Bio-Techne Corporation (TECH) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects positive growth trends, particularly in China and APAC, alongside strong EPS growth. Despite some margin pressures, management anticipates improvement. The Q&A section highlights growth in cell therapy and biotech funding, contributing to a favorable outlook. The absence of specific guidance for fiscal year '27 is a slight concern, but overall, the positive momentum and strategic initiatives suggest a positive stock price movement.
Key Financial Performance
Organic Revenue Growth Flat year-over-year. Reasons include strength from large pharma customers offset by a soft biotech end market, a stable U.S. academic market, and order timing impacts from two large cell therapy customers receiving FDA Fast Track designations.
Adjusted Operating Margins Expanded by approximately 100 basis points year-over-year to 31.1%. This was driven by disciplined productivity and cost management while continuing investments in strategic growth areas.
Revenue from Large Pharma Customers Increased low double digits for the fourth consecutive quarter. This reflects strong demand from large pharma customers.
Revenue from Emerging Biotech Declined mid-single digits year-over-year. This was due to negative funding conditions in the first half of calendar 2025, though sequential improvement was noted.
U.S. Academic Business Declined modestly year-over-year. Stabilization in the U.S. was partially offset by stable growth in Europe, resulting in a low single-digit decline overall.
Revenue in the Americas Declined high single digits year-over-year. Adjusting for cell therapy order timing headwinds, revenue grew low single digits.
Revenue in China Grew mid-single digits year-over-year. This marks the third consecutive quarter of growth, driven by R&D investments from CDMO, CRO, and biotech customers.
Revenue in APAC (excluding China) Increased almost 20% year-over-year. This reflects strong broad-based performance in the region.
Protein Sciences Segment Revenue Declined 1% organically year-over-year. Excluding cell therapy timing impacts, organic growth was 4%. Growth was led by proteomic analytical tools and low single-digit growth in core reagents and assays.
Diagnostics and Spatial Biology Segment Revenue Delivered 3% organic growth year-over-year. Diagnostics products grew upper single digits, while Spatial Biology was relatively flat.
Adjusted Gross Margin 68.5%, down from 70.5% year-over-year. The decline was due to unfavorable product and customer mix.
Adjusted SG&A Expense 29.6% of revenue, down 240 basis points year-over-year. This reflects structural streamlining and disciplined expense management.
Adjusted EPS $0.46, up 10% year-over-year. Foreign exchange had a favorable impact of $0.04.
GAAP EPS $0.24, up from $0.22 in the prior year period.
Operating Cash Flow $82.4 million for the quarter. Net capital expenditures were $5.9 million.
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Operating Highlights
Core reagents and assays, proteomic analysis instruments, and diagnostic kits: Grew modestly more in Q2 than during Q1.
Cell therapy (excluding 2 largest FDA Fast Track customers): Delivered strong sequential improvement in year-over-year growth.
Spatial biology franchise: Saw a meaningful acceleration in bookings for automated common platform.
Organoid initiatives: Launched Cultrex Synthetic Hydrogel, a fully defined synthetic matrix for nonanimal-derived models.
Proteomic analytical instruments: Introduced ultrasensitive assays on Ella platform and enhanced Leo platform with fluorescence detection.
China and APAC regions: China grew mid-single digits for the third consecutive quarter, and APAC growth approached 20%.
Biopharma customers: Large pharma revenue increased low double digits, while emerging biotech declined mid-single digits but showed sequential improvement.
U.S. academic market: Stabilized with a low single-digit decline, supported by federal funding developments.
Adjusted operating margins: Expanded by approximately 100 basis points year-over-year to 31.1%.
Diagnostics and Spatial Biology segment: Delivered 3% organic growth, with COMET instrument bookings growing nearly 40%.
Wilson Wolf's G-Rex bioreactor: Delivered 20% organic revenue growth in the quarter.
Strategic growth verticals: Cell therapy, proteomic analytical instrumentation, spatial biology, and precision diagnostic tools now represent 47% of total revenue, up from 32% in fiscal 2020.
M&A and capital allocation: M&A remains a top priority for capital allocation.
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Risk or Challenges
Soft biotech and U.S. academic end markets: The biotech end market remains soft, though improving, and the U.S. academic market is soft but stable. These conditions have contributed to flat organic revenue growth for the quarter.
Order timing impact from cell therapy customers: Two of the largest cell therapy customers receiving FDA Fast Track designations created a temporary headwind, reducing near-term GMP reagent demand.
Emerging biotech funding pressures: Emerging biotech customers faced mid-single-digit declines due to negative funding conditions in the first half of calendar 2025, though there was some sequential improvement.
Geographic performance challenges: The Americas declined high single digits, and EMEA was flat due to order timing dynamics. These regions faced challenges despite some growth in other areas like China and APAC.
Unfavorable product and customer mix: Adjusted gross margin declined due to unfavorable product and customer mix, which is expected to gradually improve over the calendar year.
Cell therapy business decline: Revenue in the cell therapy business declined over 30%, including a 50% drop in GMP reagents, due to the timing of FDA Fast Track designations for two major customers.
Capital equipment environment challenges: The challenging capital equipment environment, particularly among biotech and academic laboratories, impacted instrument sales despite some growth.
Spatial Biology and academic concentration: Spatial Biology remains heavily concentrated in academic and biotech end markets, which are facing ongoing challenges.
