024 Acquisitions

Lunaphore Technologies SA.

On July 7, 2023, the Company acquired all of the ownership interests of Lunaphore Technologies SA (“Lunaphore”) for $170.1 million, in a cash-free, debt-free acquisition. Lunaphore is a leading developer of fully automated spatial biology solutions. The Lunaphore acquisition adds spatial biology instruments to Bio-Techne’s portfolio to accelerate our leadership position in translational and clinical research markets. The transaction was accounted for in accordance with ASC 805, Business Combinations. The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Diagnostics and Genomics operating segment in the first quarter of fiscal year 2024.

The allocation of purchase consideration related to Lunaphore is considered preliminary with provisional amounts primarily related to the finalization of the working capital adjustment, current assets and liabilities, equipment, intangible assets, certain tax-related amounts, and goodwill. The Company expects to finalize the allocation of purchase price within the one-year measurement-period following the acquisition. Net sales and operating loss of this business included in Bio-Techne's consolidated results of operations as of September 30, 2023 were approximately $2.1 million and $7.3 million, respectively. The preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date and as of September 30, 2023 are as follows (in thousands):

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	Preliminary allocation at acquisition date and at September 30, 2023
Current assets	$	12,512
Equipment and other long-term assets		1,470
Intangible assets:
Developed technologies		60,300
Tradenames		4,900
Customer relationships		1,200
Goodwill		102,560
Total assets acquired		182,942

Liabilities		7,096
Deferred income taxes, net		5,768
Net assets acquired	$	170,078

Cash paid		166,426
Estimated net working capital payable		3,652
Net assets acquired	$	170,078

Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's preliminary assessment. The purchase price allocated to developed technology and customer relationships was based on management’s preliminary forecasted cash inflows and outflows and using a multiperiod excess earnings method to calculate the fair value of assets purchased. The purchase price allocated to trade names was based on management's preliminary forecasted cash inflows and outflows and using a relief from royalty method. The amount recorded for developed technology is being amortized with the expense reflected in cost of goods sold in the Condensed Consolidated Statement of Earnings and Comprehensive Income. The amortization period for developed technology is estimated to be 14 years. Amortization expense related to customer relationships is reflected in selling, general and administrative expenses in the Condensed Consolidated Statement of Earnings and Comprehensive Income. The amortization period for customer relationships is estimated to be 8 years. The amount recorded for trade names is being amortized with the expense reflected in selling, general and administrative expenses in the Condensed Consolidated Statement of Earnings and Comprehensive Income. The amortization period for trade names ranges from 4 years to 8 years. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes, offset by the deferred tax asset for the preliminary calculation of acquired net operating losses.

Note 5. Fair Value Measurements:

The Company’s financial instruments include cash and cash equivalents, available for sale investments, derivative instruments, accounts receivable, accounts payable, contingent consideration obligations, and long-term debt.

Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. This standard also establishes a hierarchy for inputs used in measuring fair value. This standard maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available in the circumstances.

The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable for the asset or liability and their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 may also include certain investment securities for which there is limited market activity or a decrease in the observability of market pricing for the investments, such that the determination of fair value requires significant judgment or estimation.

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The following tables provide information by level for financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):


		Total
		carrying
		value as of		Fair Value Measurements Using
	Balance Sheet Location	September 30,		Inputs Considered as
		2023		Level 1		Level 2		Level 3

Assets
Exchange traded securities⁽¹⁾	Short-term available-for-sale investments	$	—	$	—	$	—	$	—
Derivatives designated as hedging instruments - cash flow hedges	Other assets		16,398		—		16,398		—
Derivatives designated as hedging instruments - net investment hedge	Other assets		1,093		—		1,093		—
Total assets		$	17,491	$	—	$	17,491	$	—

Liabilities
Contingent consideration	Contingent consideration payable	$	1,750	$	—	$	—	$	1,750
Total liabilities		$	1,750	$	—	$	—	$	1,750


		Total
		carrying
		value as of		Fair Value Measurements Using
	Balance Sheet Location	June 30,		Inputs Considered as
		2023		Level 1		Level 2		Level 3

Assets
Exchange traded securities⁽¹⁾	Short-term available-for-sale investments	$	23,739	$	23,739	$	—	$	—
Derivative instruments - cash flow hedges	Other assets		16,857		—		16,857		—
Total assets		$	40,596	$	23,739	$	16,857	$	—

Liabilities
Contingent consideration	Contingent consideration payable	$	3,500	$	—	$	—	$	3,500
Total liabilities		$	3,500	$	—	$	—	$	3,500

⁽¹⁾

During the quarter ended September 30, 2023, the Company sold all of its outstanding shares of its exchange traded investment grade bond funds that it held at June 30, 2023. The cost basis and fair value of the Company’s exchange traded investment grade bond funds were $25.0 million and $23.7 million at June 30, 2023, respectively. Our available for sale securities are measured at fair value using quoted market prices in active markets for identical assets and are therefore classified as Level 1 assets.