Temporary pause in GMP reagent purchases: FDA Fast Track designations for major cell therapy customers have led to a temporary pause in GMP reagent purchases, impacting near-term revenue.
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Guidance & Outlook
Revenue Growth: The company anticipates overall Q3 organic growth to be consistent with Q2. Excluding customer-specific cell therapy and OEM headwinds, underlying growth for the remainder of the business is expected to be mid-single digits. Improved biotech funding and resolution of U.S. academic budgets are expected to contribute to higher spending and growth in fiscal year 2027.
Cell Therapy Segment: FDA Fast Track designation for the largest cell therapy customers is expected to reduce near-term reagent demand but accelerate clinical timelines. The headwind is expected to moderate slightly in Q3, impacting growth by approximately 300 basis points year-over-year, and will be completely out of year-over-year comparisons in fiscal 2027.
Geographic Growth: China and APAC regions are expected to continue showing strong growth momentum, with China having achieved mid-single-digit growth and APAC approaching 20% growth in the most recent quarter.
Operating Margins: The company remains on track to achieve 100 basis points of operating margin expansion for the full fiscal year, driven by productivity and cost management initiatives.
Spatial Biology and Diagnostics: Spatial Biology remains a high-growth area, with COMET instruments showing strong double-digit growth in bookings for two consecutive quarters. Diagnostics products are also expected to continue growing, supported by recent innovations in molecular diagnostics.
Biotech and Academic Markets: Improved biotech funding and favorable fiscal 2026 U.S. appropriation bills are expected to stabilize and gradually improve these end markets. Biotech funding rebounded meaningfully in the second half of calendar 2025, positioning the market for improvement.
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Shareholder Return Plan
Dividends returned to shareholders: $12.5 million was returned to shareholders via dividends during Q2.
Share repurchase: No mention of share repurchase program in the transcript.
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Key Q&A
Q:What is the expected growth for fiscal Q4 and the calendar year '26?
A:Management expects mid-single-digit growth in fiscal Q4 and for the calendar year '26, with improvement throughout the year.
Q:Why were gross margins down sequentially, and how are they expected to trend?
A:Gross margins were down due to an unfavorable mix, including lower-margin customers and weaker performance in the Diagnostics and Spatial segments. Management expects the mix to gradually improve in Q3 and Q4.
Q:What is the impact of AI on Bio-Techne's business?
A:Management believes AI will enable customers to drive programs forward and demand more complex materials, which aligns with Bio-Techne's capabilities in designing and manufacturing high-quality ingredients.
Q:What are the underlying business trends and growth drivers for fiscal Q4 and beyond?
A:The core business is recovering, with growth in cell therapy (30% growth excluding two large customers), organoids, proteomic analysis, and spatial biology. New product introductions and positive trends in China and APAC are also contributing to growth.
Q:What is driving Bio-Techne's growth in China?
A:Growth in China is driven by the country's 15th 5-year funding plan prioritizing life sciences, increased biotech activity, and improved CDMO and CRO activity.
Q:What is the outlook for biotech funding and its impact on Bio-Techne?
A:Biotech funding improved significantly in calendar Q4, with a typical 6-month lag before impacting Bio-Techne's revenue. Management expects growth to resume as funding stabilizes and programs accelerate.
Q:What is the outlook for the GMP business and cell therapy growth?
A:The GMP business is expected to normalize by fiscal Q1 '27, with underlying growth of 30% in the last quarter. Management anticipates strong growth in cell therapy as clinical studies increase and the market recovers.
Q:What is the pull-through rate for Lunaphore instruments, and how is it expected to change?
A:The current pull-through rate is $45,000 per instrument per year, with a long-term goal of $90,000 as multiomics adoption increases and the antibody portfolio expands.
Q:What is the revenue contribution and growth potential of the organoid market?
A:The organoid market is a $1.4 billion market growing at mid-teens, with Bio-Techne's current run rate at $50 million. New products like the Cultrex Synthetic Hydrogel are expected to drive growth.
Q:What is Bio-Techne's approach to M&A and potential areas of focus?
A:Bio-Techne is actively pursuing M&A opportunities, focusing on novel antibodies, cell therapy, and proteomic analysis. The company also plans to finalize the Wilson Wolf acquisition by the end of calendar 2027.
Q:What is the operating margin outlook for the second half of the fiscal year?
A:Management expects sequential improvement in operating margins, driven by better gross margins and higher revenues, with a full-year improvement of 100 basis points.
Q:Why was operating cash flow down in the first half, and what is the outlook?
A:Operating cash flow was down due to higher bonus payouts and timing of tax payments in Q1. Management expects the timing of tax payments to unwind throughout the fiscal year.
Q:Review of Unclear Management Responses
A:Management avoided providing specific fiscal year '27 guidance, stating only that the business momentum is encouraging. Additionally, they did not provide detailed revenue numbers for organoid offerings or specific M&A targets, using general terms like 'strategic fit' and 'broadening portfolio' instead.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
APAC region
Adoption RNA
Asia line
Biology RNAscope
CDMO CRO
COMET multiomics
CRO therapy
Calendar milestone
Carrier Screening
China APAC
Ella assay
Healthcare
ProteinSimple
Rex
adoption
analysis instrument
animal
appropriation bill
biomarkers
booking
cytokine
decline
designation
detection
development manufacturing
diagnostics
franchise
insight
kit
matrix
model
multiplexing
offering
precision
productivity cost
reagent assay
sensitivity
strength pharma
therapy FDA
value application
vertical cell
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