Fair value measurements of derivative instruments

The Company utilizes forward starting swaps designated as a cash flow hedge on forecasted debt. The forward starting swaps reduce the variability of cash flow payments for the Company by converting the variable interest rate on the Company’s forecasted variable interest long-term debt to that of a fixed interest rate. Accordingly, as part of the forward starting swaps, the Company exchanges, at specified intervals, the difference between floating and fixed interest amounts based on a notional principal amount. The Company also uses a cross-currency swap contract to manage its exposure to foreign currency risk associated with the Company's net investment in its Swiss subsidiary.

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The following table presents the contractual amounts of the Company's outstanding instruments (in millions):


		September 30,		June 30,
Instruments	Designation	2023		2023
Forward starting swaps⁽¹⁾	Cash flow hedge	$	300	$	300
Cross-currency swap⁽²⁾	Net investment hedge		150		—

(1) In May 2021, the Company entered into a forward starting swap designated as a cash flow hedge on forecasted debt based on $200 million of notional principal. The effective date of the swap was November 2022 with the full swap maturing in November 2025. In March 2023, the Company entered into a forward starting swap designated as a cash flow hedge on forecasted debt based on $100 million of notional principal. The effective date of the swap was April 2023 with the full swap maturing in April 2025.

(2) In July 2023, the Company entered into a pay-fixed rate, receive-fixed rate cross-currency swap contract with a total notional amount of $150 million that was designated as a hedge to lock in the Swiss franc (CHF) rate for a portion of the Company's CHF net investment in its Lunaphore subsidiary in Switzerland. The objective of the hedge is to protect the net investment in the Company's CHF-denominated operations against changes in the spot exchange rates, on a pre-tax basis. The hedging instrument has four interim settlement dates, which will reduce the notional on the hedging instrument by $10 million at each interim date, and will reduce the notional to $110 million at maturity.

The pretax amount of the gains and losses on our hedging instruments and the classification of those gains and losses within our consolidated financial statements for the three months ended September 30, 2023 and September 30, 2022 were as follows (in thousands):


	(Gain) Loss Recognized in Accumulated Other Comprehensive Loss				(Gain) Loss Reclassified into Income
	Quarter Ended				Quarter Ended
	September 30,				September 30,				Location of (Gain) Loss
	2023		2022		2023		2022		in Income Statement
Cash flow hedges
Forward starting swaps	$	(1,587)	$	(4,376)	$	(2,539)	$	417	Interest expense
Net investment hedges
Cross-currency swap		(1,366)		—		(698)		—	Interest expense
Total	$	(2,953)	$	(4,376)	$	(3,237)	$	417

Gains or losses related to the net investment hedges are classified as foreign currency translation adjustments in the schedule of changes in Accumulated Other Comprehensive Income (“AOCI”) in Note 8, as these items are attributable to the Company’s hedges of its net investment in foreign operations. Gains or losses related to the cash flow hedges are classified as Unrealized gains (losses) on cash flow hedges in the schedule of changes in AOCI in Note 8.

Fair value measurements of contingent consideration

The Company has $1.8 million in contingent consideration recorded as of September 30, 2023, which is the fair value of contingent consideration related to the Asuragen and Namocell acquisitions. The Company is required to make contingent consideration payments of up to $105.0 million as part of the Asuragen acquisition agreement and up to $25.0 million as part of the Namocell acquisition agreement. As of September 30, 2023, the maximum payout for the Asuragen and Namocell agreements is $100.0 million as both Asuragen and Namocell did not achieve their respective December 31, 2022 revenue milestones.

The Asuragen contingent agreement is based on achieving certain revenue thresholds by December 31, 2023. The opening balance sheet fair value of the liabilities was $18.3 million, which was determined using a Monte Carlo simulation-based model discounted to present value. Assumptions used in these calculations are units sold, expected revenue, expected expenses, discount rate, and various probability

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factors. The contingent consideration related to Asuragen was $1.0 million and $2.0 million as of September 30, 2023 and June 30, 2023, respectively.

The Namocell contingent agreement is based on achieving certain revenue thresholds by December 31, 2023. The opening balance sheet fair value of the liabilities was $10.6 million, which was determined using a Monte Carlo simulation-based model discounted to present value. Assumptions used in these calculations are units sold, expected revenue, expected expenses, discount rate, and various probability factors. The contingent consideration related to Namocell was $0.8 million and $1.5 million as of September 30, 2023 and June 30, 2023, respectively.

The ultimate settlement of contingent consideration liabilities could deviate from current estimates based on the actual results of the financial measures described above. This liability is considered to be a Level 3 financial liability that is re-measured each reporting period. The change in fair value of contingent consideration for these acquisitions is included in general and administrative expense.

The following table presents a reconciliation of the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):


	Quarter Ended
	September 30,
	2023

Fair value at the beginning of period	$	3,500
Change in fair value of contingent consideration		(1,750)
Fair value at the end of period	$	1,750

The use of different assumptions, applying different judgment to matters that inherently are subjective and changes in future market conditions could result in different estimates of fair value of our securities or contingent consideration, currently and in the future. If market conditions deteriorate, we may incur impairment charges for securities in our investment portfolio.

Fair value measurements of other financial instruments – The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate fair value.

Cash and cash equivalents, certificates of deposit, accounts receivable, and accounts payable – The carrying amounts reported in the consolidated balance sheets approximate fair value because of the short-term nature of these items.

Long-term debt – The carrying amounts reported in the consolidated balance sheets for the amount drawn on our line-of-credit facility and long-term debt approximates fair value because our interest rate is variable and reflects current market rates.

Note 6. Debt and Other Financing Arrangements:

On August 31, 2022, the Company entered into a revolving line-of-credit and term loan governed by a Credit Agreement (the Credit Agreement). The Credit Agreement provides for a revolving credit facility of $1 billion, which can be increased by an additional $400 million subject to certain conditions. Borrowings under the Credit Agreement may be used for working capital and expenditures of the Company and its subsidiaries, including financing permitted acquisitions. Borrowings under the Credit Agreement bear interest at a variable rate. The current outstanding debt is based on the one-month Secured Overnight Financing Rate (SOFR) plus an applicable margin. The applicable margin is determined from the total leverage ratio of the Company and updated on a quarterly basis. The annualized fee for any unused portion of the credit facility is currently 10 basis points.

The Credit Agreement matures on August 1, 2027 and contains customary restrictive and financial covenants and customary events of default. As of September 30, 2023, the outstanding balance under the Credit Agreement was $440 million.

Note 7. Leases:

As a lessee, the company leases offices, labs, and manufacturing facilities, as well as vehicles, copiers, and other equipment. The Company recognizes operating lease expense on a straight-line basis over the lease term. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate

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used to calculate present value is Bio-Techne’s incremental borrowing rate or, if available, the rate implicit in the lease. Bio-Techne determines the incremental borrowing rate for each lease based primarily on its lease term and the economic environment of the applicable country or region. During the three months ended September 30, 2023, the Company recognized $1.2 million in variable lease expense and $4.5 million relating to fixed lease expense in the Condensed Consolidated Statements of Earnings and Comprehensive Income.

The following table summarizes the balance sheet classification of the Company’s operating leases and amounts of right of use assets and lease liabilities and the weighted average remaining lease term and weighted average discount rate for the Company’s operating leases (asset and liability amounts are in thousands):


			As of
			September 30,
	Balance Sheet Classification		2023
Operating leases:
Operating lease right of use assets		Right of use asset	$	102,277

Current operating lease liabilities		Operating lease liabilities - current	$	12,198
Noncurrent operating lease liabilities		Operating lease liabilities		97,332
Total operating lease liabilities			$	109,530

Weighted average remaining lease term (in years):				9.05

Weighted average discount rate (%):				4.21

The following table summarizes the cash paid for amounts included in the measurement of operating lease liabilities and right of use assets obtained in exchange for new operating lease liabilities for the three months ended (in thousands):


	Quarter ended
	September 30,
	2023
Cash amounts paid on operating lease liabilities	$	3,884

Right of use assets obtained in exchange for lease liabilities	$	7,923

The following table summarizes the fair value of the lease liability by payment date for the Company’s operating leases by fiscal year (in thousands):


	September 30, 2023
	Operating
	Leases
Remainder 2024	$	12,166
2025		15,927
2026		16,076
2027		13,448
2028		13,444
Thereafter		62,491
Total	$	133,552
Less: Amounts representing interest		24,022
Total lease obligations	$	109,530

Certain leases include one or more options to renew, with terms that extend the lease term up to five years. Bio-Techne includes the option to renew the lease as part of the right of use lease asset and liability when it is reasonably certain the Company will exercise the option. In addition, certain leases contain fair value purchase and termination options with an associated penalty. In general, Bio-Techne is not reasonably certain to exercise such options.


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27

Item 4.	Controls and Procedures	27

PART II: OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.	Defaults Upon Senior Securities	28

Item 4.	Mine Safety Disclosures	28

Item 5.	Other Information	28

Item 6.	Exhibits	29

	SIGNATURES	32